Question 1

Why is it often difficult to remove a binding price floor after it exists?

Accepted Answer

A)   in general, because consumers benefit from the lower prices and would lobby their elected officials to keep the price control
B)   in general, because consumers benefit from higher quality products and would lobby their elected officials to keep the price control
C)   in general, because consumers benefit from larger products and would lobby their elected officials to keep the price control
D)   in general, because sellers benefit from higher prices and would lobby their elected officials to keep the price control
E)   in general, because it has little effect on the market price and people forget about it

Question 2

Use the following table to answer the next five questions.
 
-What is the equilibrium quantity in the market for public transportation?

Accepted Answer

A)   100,000
B)   86,000
C)   75,000
D)   116,000
E)   0 (zero)

Question 3

If a price ceiling or price floor existed where you lived,would you be willing to purchase products on the black market? What would you identify as a consequence to engaging in transactions on the black market over the short run and the long run?

Accepted Answer

Students' answers will vary.If a student...

Question 4

An example of a binding price ceiling is:

Accepted Answer

A)   a minimum wage law that is set above the equilibrium price.
B)   rent control that is set above the equilibrium price.
C)   a black market that sets the price below the equilibrium price.
D)   a minimum wage law that is set below the equilibrium price.
E)   rent control that is set below the equilibrium price.

Question 5

Use the following information to answer the next two questions.
Market for flat-screen TVs:
Demand: Qd = 2,600 - 5 P
Supply: Qs = -1,000 + 10 P
-What would be the quantity demanded if a price ceiling is set at $150?

Accepted Answer

A)   500
B)   1,850
C)   240
D)   1,350
E)   260

Question 6

You are the president of the United States.In an attempt to make gasoline prices cheaper,you have imposed a binding price ceiling on gas.What would you expect your critics to say?

Accepted Answer

A)   The binding price ceiling will encourage oil companies to deplete the resource too quickly.
B)   The binding price ceiling will discourage individuals from using their personal automobile to commute to work or school.
C)   The binding price ceiling will cause firms to minimize their spending on the research and development of alternatives to gasoline.
D)   The binding price ceiling will increase the likelihood that customers obtain needed gasoline on the black market.
E)   The binding price ceiling will cause firms to produce only gasoline of the highest quality.

Question 7

Use the following information to answer the next three questions.
Market for flat-screen TVs:
Demand: Qd = 2,600 - 5 P
Supply: Qs = -1,000 + 10 P
-What would be the quantity demanded if a price floor is set at $100?

Accepted Answer

A)   240
B)   2,100
C)   0
D)   1,400
E)   700

Question 8

Refer to the accompanying table to answer the next five questions.
 
-At what price level does the apartment market reach equilibrium?

Accepted Answer

A)   $1,500
B)   $1,550
C)   $1,600
D)   $1,650
E)   $1,700

Question 9

As a politician,you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would:

Accepted Answer

A)   remain below the equilibrium wage and be binding.
B)   remain above the equilibrium wage and be binding.
C)   remain below the equilibrium wage and be nonbinding.
D)   remain above the equilibrium wage and be nonbinding.
E)   be equal to the equilibrium wage.

Question 10

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

Accepted Answer

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.

Question 11

A real-life example of a binding price ceiling is:

Accepted Answer

A)   a minimum wage law.
B)   rent control.
C)   a price gouging law.
D)   a black market price.
E)   a ration price.

Question 12

Some states and localities have laws that make it illegal to resell event tickets at prices higher than the original,legal market price.What would be the positive and negative consequences to such a law?

Accepted Answer

The positive consequence would be for th...

Question 13

The town of Fairness has a law stating that wages should be high enough to ensure that all people can afford to buy enough food for their families.The law that sets wages would be an example of a:

Accepted Answer

A)   minimum wage law.
B)   fair wage law.
C)   price ceiling.
D)   black market price.
E)   ration price.

Question 14

As a seller of a product subject to a binding price floor,you would be better off in which of the following situations?

Accepted Answer

A)   You would be better off under a binding price floor because you would be able to sell all that you produce at a higher price.
B)   You would be better off under a binding price floor because you would be able to sell goods that are smaller and cost less to produce.
C)   You would be better off under a binding price floor because you would be able to sell goods of lower quality, which cost less to produce.
D)   You would be better off under a binding price floor because you could sell any of the resulting surplus to the government.
E)   There is no scenario where a seller is better off when selling a good that is subject to a binding price floor.

Question 15

You are a senator from Kansas who wants to help farmers.You have worked to encourage the passage of a law that would impose a binding price floor on wheat.What would you expect your critics to say?

Accepted Answer

A)   The binding price floor will discourage farmers from planting wheat and they will plant other crops instead.
B)   The binding price floor will encourage consumers to eat too much wheat.
C)   The binding price floor will discourage farmers from using the most productive farming methods available.
D)   The binding price floor will cause a shortage of wheat.
E)   The binding price floor will cause a surplus of wheat that farmers will be unable to sell.

Question 16

If a good is subject to a binding price ceiling and you purchase it on the black market,what do you expect to happen to the availability of the good over time?

Accepted Answer

A)   The availability of the good will rise over time as the supply curve becomes more elastic and the demand curve becomes more inelastic.(The shortage of the good will fall.) 
B)   The availability of the good will fall over time as both the supply and demand curves become more elastic.(The shortage of the good will fall.) 
C)   The availability of the good will fall over time as both the supply and demand curves become more elastic.(The shortage of the good will rise.) 
D)   The availability of the good will rise over time as the demand curve becomes more elastic and the supply curve becomes more inelastic.(The shortage of the good will fall.) 
E)   The availability of the good will not change over time.

Question 17

Which of the following is true,holding all other things constant,when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?

Accepted Answer

A)   In regions with the highest minimum wage, most of the jobs require low skills and workers are not productive enough to get paid the higher wage.
B)   In regions with the lowest minimum wage, most of the jobs require technical skills and no one works minimum wage jobs.
C)   In regions with the lowest minimum wage, the price control is nonbinding; in the regions with the highest minimum wage, the price control is binding.
D)   In regions with the lowest minimum wage, the price control is binding; in the regions with the highest minimum wage, the price control is nonbinding.
E)   In regions with the highest minimum wage, the minimum wage law is legally enforced; in regions with the lowest minimum wage, the law is not strongly enforced.

Question 18

Use the following information to answer the next four questions.
Market for used cars:
Demand: Qd = 154,000 - 86 P
Supply: Qs = -100 + 14 P
-What would be the quantity supplied if a price floor is set at $2,000?

Accepted Answer

A)   9,900
B)   200
C)   27,900
D)   1,541
E)   18,000

Question 19

What is a black market? Under what conditions does such a market emerge? How do the prices charged on the black market compare to the conditions that exist in the legal market?

Accepted Answer

A black market is an illegal market that...

Question 20

Refer to the accompanying table to answer the next five questions.
 
-If rent control is established at $1,550,what would be the amount of disequilibrium in the apartment market?

Accepted Answer

A)   There would be a shortage of 28,990 apartments.
B)   There would be a surplus of 28,990 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 28,990 apartments that is eliminated through individuals renting apartments in the illegal black market.
E)   There would be a surplus of 28,990 apartments that increases as houses and condominiums are converted into apartments.

Exam 4: Price Controls

Use the following information to answer the next four questions. Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P -What would be the quantity supplied if a price floor is set at $2,000?

Correct AnswerverifiedShow Answer

As a politician,you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would:

Correct AnswerverifiedShow Answer

An example of a binding price ceiling is:

Correct AnswerverifiedShow Answer

You are the president of the United States.In an attempt to make gasoline prices cheaper,you have imposed a binding price ceiling on gas.What would you expect your critics to say?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a price ceiling or price floor existed where you lived,would you be willing to purchase products on the black market? What would you identify as a consequence to engaging in transactions on the black market over the short run and the long run?

Correct AnswerverifiedStudents' answers will vary.If a student...View AnswerShow Answer

What is a black market? Under what conditions does such a market emerge? How do the prices charged on the black market compare to the conditions that exist in the legal market?

Correct AnswerverifiedA black market is an illegal market that...View AnswerShow Answer

Why is it often difficult to remove a binding price floor after it exists?

Correct AnswerverifiedShow Answer

A real-life example of a binding price ceiling is:

Correct AnswerverifiedShow Answer

Some states and localities have laws that make it illegal to resell event tickets at prices higher than the original,legal market price.What would be the positive and negative consequences to such a law?

Correct AnswerverifiedThe positive consequence would be for th...View AnswerShow Answer

Refer to the accompanying table to answer the next five questions. -If rent control is established at $1,550,what would be the amount of disequilibrium in the apartment market?

Correct AnswerverifiedShow Answer

The town of Fairness has a law stating that wages should be high enough to ensure that all people can afford to buy enough food for their families.The law that sets wages would be an example of a:

Correct AnswerverifiedShow Answer

Which of the following is true,holding all other things constant,when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?

Correct AnswerverifiedShow Answer

Use the following information to answer the next three questions. Market for flat-screen TVs: Demand: Qd = 2,600 - 5 P Supply: Qs = -1,000 + 10 P -What would be the quantity demanded if a price floor is set at $100?

Correct AnswerverifiedShow Answer

Refer to the accompanying table to answer the next five questions. -At what price level does the apartment market reach equilibrium?

Correct AnswerverifiedShow Answer

You are a senator from Kansas who wants to help farmers.You have worked to encourage the passage of a law that would impose a binding price floor on wheat.What would you expect your critics to say?

Correct AnswerverifiedShow Answer

Use the following information to answer the next two questions. Market for flat-screen TVs: Demand: Qd = 2,600 - 5 P Supply: Qs = -1,000 + 10 P -What would be the quantity demanded if a price ceiling is set at $150?

Correct AnswerverifiedShow Answer

If a good is subject to a binding price ceiling and you purchase it on the black market,what do you expect to happen to the availability of the good over time?

Correct AnswerverifiedShow Answer

As a seller of a product subject to a binding price floor,you would be better off in which of the following situations?

Correct AnswerverifiedShow Answer

Use the following table to answer the next five questions. -What is the equilibrium quantity in the market for public transportation?

Correct AnswerverifiedShow Answer

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Students' answers will vary.If a student...
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A black market is an illegal market that...
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The positive consequence would be for th...
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Use the following information to answer the next two questions. Market for flat-screen TVs: Demand: Q_d = 2,600 - 5 P Supply: Q_s = -1,000 + 10 P -What would be the quantity demanded if a price ceiling is set at $150?

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