178. One economist has argued that rent control is “the best way to destroy a city, other than bombing.” Why would an
economist say this?
a.
He fears that low rents will cause low-income people to move into the city, reducing the quality of life for
other people.
b.
He fears that rent control will benefit landlords at the expense of tenants, increasing inequality in the city.
c.
He fears that rent controls will cause a construction boom, which will make the city crowded and more
polluted.
d.
He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the
city.
179. Rent control
a.
serves as an example of how a social problem can be alleviated or even solved by government policies.
b.
serves as an example of a price ceiling.
c.
is regarded by most economists as an efficient way of helping the poor.
d.
is the most efficient way to allocate scarce housing resources.
180. The goal of rent control is to
a.
b.
c.
d.
181. Which of the following is not a rationing mechanism used by landlords in cities with rent control?
a.
waiting lists
b.
race
c.
price
d.
bribes
182. Under rent control, bribery is a mechanism to
a.
bring the total price of an apartment (including the bribe) closer to the equilibrium price.
b.
allocate housing to the poorest individuals in the market.
c.
force the total price of an apartment (including the bribe) to be less than the market price.
d.
allocate housing to the most deserving tenants.
183. Under rent control, landlords cease to be responsive to tenants’ concerns about the quality of the housing because
a.
with rent control, the government guarantees landlords a minimum level of profit.
b.
they become resigned to the fact that many of their apartments are going to be vacant at any given time.
c.
with shortages and waiting lists, they have no incentive to maintain and improve their property.
d.
with rent control, it becomes the government’s responsibility to maintain rental housing.
184. Under rent control, tenants can expect
a.
lower rent and higher quality housing.
b.
lower rent and lower quality housing.
c.
higher rent and a shortage of rental housing.
d.
higher rent and a surplus of rental housing.
185. Which of the following is not a result of rent control?
a.
fewer new apartments offered for rent
b.
less maintenance provided by landlords
c.
bribery
d.
higher quality housing
186. Rent control
a.
is an example of a price ceiling.
b.
leads to a larger shortage of apartments in the long run than in the short run.
c.
leads to lower rents and, in the long run, to lower-quality housing.
d.
All of the above are correct.
187. In the housing market, supply and demand are
a.
more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in
the short run than in the long run.
b.
more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in
the long run than in the short run.
c.
more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in
the short run than in the long run.
d.
more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in
the long run than in the short run.
188. Rent control policies tend to cause
a.
relatively smaller shortages in the short run than in the long run because supply and demand tends to be more
elastic in the short run than in the long run.
b.
relatively larger shortages in the short run than in the long run because supply and demand tends to be more
elastic in the short run than in the long run.
c.
relatively larger shortages in the short run than in the long run because supply and demand tends to be more
inelastic in the short run than in the long run.
d.
relatively smaller shortages in the short run than in the long run because supply and demand tends to be more
inelastic in the short run than in the long run.
189. In the short run, rent control causes the quantity supplied
a.
and quantity demanded to fall.
b.
to fall and quantity demanded to rise.
c.
to rise and quantity demanded to fall.
d.
and quantity demanded to rise.
190. Which of the following is not a short-run effect of rent control on the housing market?
a.
reduced rents
b.
a large shortage
c.
a small increase in quantity demanded
d.
a small decrease in quantity supplied
191. Over time, housing shortages caused by rent control
a.
increase, because the demand for and supply of housing are less elastic in the long run.
b.
increase, because the demand for and supply of housing are more elastic in the long run.
c.
decrease, because the demand for and supply of housing are less elastic in the long run.
d.
decrease, because the demand for and supply of housing are more elastic in the long run.
192. Which of the following statements about the effects of rent control is correct?
a.
The short-run effect of rent control is a surplus of apartments, and the long-run effect of rent control is a
shortage of apartments.
b.
The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent
control is a larger shortage of apartments.
c.
In the long run, rent control leads to a shortage of apartments and an improvement in the quality of available
apartments.
d.
The effects of rent control are very noticeable to the public in the short run because the primary effects of rent
control occur very quickly.
193. The long-run effects of rent controls are a good illustration of the principle that
a.
society faces a short-run tradeoff between unemployment and inflation.
b.
the cost of something is what you give up to get it.
c.
people respond to incentives.
d.
government can sometimes improve on market outcomes.
194. An alternative to rent-control laws that would not reduce the quantity of housing supplied is
a.
the payment by government of a fraction of a poor family’s rent.
b.
higher taxes on rental income earned by landlords.
c.
a policy that prevents landlords from evicting tenants.
d.
a policy that allows government to confiscate residential property for the purpose of commercial development.
195. Which of the following is correct?
a.
Rent control and the minimum wage are both examples of price ceilings.
b.
Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor.
c.
Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling.
d.
Rent control and the minimum wage are both examples of price floors.
196. Which of the following is not correct? In a 2006 survey of Ph.D. economists,
a.
47 percent favored eliminating the minimum wage.
b.
14 percent would maintain the minimum wage at its current level.
c.
38 percent would increase the minimum wage.
d.
10 percent would decrease the minimum wage.
197. An example of a price floor is
a.
the regulation of gasoline prices in the U.S. in the 1970s.
b.
rent control.
c.
the minimum wage.
d.
any restriction on price that leads to a shortage.
198. The minimum wage is an example of a
a.
price ceiling.
b.
price floor.
c.
wage subsidy.
d.
tax.
199. Minimum-wage laws dictate the
a.
average price employers must pay for labor.
b.
highest price employers may pay for labor.
c.
lowest price employers may pay for labor.
d.
the highest and lowest prices employers may pay for labor.
200. The U.S. Congress first instituted a minimum wage in
a.
1776.
b.
1812.
c.
1938.
d.
1975.
201. The minimum wage was instituted to ensure workers
a.
a middle-class standard of living.
b.
employment.
c.
a minimally adequate standard of living.
d.
unemployment compensation.
202. In 2012, the U.S. minimum wage according to federal law was
a.
$4.25 per hour.
b.
$5.15 per hour.
c.
$5.75 per hour.
d.
$7.25 per hour.
203. Which of the following is not correct?
a.
Some states in the U.S. mandate minimum wages above the federal level.
b.
Most European nations have minimum-wage laws.
c.
The U.S. minimum wage is significantly higher than the minimum wages in France and the United Kingdom.
d.
The U.S. Congress first instituted a minimum wage with the Fair Labor Standards Act.
204. If the minimum wage exceeds the equilibrium wage, then
a.
the quantity demanded of labor will exceed the quantity supplied.
b.
the quantity supplied of labor will exceed the quantity demanded.
c.
the minimum wage will not be binding.
d.
there will be no unemployment.
205. A minimum wage that is set below a market’s equilibrium wage will
a.
result in an excess demand for labor, that is, unemployment.
b.
result in an excess demand for labor, that is, a shortage of workers.
c.
result in an excess supply of labor, that is, unemployment.
d.
have no impact on employment.
206. A binding minimum wage
a.
alters both the quantity demanded and quantity supplied of labor.
b.
affects only the quantity of labor demanded; it does not affect the quantity of labor supplied.
c.
has no effect on the quantity of labor demanded or the quantity of labor supplied.
d.
causes only temporary unemployment because the market will adjust and eliminate any temporary surplus of
workers.
207. Which of the following is not correct?
a.
The economy contains many labor markets for different types of workers.
b.
The impact of the minimum wage depends on the skill and experience of the worker.
c.
The minimum wage is binding for workers with high skills and much experience.
d.
The minimum wage is not binding when the equilibrium wage is above the minimum wage.
208. The minimum wage has its greatest impact on the market for
a.
female labor.
b.
older labor.
c.
black labor.
d.
teenage labor.
209. The minimum wage does not apply to
a.
jobs for teenagers.
b.
jobs for members of minority groups.
c.
unpaid internships.
d.
jobs that include on-the-job training.
210. Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage depresses
teenage employment by about
a.
1 to 3 percent.
b.
5 to 7 percent.
c.
10 percent.
d.
None of the above is correct because studies show no decrease in teenage employment.
211. Which of the following is correct?
a.
Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage
raises the average wage of teenagers by 10 percent.
b.
The drop in teenage employment caused by a 10 percent increase in the minimum wage is not significant.
c.
The minimum wage is more often binding for teenagers than for other members of the labor force.
d.
All firms consistently enforce minimum-wage laws.
212. The minimum wage
a.
is an example of a price ceiling.
b.
has its greatest impact on middle-aged and immigrant workers.
c.
does not apply to unpaid internships.
d.
does not affect the quantity of labor demanded; it only affects the quantity of labor supplied.
213. A binding minimum wage tends to
a.
cause a labor surplus.
b.
cause unemployment.
c.
have the greatest impact in the market for teenage labor.
d.
All of the above are correct.
214. Minimum wage laws
a.
may encourage some teenagers to drop out and take jobs.
b.
create labor shortages.
c.
have the greatest impact in the market for skilled labor.
d.
All of the above are correct.
215. Advocates of the minimum wage
a.
deny that the minimum wage produces any adverse effects.
b.
emphasize the benefits to teenagers of increases in the minimum wage.
c.
emphasize the low annual incomes of those who work for the minimum wage.
d.
All of the above are correct.
216. Opponents of the minimum wage point out that the minimum wage
a.
encourages teenagers to drop out of school.
b.
prevents some workers from getting needed on-the-job training.
c.
contributes to the problem of unemployment.
d.
All of the above are correct.
217. The proportion of minimum-wage earners who are in families with incomes below the poverty line is
a.
less than one-third.
b.
between one-third and one-half.
c.
between one-half and two-thirds.
d.
greater than two-thirds.
218. There are several criticisms of the minimum wage. Which of the following is not one of those criticisms? The
minimum wage
a.
often hurts those people who it is intended to help.
b.
results in an excess supply of low-skilled labor.
c.
prevents some unskilled workers from getting needed on-the-job training.
d.
fails to raise the wage of any employed person.
219. The minimum wage, if it is binding, raises the incomes of
a.
no workers.
b.
only those workers who cannot find jobs.
c.
only those workers whose jobs would pay less than the minimum wage if it didn’t exist.
d.
all workers.
220. The minimum wage, if it is binding, lowers the incomes of
a.
no workers.
b.
only those workers who become unemployed.
c.
only those workers who have jobs.
d.
all workers.
221. A minimum wage that is set above a market’s equilibrium wage will result in an excess
a.
demand for labor, that is, unemployment.
b.
demand for labor, that is, a shortage of workers.
c.
supply of labor, that is, unemployment.
d.
supply of labor, that is, a shortage of workers.
222. Unlike minimum wage laws, wage subsidies
a.
discourage firms from hiring the working poor.
b.
cause unemployment.
c.
help only wealthy workers.
d.
raise the living standards of the working poor without creating unemployment.
223. The Earned Income Tax Credit is an example of a
a.
minimum-wage law.
b.
price ceiling.
c.
wage subsidy.
d.
rent subsidy.
224. Which of the following is correct? Price controls
a.
always help those they are designed to help.
b.
never help those they are designed to help.
c.
often hurt those they are designed to help.
d.
always hurt those they are designed to help.
225. Which of the following would not interfere with market equilibria?
a.
a minimum wage
b.
a rent control
c.
a non-binding price floor
d.
a binding price ceiling
226. One disadvantage of government subsidies over price controls is that subsidies
a.
prevent the attainment of equilibrium in the markets in which they are imposed.
b.
make higher taxes necessary.
c.
are always unfair to those with low incomes.
d.
cause unemployment.
227. Which of the following is correct?
a.
Workers determine the supply of labor, and firms determine the demand for labor.
b.
Workers determine the demand for labor, and firms determine the supply of labor.
c.
The labor market is a single market for all different types of workers.
d.
The price of the product produced by labor adjusts to balance the supply of labor and the demand for labor.
228. As rationing mechanisms, prices
a.
and long lines are efficient.
b.
are efficient, but long lines are inefficient.
c.
are inefficient, but long lines are efficient.
d.
and long lines are inefficient.
229. As a rationing mechanism, discrimination according to seller bias is
a.
efficient and fair.
b.
efficient, but potentially unfair.
c.
inefficient, but fair.
d.
inefficient and potentially unfair.
230. Long lines
a.
and discrimination according to seller bias are both inefficient rationing mechanisms because they both waste
buyers’ time.
b.
and discrimination according to seller bias are both inefficient rationing mechanisms because the good does
not necessarily go to the buyer who values it most highly.
c.
are an inefficient rationing mechanism because they waste buyers’ time, and discrimination according to seller
bias is an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it
most highly.
d.
are an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it
most highly, and discrimination according to seller bias is an inefficient rationing mechanism because it
wastes buyers’ time.
231. In a market with a binding price control,
a.
there is an imbalance between the quantity supplied by sellers and the quantity demanded by buyers.
b.
the costs of production are fully reflected in the price paid.
c.
the price observe reflects the scarcity of the good.
d.
all of the above are true.
232. Consider the US market for chocolate, a market in which the government has imposed a price ceiling. Which of the
following events could convert the price ceiling from a nonbinding to a binding price ceiling?
a.
a government study that shows that consuming chocolate increases the incidence of cancer.
b.
a large increase in the size of the cocoa bean crop; cocoa beans are used to produce chocolate.
c.
South American cocoa bean producers refuse to ship to chocolate producers in the US.
d.
a sharp drop in consumer income; chocolate is a normal good.
233. Suppose that a binding rent control law is repealed in San Francisco. As a result, we would expect the total number
of units rented in the city to
a.
increase.
b.
decrease.
c.
remain unchanged.
d.
decrease, then increase.
234. A shortage is eliminated when
a.
a binding price ceiling is removed.
b.
a binding price ceiling is enacted.
c.
a nonbinding price ceiling is repealed.
d.
a nonbinding price ceiling is imposed.
235. After OPEC raised the price of crude oil in the 1970’s, which of the following was the most important reason that
there were shortages of gasoline?
a.
Americans drove large, gas-guzzling vehicles.
b.
The increase in the price of crude oil by OPEC.
c.
The effects of a price ceiling on gasoline prices imposed by the US government.
d.
Increased commuting times resulting from traffic congestion.
236. Rent controls can cause
a.
a decline in the quality of housing available for rent.
b.
the development of a black market to allocate apartments to renters.
c.
longer search times for renters attempting to locate an apartment.
d.
all of these are possible results of rent controls.
Figure 6-31
237. Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30. The effect of this
price ceiling would be
a.
nonbinding and cause a shortage of 50 units.
b.
binding and cause a shortage of 50 units.
c.
binding and cause a shortage of 20 units.
d.
nonbinding and have no effect on the market.
238. Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30 and market demand for
the good subsequently increases. This would
a.
decrease the size of the surplus.
b.
decrease the size of the shortage.
c.
increase the size of the surplus.
d.
increase the size of the shortage.
Figure 6-32
239. Refer to Figure 6-32. Which of the following statements is NOT accurate regarding the situation reflected by this
diagram?
a.
the price will reflect the scarcity of the good when a price floor is imposed at a price of $8.
b.
the price will reflect the scarcity of the good when a price ceiling is imposed at a price of $10.
c.
the price will reflect the scarcity of the good when a price ceiling is imposed at a price of $12.
d.
the price will reflect the scarcity of the good when a price floor is imposed at a price of $14.
240. Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market?
a.
a shortage will develop when a price ceiling is imposed at a price of $10.
b.
a surplus will develop when a price floor is imposed at a price of $8.
c.
a surplus will develop when a price floor is imposed at a price of $12.
d.
a shortage will develop when a price ceiling is imposed at a price of $14.