Question 1

An economy with permanent, universal price controls is in essence a:

Accepted Answer

A)   market economy.
B)   social economy.
C)   free economy.
D)   command economy.

Question 2

After President Reagan repealed the price controls on gasoline:

Accepted Answer

A)   the supply of gasoline fell dramatically.
B)   the market experienced a period of vast surpluses as a result of the lack of regulation.
C)   prices rose a little at first, but quickly supply began to increase and prices fell.
D)   prices rose dramatically as a result of the repealed legislation.

Question 3

Reference: Ref 8-7 (Figure: Losses from Price Ceilings)  Refer to the figure. A price ceiling of $1 causes lost consumer surplus equal to area ________ and lost producer surplus equal to area ________.

Accepted Answer

A)   c; e
B)   bc; de
C)   a; f
D)   d; b

Question 4

Figure: Effects of Price Ceilings Reference: Ref 8-4  (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

In situations of excess demand, sellers might lower quality when they are unable to raise prices because they wish to:

Accepted Answer

A)   reduce excess demand.
B)   raise their profit levels.
C)   decrease surpluses.
D)   raise their sales.

Question 6

In situations of excess demand, sellers might decrease service levels when they are unable to raise prices because they wish to:

Accepted Answer

A)   reduce excess demand.
B)   decrease surpluses.
C)   raise their profit levels.
D)   raise their sales.

Question 7

Housing shortages caused by rent controls are larger in the long run because the supply of housing is more elastic in the long run.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would be the least likely result of a price ceiling imposed in the market for gasoline?

Accepted Answer

A)   Buyers line up to buy gasoline.
B)   Buyers bribe station attendants to fill up their tanks.
C)   Some buyers will get less gasoline than they want.
D)   Competition in the market will be eliminated.

Question 9

Why do many consumers and politicians advocate for price controls?

Accepted Answer

A)   Price controls are the only way for the poor to obtain certain goods when prices rise.
B)   Most consumers and politicians do not advocate for price controls, as they understand their negative consequences.
C)   Price controls appear to be a straightforward response to the problem of price increases.
D)   The gains in consumer surplus typically outweigh the loss in producer profits.

Question 10

Why are housing vouchers a better option than rent controls when a government is attempting to make housing affordable for the poor? The housing voucher entitles the tenant to:

Accepted Answer

A)   live in a rent controlled apartment.
B)   free maintenance of their apartment.
C)   a certain dollar amount off the rent of any apartment they choose.
D)   live in a luxury apartment of their choice.

Question 11

Which of the following statements is TRUE? I. Regulations that limit the rate of increase in rents are equally inefficient as rent controls. II. Rent regulations reduce the incentive for landlords to cut back on maintenance. III. Regulations that limit the rate of increase in rents allow the price of rental housing to respond to market forces.

Accepted Answer

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

Question 12

Which of the following is not an effect of a price floor?

Accepted Answer

A)   misallocation of resources
B)   deregulation
C)   surpluses
D)   wasteful increases in quality

Question 13

Which of the following would be the LEAST likely result of a price floor in the market for airline travel?

Accepted Answer

A)   rapid replacement of old airliners with new aircraft
B)   narrow seats and basic meals like peanuts or chips with a coffee or soda
C)   special incentives like airline mileage clubs to attract customers
D)   excellent engine maintenance

Question 14

Southwest Airlines was able to enter the national market in 1978 as a result of:

Accepted Answer

A)   winning a series of law suits.
B)   accumulating market share.
C)   airline deregulation.
D)   establishment of new price controls.

Question 15

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 16

A price ceiling is a minimum price below the market price that can be legally charged.

Accepted Answer

A) True 
 B)False

Question 17

In a market with a price ceiling which of the following is TRUE?

Accepted Answer

A)   Buyers and sellers experience unexploited gains from trade.
B)   Resources are allocated to their most efficient uses.
C)   The supply of goods is sold by the sellers with the lowest costs.
D)   The supply of goods is bought by the buyers with the highest willingness to pay.

Question 18

Most economists favor price controls as a way of allocating resources.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is NOT true? I. The increase in the minimum wage in Puerto Rico in 1938 did not affect Puerto Rico's unemployment rate. II. About 15 percent of all hourly workers in the United States earn the minimum wage. III. Raising the minimum wage is an effective method to combat poverty. IV. Raising the minimum wage decreases employment of low- skilled workers.

Accepted Answer

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

Question 20

At a price ceiling of $1 per loaf of bread, quantity supplied is 99 loaves, which is less than quantity demanded. What must be true for the 100th loaf of bread?

Accepted Answer

A)   Consumers do not value the 100th loaf of bread.
B)   The cost of producing the 100th loaf of bread is less than $1.00.
C)   Consumers value the 100th loaf of bread at less than $1.00.
D)   Consumers value the 100th loaf of bread more than it costs producers to make it.

Exam 8: Price Ceilings and Floors

Reference: Ref 8-7 (Figure: Losses from Price Ceilings) Refer to the figure. A price ceiling of $1 causes lost consumer surplus equal to area and lost producer surplus equal to area .

Correct Answer
verified

Why do many consumers and politicians advocate for price controls?

Correct Answer
verified

Which of the following would be the least likely result of a price ceiling imposed in the market for gasoline?

Correct Answer
verified

Southwest Airlines was able to enter the national market in 1978 as a result of:

Correct Answer
verified

A price ceiling is a minimum price below the market price that can be legally charged.

Correct Answer
verified

In situations of excess demand, sellers might lower quality when they are unable to raise prices because they wish to:

Correct Answer
verified

Why are housing vouchers a better option than rent controls when a government is attempting to make housing affordable for the poor? The housing voucher entitles the tenant to:

Correct Answer
verified

At a price ceiling of $1 per loaf of bread, quantity supplied is 99 loaves, which is less than quantity demanded. What must be true for the 100th loaf of bread?

Correct Answer
verified

An economy with permanent, universal price controls is in essence a:

Correct Answer
verified

Correct Answer
verified

Which of the following would be the LEAST likely result of a price floor in the market for airline travel?

Correct Answer
verified

After President Reagan repealed the price controls on gasoline:

Correct Answer
verified

Which of the following is not an effect of a price floor?

Correct Answer
verified

Housing shortages caused by rent controls are larger in the long run because the supply of housing is more elastic in the long run.

Correct Answer
verified

Correct Answer
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Figure: Effects of Price Ceilings Reference: Ref 8-4 (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
verified

In situations of excess demand, sellers might decrease service levels when they are unable to raise prices because they wish to:

Correct Answer
verified

In a market with a price ceiling which of the following is TRUE?

Correct Answer
verified

Most economists favor price controls as a way of allocating resources.

Correct Answer
verified

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

Exam 8: Price Ceilings and Floors

Reference: Ref 8-7 (Figure: Losses from Price Ceilings) Refer to the figure. A price ceiling of $1 causes lost consumer surplus equal to area ________ and lost producer surplus equal to area ________.

Correct AnswerverifiedShow Answer

Why do many consumers and politicians advocate for price controls?

Correct AnswerverifiedShow Answer

Which of the following would be the least likely result of a price ceiling imposed in the market for gasoline?

Correct AnswerverifiedShow Answer

Southwest Airlines was able to enter the national market in 1978 as a result of:

Correct AnswerverifiedShow Answer

A price ceiling is a minimum price below the market price that can be legally charged.

Correct AnswerverifiedShow Answer

In situations of excess demand, sellers might lower quality when they are unable to raise prices because they wish to:

Correct AnswerverifiedShow Answer

Why are housing vouchers a better option than rent controls when a government is attempting to make housing affordable for the poor? The housing voucher entitles the tenant to:

Correct AnswerverifiedShow Answer

At a price ceiling of $1 per loaf of bread, quantity supplied is 99 loaves, which is less than quantity demanded. What must be true for the 100th loaf of bread?

Correct AnswerverifiedShow Answer

An economy with permanent, universal price controls is in essence a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would be the LEAST likely result of a price floor in the market for airline travel?

Correct AnswerverifiedShow Answer

After President Reagan repealed the price controls on gasoline:

Correct AnswerverifiedShow Answer

Which of the following is not an effect of a price floor?

Correct AnswerverifiedShow Answer

Housing shortages caused by rent controls are larger in the long run because the supply of housing is more elastic in the long run.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure: Effects of Price Ceilings Reference: Ref 8-4 (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

In situations of excess demand, sellers might decrease service levels when they are unable to raise prices because they wish to:

Correct AnswerverifiedShow Answer

In a market with a price ceiling which of the following is TRUE?

Correct AnswerverifiedShow Answer

Most economists favor price controls as a way of allocating resources.

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

Reference: Ref 8-7 (Figure: Losses from Price Ceilings) Refer to the figure. A price ceiling of $1 causes lost consumer surplus equal to area and lost producer surplus equal to area .

Correct Answer
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