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Exam 8: Price Ceilings and Floors

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Question 21

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Even though shortages typically result from the imposition of price ceilings, the overall gains in economic efficiency outweigh the costs.

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Question 22

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A legal maximum price at which a good can be sold is a price:

A) stabilization.
B) ceiling.
C) support.
D) floor.

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Question 23

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Which of these statements explains why price ceilings result in lost gains from trade?

Use the following to answer questions: Figure: Losses from Price Ceilings -(Figure: Losses from Price Ceilings) Refer to the figure. At a price ceiling of $1, the area representing the total value of wasted time is ________, and the area of the deadweight loss is ________.

Use the following to answer questions: Figure: Price Ceiling -(Figure: Price Ceiling) Refer to the figure. If a price ceiling were set at $12, there would be a:

The statement that "price controls do not eliminate competition":

In the case of a binding price floor, the price paid in the market will be:

Currently, the federal minimum wage is set at $7.25 per hour. A survey conducted by Newsweek magazine (June 27, 2011) indicated that many Americans would be willing to work for far less than the minimum wage-some as low as 25¢ per hour! What would happen if the U.S. government eliminated the minimum wage, and instead let wages be set by the marketplace?

Use the following to answer questions: Figure: Price Ceilings and Random Allocation -(Figure: Price Ceilings and Random Allocation) Refer to the figure. When a controlled price is imposed and the quantity of goods is allocated randomly between the highest-valued uses and lowest-valued uses, loss due to random allocation instead of allocation to the highest-valued use is represented by area:

If a seller facing excess demand is unable to raise the price of the good due to a price ceiling, a likely result will be:

If the equilibrium wage is $10 an hour and the government sets a minimum wage of $8, there will be a shortage of labor.

Figure: Minimum Wage for Country A Refer to the figure. The deadweight loss from the $8 minimum wage is area:

Price controls cause resources to be ________ not just geographically, but also across different ________ of those resources.

Rent controls have five important effects on the market for apartments. Please list and provide an example of each effect.

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, with a rent-controlled price of $800, the long-run supply curve will be ______ elastic than the short-run supply curve, causing the _____.

Which would NOT happen as the result of a price floor?

Use the following to answer questions: Figure: Labor Market 1 -(Figure: Labor Market 1) If there is a price floor set at $9, how much deadweight loss is created, if any?

If there are 100 tickets to a concert and 200 fans who would like to go to the concert, each placing a slightly different value on the tickets, is it more efficient to hold an auction for the tickets or to hold a random drawing for the tickets?

In a market the equilibrium price is $20. A price ceiling of $15 creates a bigger shortage than a price ceiling of $10.

Minimum wage laws are an example of price ceilings.