Question 1

Reference: Ref 8-6 (Figure: Price Ceiling of Ps)  Refer to the figure. Suppose a price ceiling of Ps is imposed. As a result:

Accepted Answer

A)   the quantity supplied in the market is Qs.
B)   buyers' willingness to pay for the good is Pd.
C)   the quantity demanded in the market is Qd.
D)   All of the answers are correct.

Question 2

The best way to help the poor afford housing is by:

Accepted Answer

A)   using rent control.
B)   raising the minimum wage.
C)   issuing housing vouchers.
D)   raising payroll taxes.

Question 3

The U.S. Congress first instituted the minimum wage in:

Accepted Answer

A)   1914.
B)   1974.
C)   1938.
D)   1925.

Question 4

Which of the following scenarios shows how the Russian concept of blat works during a beef shortage?

Accepted Answer

A)   a politician acquires some steak through his friendship with the owner of the beef factory
B)   a beef factory owner hoards some steak at his own house
C)   a beef factory owner realizes that there is a surplus of plastic wrapping
D)   more people than usual stand in line to try to buy steak

Question 5

Effective price ceilings cause misallocation of resources because scarce resources are usually not allocated to their highest value uses.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

1) Shortage: Since the rent-controlled p...

Question 7

Reference: Ref 8-2 (Figure: Price Controls)  Refer to the figure. Which of the following price controls would cause a shortage of 20 units of the good?

Accepted Answer

A)   a price ceiling of $10
B)   a price floor of $10
C)   a price ceiling of $6
D)   a price floor of $6

Question 8

Illustrate on a supply and demand diagram how price ceilings may distort the market outcome and specify what secondary effects price ceilings can create.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When the maximum price that can be lega...

Question 9

The Civil Aeronautics Board regulated airline fares above the free-market rates, which led airlines to compete by offering fancy meals, wide seats, and frequent flights.

Accepted Answer

A) True 
 B)False

Question 10

Reference: Ref 8-10 (Figure: Price Ceilings and Valuation of Uses)  Refer to the figure. Suppose a price ceiling of $15 goes into effect. If the highest value use and the lowest value use are equally likely to be satisfied, then the average value of the product is:

Accepted Answer

A)   $45.
B)   $30.
C)   $25.
D)   $35.

Question 11

Which of these statements about price ceilings is correct?

Accepted Answer

A)   Whether a price ceiling is placed below or above the equilibrium price, it will always cause deadweight loss.
B)   A price ceiling will only cause deadweight loss if it is placed above the equilibrium price.
C)   A price ceiling will only cause deadweight loss if it is placed below the equilibrium price.
D)   Whether a price ceiling is placed below or above the equilibrium price, it will always cause a shortage of the good.

Question 12

An increase in the minimum wage would likely increase unemployment among which group of workers?

Accepted Answer

A)   An increase in the minimum wage does not lead to an increase in unemployment.
B)   unskilled workers
C)   female workers
D)   older workers

Question 13

Reference: Ref 8-9 (Figure: Price Ceilings and Consumer Surplus)  Refer to the figure. There is a price ceiling of $20. What is the value of consumer surplus if all the goods are allocated randomly?

Accepted Answer

A)   $120
B)   $180
C)   $80
D)   None of the answers is correct.

Question 14

Vietnam's foreign minister said, "The Americans couldn't destroy Hanoi, but we have destroyed our city by very low rents." He was referring to the fact that:

Accepted Answer

A)   very low rents provided very little income for carrying out warfare.
B)   very low rents turned portions of city housing into a state of disrepair and slum-like conditions.
C)   the Americans did not install proper city housing codes in Hanoi.
D)   bombing a city is always worse than rent control.

Question 15

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 16

Which of these cases would likely result from an increase in minimum wage?

Accepted Answer

A)   an increase in the price of hamburgers
B)   an increase in unemployment among teenagers
C)   incomes increase for those who keep minimum wage jobs
D)   All of the answers are correct.

Question 17

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.

Question 18

(Figure: Short and Long Run Shortages)  Use the figure. At a rent controlled price of $800, the short-run shortage of apartments is ________ and the long-run shortage is ________.

Accepted Answer

A)   12,000; 4,000
B)   4,000; 12,000
C)   8,000; 4,000
D)   8,000; 12,000

Question 19

When an effective price ceiling causes a shortage, some of the buyers who value the good the most may not be able to get the good. Why does this occur?

Accepted Answer

A)   The highest value users cannot outbid the lower valued users and so the seller cannot distinguish between them.
B)   The highest value users are eliminated from the market due to the price ceiling.
C)   The price ceiling causes the price to rise so high that even the highest value users cannot afford the good.
D)   The government purchases most of the goods.

Question 20

Reference: Ref 8-10 (Figure: Price Ceilings and Valuation of Uses)  Refer to the figure. Suppose a price ceiling of $15 goes into effect. If the goods are allocated only to the highest value uses, the total consumer surplus in the market would be:

Accepted Answer

A)   $3,000.
B)   $500.
C)   $2,500.
D)   $1,000.

Exam 8: Price Ceilings and Floors

Reference: Ref 8-10 (Figure: Price Ceilings and Valuation of Uses) Refer to the figure. Suppose a price ceiling of $15 goes into effect. If the highest value use and the lowest value use are equally likely to be satisfied, then the average value of the product is:

Correct AnswerverifiedShow Answer

Which of the following scenarios shows how the Russian concept of blat works during a beef shortage?

Correct AnswerverifiedShow Answer

Reference: Ref 8-10 (Figure: Price Ceilings and Valuation of Uses) Refer to the figure. Suppose a price ceiling of $15 goes into effect. If the goods are allocated only to the highest value uses, the total consumer surplus in the market would be:

Correct AnswerverifiedShow Answer

Reference: Ref 8-9 (Figure: Price Ceilings and Consumer Surplus) Refer to the figure. There is a price ceiling of $20. What is the value of consumer surplus if all the goods are allocated randomly?

Correct AnswerverifiedShow Answer

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

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

(Figure: Short and Long Run Shortages) Use the figure. At a rent controlled price of $800, the short-run shortage of apartments is ________ and the long-run shortage is ________.

Correct AnswerverifiedShow Answer

Which of these statements about price ceilings is correct?

Correct AnswerverifiedShow Answer

The best way to help the poor afford housing is by:

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Vietnam's foreign minister said, "The Americans couldn't destroy Hanoi, but we have destroyed our city by very low rents." He was referring to the fact that:

Correct AnswerverifiedShow Answer

Reference: Ref 8-2 (Figure: Price Controls) Refer to the figure. Which of the following price controls would cause a shortage of 20 units of the good?

Correct AnswerverifiedShow Answer

An increase in the minimum wage would likely increase unemployment among which group of workers?

Correct AnswerverifiedShow Answer

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

Correct Answerverified1) Shortage: Since the rent-controlled p...View AnswerShow Answer

Reference: Ref 8-6 (Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. As a result:

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The U.S. Congress first instituted the minimum wage in:

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When an effective price ceiling causes a shortage, some of the buyers who value the good the most may not be able to get the good. Why does this occur?

Correct AnswerverifiedShow Answer

The Civil Aeronautics Board regulated airline fares above the free-market rates, which led airlines to compete by offering fancy meals, wide seats, and frequent flights.

Correct AnswerverifiedShow Answer

Illustrate on a supply and demand diagram how price ceilings may distort the market outcome and specify what secondary effects price ceilings can create.

Correct Answerverified When the maximum price that can be lega...View AnswerShow Answer

Effective price ceilings cause misallocation of resources because scarce resources are usually not allocated to their highest value uses.

Correct AnswerverifiedShow Answer

Which of these cases would likely result from an increase in minimum wage?

Correct AnswerverifiedShow Answer

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(Figure: Short and Long Run Shortages) Use the figure. At a rent controlled price of $800, the short-run shortage of apartments is and the long-run shortage is .

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1) Shortage: Since the rent-controlled p...
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When the maximum price that can be lega...
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