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Refer to the accompanying table to answer the questions that follow. Refer to the accompanying table to answer the questions that follow. -If rent control is established at $1,750,what would be the amount of disequilibrium in the apartment market? A) There would be a shortage of 23,500 apartments. B) There would be a surplus of 23,500 apartments that is reduced, over time, as individuals rent apartments in the illegal black market. C) There would be neither a shortage nor a surplus. D) There would be a surplus of 23,500 apartments that is eliminated through individuals renting apartments in the illegal black market. E) There would be a surplus of 23,500 apartments that increases as houses and condominiums are converted into apartments. -If rent control is established at $1,750,what would be the amount of disequilibrium in the apartment market?


A) There would be a shortage of 23,500 apartments.
B) There would be a surplus of 23,500 apartments that is reduced, over time, as individuals rent apartments in the illegal black market.
C) There would be neither a shortage nor a surplus.
D) There would be a surplus of 23,500 apartments that is eliminated through individuals renting apartments in the illegal black market.
E) There would be a surplus of 23,500 apartments that increases as houses and condominiums are converted into apartments.

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Mortimer loves sushi.He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law.Who would be affected by this law and how?


A) Sellers would benefit from such a law because they would receive a higher price for their product.
B) Consumers would benefit from such a law because prices would be lower and all would be able to purchase sushi cheaply.
C) Consumers would benefit from such a law because the sushi would be made of higher-quality fish, and each serving would be larger than it would have been with no binding price ceiling in place.
D) Some consumers would benefit from such a law because prices for sushi would be lower for those able to buy it in the legal market.
E) Sellers would benefit from such a law because they would be able to sell higher-quality sushi and thus capture a larger share of the market.

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Which of the following is an accurate statement about the consequence of a binding price floor?


A) Binding price floors do not allow sellers to receive a higher price if they sell the product in the legal market.
B) Binding price floors encourage the formation of a black market.
C) Binding price floors discourage the formation of a black market.
D) Binding price floors create a shortage of the product.
E) Binding price floors cause consumers to want to purchase more of the product in the legal market.

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Use the following table to answer the questions that follow. Use the following table to answer the questions that follow. -If the price floor for corn is set at $5.00,what amount and type of disequilibrium will be present in the market for corn? A) There will be no shortage or surplus. B) There will be a shortage of 103,000. C) There will be a surplus of 103,000. D) There will be a surplus of 223,000. E) There will be a surplus of 120,000. -If the price floor for corn is set at $5.00,what amount and type of disequilibrium will be present in the market for corn?


A) There will be no shortage or surplus.
B) There will be a shortage of 103,000.
C) There will be a surplus of 103,000.
D) There will be a surplus of 223,000.
E) There will be a surplus of 120,000.

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What is the long-run consequence of a price ceiling law?


A) A surplus will continue to exist and will grow larger over time.
B) A surplus will continue to exist and will grow smaller over time.
C) A shortage will continue to exist and will grow larger over time.
D) A shortage will continue to exist and will grow smaller over time.
E) The amount of the surplus will not change.

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Let's say that you have a friend who was caught illegally selling a good on the black market.When the judge asks you to describe your friend's motivation as a seller,which of the following would most likely be your reply?


A) My friend sold the good on the black market because a binding price floor had created a shortage in the legal market and my friend was performing a public service by making the good available.
B) My friend sold the good on the black market because a non-binding price ceiling caused the price to be lower on the black market.
C) My friend sold the good on the black market because a non-binding price floor had created a shortage in the legal market and my friend was performing a public service by making the good available.
D) My friend sold the good on the black market because a non-binding price floor made the good too expensive to purchase in the legal market and it was cheaper on the black market.
E) My friend sold the good on the black market because a binding price floor resulted in a surplus of the product in the legal market and he needed to get rid of the surplus.

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What will I do differently as a buyer in the black market in the long run?


A) I will substitute away from the product.
B) I will substitute toward the product.
C) When a binding price floor exists, I will be willing to pay a higher price.
D) When a binding price ceiling exists, I will be willing to pay a lower price.
E) What I as a buyer do in the long run will be no different from what I do in the short run.

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When market participants are allowed through their interactions to find the price,there will be equilibrium where the quantity supplied by buyers equals the quantity supplied by sellers.If this is the case,why does the government intervene in certain markets by imposing a price floor? Why does the government intervene in certain markets by imposing a price ceiling? Which market participant (the buyer or the seller)will lobby the government to secure passage of a binding price floor? Which one will lobby for a binding price ceiling?

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The government will generally intervene ...

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Suppose you live in a community with no price controls.What do you expect will happen if your town borders a community where there is a binding price ceiling on most products?


A) Prices in the legal market in the community with a binding price ceiling will rise.
B) Prices in the legal market in the community with a binding price ceiling will fall.
C) There will be shortages in the community with a binding price ceiling.
D) More consumers will purchase the product in the community with the price ceiling.
E) The black market in your community will be larger than the black market in the community with the binding price ceiling.

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Use the following figure to answer the questions that follow. Use the following figure to answer the questions that follow. -The accompanying figure describes the market for gasoline in a local community.If the government were to place a price floor at Pā‚,what would be the resulting surplus or shortage? A) There would be a shortage of 75,000 units. B) There would be a surplus of 75,000 units. C) There would be neither a shortage nor a surplus. D) There would be a shortage of 150,000 units. E) There would be a surplus of 150,000 units. -The accompanying figure describes the market for gasoline in a local community.If the government were to place a price floor at Pā‚,what would be the resulting surplus or shortage?


A) There would be a shortage of 75,000 units.
B) There would be a surplus of 75,000 units.
C) There would be neither a shortage nor a surplus.
D) There would be a shortage of 150,000 units.
E) There would be a surplus of 150,000 units.

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Why does a surplus exist under a binding price floor?


A) It encourages sellers to produce less of the product.
B) It encourages buyers to purchase more of the product.
C) It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.
D) It makes the price so low that the quantity demanded exceeds the quantity supplied on the legal market.
E) It discourages sellers from increasing the quality of the product they sell, which, in turn, increases the quantity demanded.

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Discuss why any society would want a binding price floor law on a commodity such as corn.Who would benefit? Who would suffer? If it is the case that more suffering is caused by the presence of a price floor law,why does it remain in effect?

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A society might interpret a binding pric...

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Use the following information to answer the questions that follow. Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P -What would be the quantity demanded if a price ceiling is set at $20?


A) 90
B) 45
C) 265
D) 165
E) 305

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Why are the long-run consequences of a price control different from the short-run consequences of a price control? Be specific,and consider both price floors and price ceilings in your answer.

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The long-run consequence of a price floo...

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One strategy I might use to be elected mayor of a university town is to place a binding price ceiling on rent for student apartments.What will happen if I get elected and am able to pass such a law?


A) The price ceiling will increase the number of apartments available for rent.
B) The price ceiling will cause the demand curve to shift.
C) The price ceiling will cause the supply curve to shift.
D) The price ceiling will decrease the number of students who want to rent an apartment.
E) The price ceiling will cause students to sleep in their cars or to move in with their friends because they will not be able to find a place to live.

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Let's say that you are a politician who promises cheaper gasoline for everyone in the country if you are elected.Once you are elected,you make gas cheaper by imposing a price ceiling that is one full dollar less than the market's equilibrium price.What would be the reaction of the sellers of gasoline and of the public to your price ceiling law? Would you expect to be reelected in the long run?

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The public would initially be quite happ...

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As a voter,why would or would you not vote for a referendum calling for an increase in the minimum wage? What consequences would result from raising the minimum wage?

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Students' answers will vary.If the stude...

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Use the following information to answer the questions that follow. Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P -What would be the quantity demanded if a price ceiling is set at $50?


A) 90
B) 35
C) 265
D) 165
E) 75

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What will happen in a market where a binding price ceiling is removed?


A) There will be downward pressure on the price in the legal market.
B) The products sold will improve in quality and become more plentiful.
C) Sellers will face a reduced incentive to sell the product.
D) Buyers will find the good more difficult to obtain in the legal market.
E) There will be increased pressure to buy and sell the good on the black market.

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Why is raising the minimum wage generally ineffective?


A) Most employers purchase labor on the black market, where the binding price floor is not present.
B) The minimum wage is an amount suggested by the government, and employers are under no obligation to pay their employees the suggested basic wage.
C) The minimum wage is usually set below the prevailing equilibrium wage and is frequently non-binding.
D) Employees are often unconcerned with their wages and care more about the benefits that come with the job.
E) Most employees who hold low-wage jobs work in the black market, where the binding price floor does not exist.

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