Question 1

People typically blame price controls for the problems caused by price controls.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that supply is fixed at 100 units and demand is Q = 500 - P. A price ceiling of $100 creates a shortage of 400 units.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions: Figure: Price Ceiling of Ps 
-(Figure: Price Ceiling of Ps)  Refer to the figure. Suppose a price ceiling of Ps is imposed. The shaded area may likely represent all of the following EXCEPT:

Accepted Answer

A)   value of wasted time.
B)   the amount that buyers bribe sellers.
C)   the amount of corruption.
D)   consumer surplus.

Question 4

Use the following to answer questions: Figure: Effects of Price Ceilings 
-(Figure: Effects of Price Ceilings)  Refer to the figure. At a price ceiling of $2 per unit, consumers are willing to pay a maximum of:

Accepted Answer

A)   $2.00.
B)   $2.50.
C)   $3.00.
D)   $4.00.

Question 5

The blat economy described in the text results when price controls are:

Accepted Answer

A)   extensive and cause chronic shortages in the economy.
B)   extensive but the causes of shortages in the economy are only temporary.
C)   short-lasting but cause chronic shortages in the economy.
D)   short-lasting and cause only temporary shortages in the economy.

Question 6

Rent controls are:

Accepted Answer

A)   price floors on rental housing.
B)   price ceilings on rental housing.
C)   quality freezes on rental housing.
D)   quantity freezes on rental housing.

Question 7

Use the following to answer questions: Figure: Supply and Demand 4 
-(Figure: Supply and Demand 4)  Refer to the figure. If the good is purchased by those with the highest willingness to pay, what is the value of consumer surplus in the figure at the price ceiling of $8?

Accepted Answer

A)   $54
B)   $136
C)   $36
D)   $45

Question 8

Which statement(s)  about price ceilings are TRUE?
I. Price ceilings cause quantity demanded to exceed quantity supplied.
II. When including time costs and bribes, consumers pay a total price in excess of the price ceiling.
III. All else equal, it is more wasteful to allocate goods based on bribes than on waiting time costs.

Accepted Answer

A)   I only
B)   II and III only
C)   I and II only
D)   I, II, and III

Question 9

When price floors are in effect, goods and services:

Accepted Answer

A)   are still allocated efficiently.
B)   are not necessarily supplied by their lowest-cost producer.
C)   do not necessarily flow to their highest-valued use.
D)   are neither necessarily supplied by their lowest-cost producer nor do they flow to their highest-valued use.

Question 10

Labor unions are composed of high-skilled workers, but generally support minimum wage laws that typically affect only low-skilled workers. Their support makes more sense by considering that low-skilled labor is a ______ for high-skilled labor, and minimum wages ______ the quantity demanded of low-skilled labor.

Accepted Answer

A)   complement; increase
B)   complement; decrease
C)   substitute; increase
D)   substitute; decrease

Question 11

After a hurricane, the prices of many items rise. How BEST might the government help poor people be able to afford to buy goods and services?

Accepted Answer

A)   institute price controls at pre-hurricane prices
B)   set prices at zero, so consumers can buy what they need without financial distress
C)   give poor people debit cards for use in purchasing essential items, while leaving prices unregulated
D)   institute a wage freeze to keep the costs of production from rising too rapidly

Question 12

Figure: Allocating Goods under Price Ceilings  
Refer to the figure. Using the information provided in the graph, answer the following questions:
a. If the goods were allocated only to those users who had the highest-value uses, find the total dollar amount of consumer surplus.
b. If the goods are allocated randomly between the high-value uses and the low-value uses, then what is the average value of the good?
c. If goods are allocated randomly, what is the total dollar amount of consumer surplus?

Accepted Answer

a. Consumer surplus, if the goods were a...

Question 13

If price controls are so harmful, why would a country ever impose them?

Accepted Answer

A)   No one really knows.
B)   Price controls are usually thought to be beneficial.
C)   Politicians have strong incentives to respond to public opinion with price controls when prices increase sharply.
D)   People usually see the consequences of price controls but think they will be a good policy.

Question 14

Under a policy of rent control, the short-run shortage ______ the long-run shortage.

Accepted Answer

A)   is smaller than
B)   is larger than
C)   is equal to
D)   overshadows

Question 15

Deadweight loss is:

Accepted Answer

A)   necessary to ensure that resources are channeled to their highest-valued use.
B)   the loss to the economy from firms going out of business due to competition.
C)   usually offset by deadweight gains.
D)   the total of lost consumer and producer surplus when not all mutually profitable gains from trade are exploited.

Question 16

Use the following to answer questions: Figure: Supply and Demand 5 
-(Figure: Supply and Demand 5)  Refer to the figure. In the figure, representing a market for apartments, a rent-controlled price of $800 will cause:

Accepted Answer

A)   a short-run shortage of 6,000 apartments.
B)   a short-run shortage of 8,000 apartments.
C)   a short-run shortage of 3,000 apartments.
D)   a short-run surplus of 14,000 apartments.

Question 17

Under rent control, tenants can expect:

Accepted Answer

A)   lower rent and higher-quality housing.
B)   lower rent and lower-quality housing.
C)   higher rent and a shortage of housing.
D)   higher rent and a surplus of housing.

Question 18

How did economists try to prove that reductions in new apartment building in Ontario, Canada, during the 1970-1975 period were a result of debates on rent control?

Accepted Answer

A)   They showed that the economy was declining during this period.
B)   They pointed to the fact that the OPEC oil crisis occurred at this time.
C)   They contrasted the fact that apartment building was declining while new house building was rising, in the same state of the economy.
D)   They pointed to the fact that rent controls had not been implemented during the OPEC oil crisis.

Question 19

A shortage results when:

Accepted Answer

A)   a price floor is imposed.
B)   a price ceiling is imposed.
C)   there is excess supply without any price controls.
D)   a price floor is imposed but it is not binding.

Question 20

The quantity traded with a binding price ceiling is lower than the quantity traded without a price ceiling, which means that price ceilings create lost gains from trade.

Accepted Answer

A) True 
 B)False

Exam 8: Price Ceilings and Floors

A shortage results when:

Correct Answer
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Deadweight loss is:

Correct Answer
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Correct Answer
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Suppose that supply is fixed at 100 units and demand is Q = 500 - P. A price ceiling of $100 creates a shortage of 400 units.

Correct Answer
verified

After a hurricane, the prices of many items rise. How BEST might the government help poor people be able to afford to buy goods and services?

Correct Answer
verified

The quantity traded with a binding price ceiling is lower than the quantity traded without a price ceiling, which means that price ceilings create lost gains from trade.

Correct Answer
verified

Under a policy of rent control, the short-run shortage ______ the long-run shortage.

Correct Answer
verified

Correct Answer
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a. Consumer surplus, if the goods were a...
View Answer

People typically blame price controls for the problems caused by price controls.

Correct Answer
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Use the following to answer questions: Figure: Effects of Price Ceilings -(Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2 per unit, consumers are willing to pay a maximum of:

Correct Answer
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Under rent control, tenants can expect:

Correct Answer
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Use the following to answer questions: Figure: Supply and Demand 4 -(Figure: Supply and Demand 4) Refer to the figure. If the good is purchased by those with the highest willingness to pay, what is the value of consumer surplus in the figure at the price ceiling of $8?

Correct Answer
verified

Use the following to answer questions: Figure: Price Ceiling of Ps -(Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. The shaded area may likely represent all of the following EXCEPT:

Correct Answer
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When price floors are in effect, goods and services:

Correct Answer
verified

How did economists try to prove that reductions in new apartment building in Ontario, Canada, during the 1970-1975 period were a result of debates on rent control?

Correct Answer
verified

Use the following to answer questions: Figure: Supply and Demand 5 -(Figure: Supply and Demand 5) Refer to the figure. In the figure, representing a market for apartments, a rent-controlled price of $800 will cause:

Correct Answer
verified

If price controls are so harmful, why would a country ever impose them?

Correct Answer
verified

Rent controls are:

Correct Answer
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The blat economy described in the text results when price controls are:

Correct Answer
verified

Labor unions are composed of high-skilled workers, but generally support minimum wage laws that typically affect only low-skilled workers. Their support makes more sense by considering that low-skilled labor is a for high-skilled labor, and minimum wages the quantity demanded of low-skilled labor.

Correct Answer
verified

Exam 8: Price Ceilings and Floors

A shortage results when:

Correct AnswerverifiedShow Answer

Deadweight loss is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that supply is fixed at 100 units and demand is Q = 500 - P. A price ceiling of $100 creates a shortage of 400 units.

Correct AnswerverifiedShow Answer

After a hurricane, the prices of many items rise. How BEST might the government help poor people be able to afford to buy goods and services?

Correct AnswerverifiedShow Answer

The quantity traded with a binding price ceiling is lower than the quantity traded without a price ceiling, which means that price ceilings create lost gains from trade.

Correct AnswerverifiedShow Answer

Under a policy of rent control, the short-run shortage ______ the long-run shortage.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Consumer surplus, if the goods were a...View AnswerShow Answer

People typically blame price controls for the problems caused by price controls.

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Effects of Price Ceilings -(Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2 per unit, consumers are willing to pay a maximum of:

Correct AnswerverifiedShow Answer

Under rent control, tenants can expect:

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Supply and Demand 4 -(Figure: Supply and Demand 4) Refer to the figure. If the good is purchased by those with the highest willingness to pay, what is the value of consumer surplus in the figure at the price ceiling of $8?

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Price Ceiling of Ps -(Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. The shaded area may likely represent all of the following EXCEPT:

Correct AnswerverifiedShow Answer

When price floors are in effect, goods and services:

Correct AnswerverifiedShow Answer

How did economists try to prove that reductions in new apartment building in Ontario, Canada, during the 1970-1975 period were a result of debates on rent control?

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Supply and Demand 5 -(Figure: Supply and Demand 5) Refer to the figure. In the figure, representing a market for apartments, a rent-controlled price of $800 will cause:

Correct AnswerverifiedShow Answer

If price controls are so harmful, why would a country ever impose them?

Correct AnswerverifiedShow Answer

Rent controls are:

Correct AnswerverifiedShow Answer

The blat economy described in the text results when price controls are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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a. Consumer surplus, if the goods were a...
View Answer

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Correct Answer
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Correct Answer
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