Question 1

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 nonbinding price ceiling on most products?

Accepted Answer

A)   Legal market prices will rise in the community with a binding price ceiling.
B)   Legal market prices will fall in the community with a binding price ceiling.
C)   The price and the quantity sold in the community without a nonbinding price ceiling will be the same as the price and quantity in the community with a nonbinding price ceiling.
D)   There will be more shortages in the community with a binding price ceiling.
E)   The black market in the community with a binding price ceiling will not be strong because consumers will simply purchase the product in the community that has no price ceiling.

Question 2

A nonbinding price floor has the following consequences:

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 are no consequences to a nonbinding price floor.
D)   The quantity demanded will always exceed the quantity supplied.
E)   The quantity demanded will always be smaller than the quantity supplied.

Question 3

Why are binding price floor laws passed?

Accepted Answer

A)   They make goods less expensive.
B)   They make goods available to the largest number of customers.
C)   They encourage producers to produce goods in the most cost-efficient fashion.
D)   They help producers receive higher prices for products sold in the legal market.
E)   They discourage the formation of illegal black markets. D

Question 4

Use the following table to answer the next questions. 
-What is the quantity demanded 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 5

Use the following table to answer the next questions. 
-If a minimum wage is established at $7.50, determine the amount of disequilibrium in the labor market.

Accepted Answer

A)   There would be a shortage of labor of 20,170,000.
B)   There would be a surplus of labor of 20,170,000.
C)   There would be neither a shortage nor a surplus.
D)   A labor shortage of 20,170,000 would be eliminated because individuals would decide to work in the illegal black market.
E)   A labor shortage of 20,170,000 would increase as individuals find work in the illegal black market.

Question 6

Imagine you find yourself in a heat wave and your air conditioner has broken. Unable to find a new one at the store because of a price gouging law, you purchase an air conditioner on the black market. What role did the price gouging law have?

Accepted Answer

A)   It increased the willingness of firms to supply air conditioners when they were out of stock at the stores.
B)   It increased consumer demand for air conditioners.
C)   It decreased the incentive of individuals to supply the good on the black market.
D)   It had no effect on consumers or firms in this situation.
E)   It increased the incentive of individuals to supply the good on the black market.

Question 7

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

Accepted Answer

A)   My friend bought the good on the black market because a binding price floor had created a shortage in the legal market and my friend really needed the good.
B)   My friend bought the good on the black market because a price ceiling caused the price to be lower on the black market.
C)   My friend bought the good on the black market because a nonbinding price floor had created a shortage on the legal market and my friend really needed the good.
D)   My friend bought the good on the black market because a binding price floor made the good too expensive to purchase on the legal market and it was cheaper on the black market.
E)   My friend bought the good on the black market because a nonbinding price floor made the good too expensive to purchase on the legal market and it was cheaper on the black market.

Question 8

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 9

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

Accepted Answer

A)   The products sold will become more plentiful.
B)   The products sold will become less plentiful.
C)   There will be upward pressure on the prices.
D)   There will be downward pressure on the prices.
E)   The price and the quantity sold in the community without a nonbinding price floor will be the same as the price and quantity in the community with a nonbinding price floor.

Question 10

Setting a price ceiling below the equilibrium price can result in:

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)   no impact on the quantity demanded or on the quantity supplied.

Question 11

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 $100?

Accepted Answer

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

Question 12

If a price ceiling is imposed at $15 per unit when the equilibrium market price is $12, there will be:

Accepted Answer

A)   no surplus or shortage.
B)   a surplus.
C)   a shortage.
D)   a downward pressure on prices.
E)   an upward pressure on prices.

Question 13

Use the following table to answer the next questions. 
-If a minimum wage is set at $5.50, predict the amount of disequilibrium in the labor market.

Accepted Answer

A)   There would be a labor shortage of 25,515,000.
B)   There would be a labor surplus of 25,515,000.
C)   There would be neither a shortage nor a surplus.
D)   A labor surplus of 25,515,000 would be eliminated because individuals would decide to work in the illegal black market.
E)   A labor surplus of 25,515,000 would increase as individuals find work in the illegal black market. C

Question 14

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 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

Use the following information to answer the next  questions.
Market for a new hardcover book:
Demand: Qd = 325 - 8 P
Supply: Qs = -60 + 3 P
-What would be the equilibrium quantity for hardcover books?

Accepted Answer

A)   100
B)   45
C)   385
D)   35
E)   11

Question 17

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

Accepted Answer

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

Question 18

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 floor is set at $100?

Accepted Answer

A)   100
B)   154,100
C)   1,541
D)   21,474
E)   1,300

Question 19

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

Accepted Answer

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.

Question 20

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?

Accepted Answer

A society might interpret a binding pric...

Exam 4: Price Controls

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 nonbinding price ceiling on most products?

Correct AnswerverifiedShow Answer

A nonbinding price floor has the following consequences:

Correct AnswerverifiedShow Answer

Why are binding price floor laws passed?

Correct AnswerverifiedD

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

Correct AnswerverifiedShow Answer

Use the following table to answer the next questions. -If a minimum wage is established at $7.50, determine the amount of disequilibrium in the labor market.

Correct AnswerverifiedShow Answer

Imagine you find yourself in a heat wave and your air conditioner has broken. Unable to find a new one at the store because of a price gouging law, you purchase an air conditioner on the black market. What role did the price gouging law have?

Correct AnswerverifiedShow Answer

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

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

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

Correct AnswerverifiedShow Answer

Setting a price ceiling below the equilibrium price can result in:

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 $100?

Correct AnswerverifiedD

If a price ceiling is imposed at $15 per unit when the equilibrium market price is $12, there will be:

Correct AnswerverifiedShow Answer

Use the following table to answer the next questions. -If a minimum wage is set at $5.50, predict the amount of disequilibrium in the labor market.

Correct AnswerverifiedC

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

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 questions. Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P -What would be the equilibrium quantity for hardcover books?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 floor is set at $100?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedA society might interpret a binding pric...View AnswerShow Answer

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D

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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 $100?

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D

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C

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A black market is an illegal market that...
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Use the following information to answer the next questions. Market for a new hardcover book: Demand: Q_d = 325 - 8 P Supply: Q_s = -60 + 3 P -What would be the equilibrium quantity for hardcover books?

Correct Answer
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Use the following information to answer the next questions. Market for a new hardcover book: Demand: Q_d = 325 - 8 P Supply: Q_s = -60 + 3 P -What would be the quantity supplied if a price floor is set at $20?

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 floor is set at $100?

Correct Answer
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A society might interpret a binding pric...
View Answer