Question 1

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

Accepted Answer

A)   more than the free market equilibrium price.
B)   less than the free market equilibrium price.
C)   equal to the free market equilibrium price.
D)   unable to be compared with the free market equilibrium price.E) A) and B)
F) A) and C)

Question 2

The most common example of a price being controlled above market levels involves a good for which the:

Accepted Answer

A)   sellers outnumber the buyers.
B)   buyers outnumber the sellers.
C)   market is controlled by a monopolist.
D)   market is controlled by the government.E) A) and D)
F) C) and D)

Question 3

Assume that a market is defined by two equations: the demand equation is Qd = 60 - 5P, and the supply equation is Qs = 5P. Now suppose that a price ceiling is instituted at $3. Use this information to answer the questions below.
a. What is the equilibrium price and quantity in this market?
b. What is the amount of the shortage at the price ceiling?
c. What is the total value of time wasted by consumers standing in line?

Accepted Answer

a. Equilibrium P = $6, and equilibrium Q...

Question 4

Use the following to answer questions:
Figure: Government Price Controls 
-(Figure: Government Price Controls)  Refer to the figure. If the government sets the price ceiling at $31, there will be:

Accepted Answer

A)   a shortage of 15 units.
B)   a surplus of 15 units.
C)   a supply of 20 units.
D)   no effect on the market.E) None of the above
F) B) and D)

Question 5

Use the following to answer questions:
Figure: Water Market 
-(Figure: Water Market)  Refer to the figure. If a price floor in the diagram gets set at $8 a gallon, how big is the shortage or surplus?

Accepted Answer

A)   60,000 gallons in surplus
B)   120,000 gallons in surplus
C)   60,000 gallons in shortage
D)   12,000 gallons in shortageE) B) and C)
F) B) and D)

Question 6

Using a supply and demand diagram as a reference, discuss the way a price ceiling causes a reduction in gains from trade.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The diagram is a copy of Figure 8.3 in ...

Question 7

If quantity supplied equals 40 units and quantity demanded equals 50 units under a price control, then it is a:

Accepted Answer

A)   binding price ceiling.
B)   binding price floor.
C)   nonbinding price ceiling.
D)   nonbinding price floor.E) A) and D)
F) None of the above

Question 8

Which statement is NOT an effect of a price ceiling?

Accepted Answer

A)   surpluses
B)   misallocation of resources
C)   loss of gains from trade
D)   wasteful lineupsE) C) and D)
F) None of the above

Question 9

The shortages that result from imposing price controls:

Accepted Answer

A)   are rarely recognized by the public as a result of the price controls themselves.
B)   typically lead the public to lobby politicians to repeal the price controls.
C)   only last for a short while until markets can adjust to the new lower prices.
D)   create higher prices.E) A) and C)
F) C) and D)

Question 10

The presence of price floors in a market usually is an indication that:

Accepted Answer

A)   there is an insufficient quantity of a good or service being produced.
B)   the forces of supply and demand are unable to establish an equilibrium price.
C)   sellers of the good or service outnumber the buyers.
D)   policymakers believe the price floor does not involve inequities.E) A) and B)
F) B) and D)

Question 11

What is blat?

Accepted Answer

A)   a long line
B)   the time costs associated with buying price-controlled goods
C)   the use of political connections to get favors
D)   a dilapidated rent-controlled apartment.E) A) and C)
F) C) and D)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The producer and consumer surplus lost as a result of price ceilings is often referred to as deadweight loss.

Accepted Answer

A) True 
 B)False

Question 14

The quantity exchanged of a good ______ under a binding price ceiling.

Accepted Answer

A)   rises
B)   remains the same
C)   falls
D)   changes in an indeterminate directionE) A) and D)
F) A) and C)

Question 15

Which statement(s)  is TRUE?
I. In the long run, rent-control laws create incentives to turn apartments into hotels or parking garages.
II. Apartment owners are less likely to do routine maintenance when the government controls apartment rents.
III. Rent-controlled apartments are more likely to be allocated by discrimination than non-rent-controlled apartments.

Accepted Answer

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

Question 16

People typically blame price controls for the problems caused by price controls.

Accepted Answer

A) True 
 B)False

Question 17

Graphically illustrate supply and demand in a market where a price floor has been instituted above the equilibrium price. Is there a shortage or a surplus of this good because of the price floor? On your graph, shade in the area of lost gains from trade and explain why this results in market inefficiency.

Accepted Answer

A price floor instituted above the equil...

Question 18

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

Accepted Answer

A)   greater than the free market equilibrium price.
B)   less than the free market equilibrium price.
C)   equal to the free market equilibrium price.
D)   unable to be compared with the free market equilibrium price.E) All of the above
F) None of the above

Question 19

Price ceilings reduce quality because:

Accepted Answer

A)   buyers are willing to accept a lower quality of goods with lower prices.
B)   sellers facing excess demand cannot raise prices to increase profit.
C)   the law would mandate the quality of goods to match the price of the goods.
D)   None of the answers are correct.E) A) and B)
F) B) and D)

Question 20

If a price ceiling on gasoline is imposed, the total price of gasoline a buyer pays is likely to equal the legal price:

Accepted Answer

A)   minus the value of wasted time.
B)   minus the value of bribery.
C)   plus the value of consumer surplus.
D)   plus the value of corruption.E) A) and B)
F) A) and C)

Exam 8: Price Ceilings and Floors

Using a supply and demand diagram as a reference, discuss the way a price ceiling causes a reduction in gains from trade.

Correct Answer
verified
The diagram is a copy of Figure 8.3 in ...
View Answer

People typically blame price controls for the problems caused by price controls.

Correct Answer
verified

The quantity exchanged of a good ______ under a binding price ceiling.

Correct Answer
verified

If a price ceiling on gasoline is imposed, the total price of gasoline a buyer pays is likely to equal the legal price:

Correct Answer
verified

Correct Answer
verified
a. Equilibrium P = $6, and equilibrium Q...
View Answer

Which statement is NOT an effect of a price ceiling?

Correct Answer
verified

Use the following to answer questions: Figure: Government Price Controls -(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be:

Correct Answer
verified

Use the following to answer questions: Figure: Water Market -(Figure: Water Market) Refer to the figure. If a price floor in the diagram gets set at $8 a gallon, how big is the shortage or surplus?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A price floor instituted above the equil...
View Answer

Price ceilings reduce quality because:

Correct Answer
verified

The producer and consumer surplus lost as a result of price ceilings is often referred to as deadweight loss.

Correct Answer
verified

The shortages that result from imposing price controls:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

If quantity supplied equals 40 units and quantity demanded equals 50 units under a price control, then it is a:

Correct Answer
verified

The most common example of a price being controlled above market levels involves a good for which the:

Correct Answer
verified

The presence of price floors in a market usually is an indication that:

Correct Answer
verified

What is blat?

Correct Answer
verified

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

Correct Answer
verified

Exam 8: Price Ceilings and Floors

Using a supply and demand diagram as a reference, discuss the way a price ceiling causes a reduction in gains from trade.

Correct Answerverified The diagram is a copy of Figure 8.3 in ...View AnswerShow Answer

People typically blame price controls for the problems caused by price controls.

Correct AnswerverifiedShow Answer

The quantity exchanged of a good ______ under a binding price ceiling.

Correct AnswerverifiedShow Answer

If a price ceiling on gasoline is imposed, the total price of gasoline a buyer pays is likely to equal the legal price:

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Equilibrium P = $6, and equilibrium Q...View AnswerShow Answer

Which statement is NOT an effect of a price ceiling?

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Government Price Controls -(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be:

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Water Market -(Figure: Water Market) Refer to the figure. If a price floor in the diagram gets set at $8 a gallon, how big is the shortage or surplus?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA price floor instituted above the equil...View AnswerShow Answer

Price ceilings reduce quality because:

Correct AnswerverifiedShow Answer

The producer and consumer surplus lost as a result of price ceilings is often referred to as deadweight loss.

Correct AnswerverifiedShow Answer

The shortages that result from imposing price controls:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If quantity supplied equals 40 units and quantity demanded equals 50 units under a price control, then it is a:

Correct AnswerverifiedShow Answer

The most common example of a price being controlled above market levels involves a good for which the:

Correct AnswerverifiedShow Answer

The presence of price floors in a market usually is an indication that:

Correct AnswerverifiedShow Answer

What is blat?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified
The diagram is a copy of Figure 8.3 in ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. Equilibrium P = $6, and equilibrium Q...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A price floor instituted above the equil...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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