Question 1

In Ancient Egypt, the "Bronze Law" set maximum prices for wages, preventing them from rising above what rulers perceived as the minimum needed to survive. If this was 10¢ a day for a porter (someone who carries things short distances)  and the market wage was 8¢ a day, which of the following would be a plausible consequence of this law?

Accepted Answer

A)   Porters would travel less quickly than they otherwise would.
B)   Porters would transport items they normally would not.
C)   Unemployment for porters would decrease.
D)   Nothing unusual would happen.

Question 2

A rent control is a price:

Accepted Answer

A)   floor on car rentals.
B)   ceiling on car rentals.
C)   floor on rental housing.
D)   ceiling on rental housing.

Question 3

Suppose a $3 per gallon price ceiling is imposed on gasoline, and the equilibrium price of gasoline is $2 per gallon. Such a price ceiling would lead to long lines at gas stations.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer question 96:
Figure: Supply and Demand 3 
-(Figure: Supply and Demand 3)  Refer to the figure. If the government sets a price ceiling at $8 in this figure, it will create a deadweight loss of:

Accepted Answer

A)   $6.
B)   $36.
C)   $9.
D)   $24.

Question 5

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

Accepted Answer

A)   Buyers and sellers want to trade, but the threat of fines or jail time prevents them from doing so.
B)   Sellers want to trade, but buyers prefer the lower prices.
C)   Buyers want to trade, but sellers are indifferent at the lower prices.
D)   Neither buyers nor sellers want to trade subject to a price ceiling resulting in lost gains from trade.

Question 6

Price floors would create all of the following effects EXCEPT:

Accepted Answer

A)   surpluses.
B)   deadweight loss.
C)   wasteful decreases in product quality.
D)   misallocation of resources.

Question 7

Which statement is FALSE?

Accepted Answer

A)   A frost that destroys half the orange crop will create a surplus of oranges.
B)   It is possible to have a shortage of a good even if its supplies are abundant.
C)   Politicians often blame speculators and profiteers for rising prices rather than changes in supply and demand.
D)   To eliminate a shortage, prices must rise.

Question 8

Airline regulation from 1938 to 1978 was successful in keeping prices high because:

Accepted Answer

A)   it controlled price, but not entry into the airline market.
B)   it controlled both price and entry into the airline market.
C)   it listened to the requests of suppliers during this time at the expense of consumers.
D)   of declining production costs.

Question 9

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

Accepted Answer

A)   rises
B)   remains the same
C)   falls
D)   changes in an indeterminate direction

Question 10

During the 1970s, the 11-tier oil production definitions came into play because of firms' attempts to bypass regulations and produce decontrolled oil.

Accepted Answer

A) True 
 B)False

Question 11

A price floor:

Accepted Answer

A)   is a maximum price allowed by law.
B)   is a minimum price allowed by law.
C)   has an effect only when it is set below the market price.
D)   has little effect on market activity.

Question 12

In 1972-1973, the swimming pools in California were heated but homes in New Jersey were cold, is an example of a(n) :

Accepted Answer

A)   misallocation of resources caused by price controls.
B)   market failure caused by speculators.
C)   market inefficiency caused by monopoly oil companies.
D)   excess supply of oil caused by the business cycle.

Question 13

Deadweight loss is:

Accepted Answer

A)   necessary to ensure that resources are channeled to their highest-valued use.
B)   the loss to the economy from firms going out of business due to competition.
C)   usually offset by deadweight gains.
D)   the total of lost consumer and producer surplus when not all mutually profitable gains from trade are exploited.

Question 14

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

Accepted Answer

A)   a surplus of the good
B)   lost gains from trade
C)   misallocation of resources
D)   decreases in product quality

Question 15

Which statement(s)  is TRUE? Price floors set above the equilibrium price cause:
I. shortages.
II. surpluses.
III. deadweight losses.

Accepted Answer

A)   I and III only
B)   II and III only
C)   III only
D)   I is true if demand is elastic; however, II is true if demand is inelastic.

Question 16

Use the following to answer questions: Figure: Minimum Wage 
-Figure: Unskilled Labor Market  Based on the figure, what is the number of unemployed workers if a minimum wage of $6 is set in this market for unskilled labor?

Accepted Answer

A)   40
B)   55
C)   20
D)   95

Question 17

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 shortage

Question 18

The minimum wage is an example of a price floor in the labor market.

Accepted Answer

A) True 
 B)False

Question 19

If price ceilings do not allow prices to rise, then demanders will be unable to signal their needs to suppliers.

Accepted Answer

A) True 
 B)False

Question 20

Which statement is TRUE in a market with a price ceiling?

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.

Exam 5: Price Ceilings and Floors

The minimum wage is an example of a price floor in the labor market.

Correct Answer
verified

Suppose a $3 per gallon price ceiling is imposed on gasoline, and the equilibrium price of gasoline is $2 per gallon. Such a price ceiling would lead to long lines at gas stations.

Correct Answer
verified

Airline regulation from 1938 to 1978 was successful in keeping prices high because:

Correct Answer
verified

Price floors would create all of the following effects EXCEPT:

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

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

Correct Answer
verified

A rent control is a price:

Correct Answer
verified

A price floor:

Correct Answer
verified

Use the following to answer questions: Figure: Minimum Wage -Figure: Unskilled Labor Market Based on the figure, what is the number of unemployed workers if a minimum wage of $6 is set in this market for unskilled labor?

Correct Answer
verified

Correct Answer
verified

If price ceilings do not allow prices to rise, then demanders will be unable to signal their needs to suppliers.

Correct Answer
verified

Which statement(s) is TRUE? Price floors set above the equilibrium price cause: I. shortages. II. surpluses. III. deadweight losses.

Correct Answer
verified

Which statement is TRUE in a market with a price ceiling?

Correct Answer
verified

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

Correct Answer
verified

Which statement is FALSE?

Correct Answer
verified

Deadweight loss is:

Correct Answer
verified

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

Correct Answer
verified

In 1972-1973, the swimming pools in California were heated but homes in New Jersey were cold, is an example of a(n) :

Correct Answer
verified

Use the following to answer question 96: Figure: Supply and Demand 3 -(Figure: Supply and Demand 3) Refer to the figure. If the government sets a price ceiling at $8 in this figure, it will create a deadweight loss of:

Correct Answer
verified

During the 1970s, the 11-tier oil production definitions came into play because of firms' attempts to bypass regulations and produce decontrolled oil.

Correct Answer
verified

Exam 5: Price Ceilings and Floors

The minimum wage is an example of a price floor in the labor market.

Correct AnswerverifiedShow Answer

Suppose a $3 per gallon price ceiling is imposed on gasoline, and the equilibrium price of gasoline is $2 per gallon. Such a price ceiling would lead to long lines at gas stations.

Correct AnswerverifiedShow Answer

Airline regulation from 1938 to 1978 was successful in keeping prices high because:

Correct AnswerverifiedShow Answer

Price floors would create all of the following effects EXCEPT:

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

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

Correct AnswerverifiedShow Answer

A rent control is a price:

Correct AnswerverifiedShow Answer

A price floor:

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Minimum Wage -Figure: Unskilled Labor Market Based on the figure, what is the number of unemployed workers if a minimum wage of $6 is set in this market for unskilled labor?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If price ceilings do not allow prices to rise, then demanders will be unable to signal their needs to suppliers.

Correct AnswerverifiedShow Answer

Which statement(s) is TRUE? Price floors set above the equilibrium price cause: I. shortages. II. surpluses. III. deadweight losses.

Correct AnswerverifiedShow Answer

Which statement is TRUE in a market with a price ceiling?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which statement is FALSE?

Correct AnswerverifiedShow Answer

Deadweight loss is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In 1972-1973, the swimming pools in California were heated but homes in New Jersey were cold, is an example of a(n) :

Correct AnswerverifiedShow Answer

Use the following to answer question 96: Figure: Supply and Demand 3 -(Figure: Supply and Demand 3) Refer to the figure. If the government sets a price ceiling at $8 in this figure, it will create a deadweight loss of:

Correct AnswerverifiedShow Answer

During the 1970s, the 11-tier oil production definitions came into play because of firms' attempts to bypass regulations and produce decontrolled oil.

Correct AnswerverifiedShow 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
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
verified

Correct Answer
verified