Question 1

A binding price floor creates a surplus, which means:

Accepted Answer

A)   there will be downward pressure on prices until quantity demanded equals quantity supplied.
B)   there will be upward pressure on prices until quantity demanded equals quantity supplied.
C)   there will be upward pressure on the quantity demanded until quantity demanded equals quantity supplied.
D)   the quantity demanded will always exceed the quantity supplied.
E)   the quantity demanded will always be smaller than the quantity supplied.

Question 2

Use the following information to answer the next  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 ceiling is set at $2,000?

Accepted Answer

A)   100
B)   154,100
C)   27,900
D)   21,474
E)   18,000

Question 3

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?

Accepted Answer

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.

Question 4

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 5

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

Accepted Answer

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

Question 6

Use the following table to answer the next questions. 
-At what price level does the labor market reach equilibrium?

Accepted Answer

A)   $5.00
B)   $5.50
C)   $6.00
D)   $6.50
E)   $7.00

Question 7

Refer to the accompanying figure, which shows both short-run and long-run demand and supply curves. If there is a $4 binding price ceiling imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run?

Accepted Answer

A)   There will be a shortage of 1,500,000 units.
B)   There will be a shortage of 800,000 units.
C)   There will not be a shortage; there will be a surplus.
D)   There will be a shortage of 2,000,000 units.
E)   There will be a shortage of 500,000 units.

Question 8

Why does a surplus exist under a binding price floor?

Accepted Answer

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.

Question 9

Use the following figure to answer the next  questions. 
-Refer to the accompanying figure. At the price of the binding price floor, by how much would the quantity supplied change from the market equilibrium?

Accepted Answer

A)   The quantity supplied would increase by 32,000 units.
B)   The quantity supplied would decrease by 18,000 units.
C)   The quantity supplied would increase by 30,500 units.
D)   The quantity supplied would decrease by 30,500 units.
E)   The quantity supplied would decrease by 32,000 units.

Question 10

Who potentially benefits from a price floor?

Accepted Answer

A)   workers
B)   employers
C)   no one
D)   renters
E)   consumers

Question 11

Why is raising the minimum wage generally ineffective?

Accepted Answer

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 nonbinding.
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 doesn't exist.

Question 12

Use the following table to answer the next questions. 
-What is the surplus when the price floor is $0.75 in the market for public transportation?

Accepted Answer

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

Question 13

The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements 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

Use the following table to answer the next questions. 
-What is the surplus when the price floor is $1.75 in the market for public transportation?

Accepted Answer

A)   100,000
B)   86,000
C)   75,000
D)   40,000
E)   0 (zero)

Question 15

Use the following table to answer the next questions. 
-If the price ceiling for corn is $2.50, what amount and type of disequilibrium would be present in the market for corn?

Accepted Answer

A)   There would be neither a shortage nor a surplus.
B)   There would be a surplus of 61,000.
C)   There would be a shortage of 61,000.
D)   There would be a shortage of 186,000.
E)   There would be a shortage of 125,000.

Question 16

Use the following information to answer the next  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 $300?

Accepted Answer

A)   900
B)   200
C)   240
D)   1,100
E)   2,000

Question 17

Use the following information to answer the next  questions.
Market for flat-screen TVs:
Demand: Qd = 2,600 - 5 P
Supply: Qs = -1,000 + 10 P
-What would be the equilibrium quantity for flat-screen TVs?

Accepted Answer

A)   240
B)   140
C)   24
D)   1,400
E)   1,600

Question 18

What will happen in a market where a nonbinding price floor is removed?

Accepted Answer

A)   The products sold will become more plentiful.
B)   The price or quantity of the product sold on the legal market will not change.
C)   There will be upward pressure on the prices.
D)   There will be downward pressure on the prices.
E)   There will be increased pressure to buy and sell the good on the black market.

Question 19

The consequence of a price floor set below the equilibrium price is:

Accepted Answer

A)   a surplus, where the quantity demanded exceeds the quantity supplied.
B)   a shortage, where the quantity demanded exceeds the quantity supplied.
C)   a surplus, where the quantity supplied exceeds the quantity demanded.
D)   a shortage, where the quantity supplied exceeds the quantity demanded.
E)   nothing; the price floor will have no impact on the quantity demanded or the quantity supplied.

Question 20

How do consumers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Accepted Answer

A)   Consumers are increasingly willing to substitute away from the good, and their elasticity of demand becomes less elastic.
B)   There are no changes, and elasticity remains unchanged.
C)   Consumers are increasingly willing to substitute away from the good, and their elasticity of demand becomes more elastic.
D)   Consumers are less willing to substitute away from the good, and their elasticity of demand becomes less elastic.
E)   Consumers are less willing to substitute away from the good, and their elasticity of demand becomes more elastic.

Exam 4: Price Controls

Why does a surplus exist under a binding price floor?

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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:

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Refer to the accompanying figure, which shows both short-run and long-run demand and supply curves. If there is a $4 binding price ceiling imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run?

Correct AnswerverifiedShow Answer

A binding price floor creates a surplus, which means:

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Use the following table to answer the next questions. -If the price ceiling for corn is $2.50, what amount and type of disequilibrium would be present in the market for corn?

Correct AnswerverifiedShow Answer

Use the following information to answer the next 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 $300?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedStudents' answers will vary. If the stud...View AnswerShow Answer

How do consumers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

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What will happen in a market where a nonbinding price floor is removed?

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Use the following information to answer the next 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 ceiling is set at $2,000?

Correct AnswerverifiedShow Answer

Who potentially benefits from a price floor?

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The consequence of a price floor set below the equilibrium price is:

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Use the following table to answer the next questions. -At what price level does the labor market reach equilibrium?

Correct AnswerverifiedShow Answer

Use the following table to answer the next questions. -What is the surplus when the price floor is $1.75 in the market for public transportation?

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The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements would be an example of a:

Correct AnswerverifiedShow Answer

Use the following table to answer the next questions. -What is the surplus when the price floor is $0.75 in the market for public transportation?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Why is raising the minimum wage generally ineffective?

Correct AnswerverifiedShow Answer

Use the following information to answer the next questions. Market for flat-screen TVs: Demand: Qd = 2,600 - 5 P Supply: Qs = -1,000 + 10 P -What would be the equilibrium quantity for flat-screen TVs?

Correct AnswerverifiedShow Answer

Use the following figure to answer the next questions. -Refer to the accompanying figure. At the price of the binding price floor, by how much would the quantity supplied change from the market equilibrium?

Correct AnswerverifiedShow Answer

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Use the following information to answer the next 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 floor is set at $300?

Correct Answer
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Correct Answer
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Students' answers will vary. If the stud...
View Answer

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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Use the following information to answer the next questions. Market for flat-screen TVs: Demand: Q_d = 2,600 - 5 P Supply: Q_s = -1,000 + 10 P -What would be the equilibrium quantity for flat-screen TVs?

Correct Answer
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Correct Answer
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