Question 1

Rent controls are:

Accepted Answer

A)   an efficient and equitable way to help the poor.
B)   inefficient,but a pretty good way to solve a serious social problem.
C)   an inefficient way to help the poor in raising their standard of living.
D)   an efficient way to allocate housing.E) A) and D)
F) B) and D)

Question 2

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.E) A) and C)
F) None of the above

Question 3

The price controls of the early 1970s caused:

Accepted Answer

A)   lead to be removed from gasoline.
B)   the disappearance of the full-service gas station.
C)   gas stations to stay open for more hours.
D)   an excess supply of gasoline.E) B) and C)
F) A) and D)

Question 4

If a price floor is above the equilibrium price it will have no effect in the market.

Accepted Answer

A) True 
 B)False

Question 5

Use the following to answer questions 
Figure: Price Ceilings and Random Allocation 
-(Figure: Price Ceilings and Random Allocation) Refer to the figure.When a controlled price is imposed and the quantity of goods is allocated randomly between the highest-valued uses and lowest-valued uses,loss due to random allocation instead of allocation to the highest-valued use is represented by area:

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) All of the above
F) A) and B)

Question 6

Use the following to answer questions 
Figure: Costs of Price Ceilings 2 
-(Figure: Costs of Price Ceilings 2) Refer to the figure.What is the dollar amount of lost producer surplus after the price ceiling of $4 has been implemented?

Accepted Answer

A)   $90
B)   $10
C)   $160
D)   $80E) None of the above
F) A) and D)

Question 7

Housing vouchers are a better option than rent controls when a government is attempting to make housing affordable for the poor.The reason is that 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.E) None of the above
F) A) and B)

Question 8

The quantity traded with a binding price ceiling is lower than the quantity traded without a price ceiling,which means that price ceilings create lost gains from trade.

Accepted Answer

A) True 
 B)False

Question 9

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 B)
F) B) and D)

Question 10

Setting the maximum legal price above the market price will cause

Accepted Answer

A)   a shortage to develop.
B)   the market to reach an equilibrium outcome.
C)   quantity supplied to exceed quantity demanded.
D)   market inefficiencies.E) C) and D)
F) B) and C)

Question 11

Prices ceilings misallocate resources because with them resources are not necessarily allocated to their highest-valued use.

Accepted Answer

A) True 
 B)False

Question 12

The blat economy described in the text results when price controls are:

Accepted Answer

A)   extensive and cause chronic shortages in the economy.
B)   extensive but the causes of shortages in the economy are only temporary.
C)   short-lasting but cause chronic shortages in the economy.
D)   short-lasting and cause only temporary shortages in the economy.E) A) and B)
F) A) and C)

Question 13

If price controls are imposed,gains from trade,including consumer and producer surplus,are likely to increase.

Accepted Answer

A) True 
 B)False

Question 14

Once one accounts for time costs and bribes,it may be more expensive to make purchases at the government-controlled price than at the free-market price.

Accepted Answer

A) True 
 B)False

Question 15

Which statement 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.E) A) and B)
F) A) and D)

Question 16

A major hurricane damages many oil refineries,which increases the market price of gasoline from $3.50 to $5 per gallon.The Attorney General threatens legal action against gas station owners who raise prices above pre-hurricane levels,causing gas station owners to reluctantly sell gas for $3.50 per gallon.At $3.50 per gallon,shortages cause buyers to wait in line for 2 hours.If the average purchase is 15 gallons and buyers value their time at $20 an hour,is the Attorney General helping?

Accepted Answer

A)   No,paying $92.50 at $3.50 per gallon is more expensive than $75 at $5.00 per gallon.
B)   Yes,paying $52.50 at $3.50 is cheaper than $75 at $5.00 per gallon.
C)   Yes,gas is cheaper at $3.50 per gallon because the waiting costs keep gas prices low.
D)   No,$5.00 per gallon would insure that buyers could always buy as much as they want.E) A) and B)
F) All of the above

Question 17

Which statement about price controls is most correct?

Accepted Answer

A)   Price controls often hurt the people they are designed to help.
B)   Price controls always help the people they are designed to help.
C)   Price controls have minimal adverse effects.
D)   Price controls make economic sense even if they have adverse effects.E) A) and B)
F) B) and D)

Question 18

Minimum wage laws are an example of price floors.

Accepted Answer

A) True 
 B)False

Question 19

A price ceiling is a legal maximum on the price of the good or service.

Accepted Answer

A) True 
 B)False

Question 20

How can sellers increase profits when they face a price ceiling?

Accepted Answer

A)   charge a higher price for the good
B)   charge a lower price for the good to undercut rival sellers
C)   produce and sell more output
D)   reduce the quality of the product and provide less customer serviceE) All of the above
F) A) and B)

Exam 5: Price Ceilings and Floors

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

Correct Answer
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Setting the maximum legal price above the market price will cause

Correct Answer
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Which statement about price controls is most correct?

Correct Answer
verified

Which statement about price ceilings is correct?

Correct Answer
verified

If price controls are imposed,gains from trade,including consumer and producer surplus,are likely to increase.

Correct Answer
verified

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

Correct Answer
verified

The price controls of the early 1970s caused:

Correct Answer
verified

The blat economy described in the text results when price controls are:

Correct Answer
verified

A price ceiling is a legal maximum on the price of the good or service.

Correct Answer
verified

The quantity traded with a binding price ceiling is lower than the quantity traded without a price ceiling,which means that price ceilings create lost gains from trade.

Correct Answer
verified

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

Correct Answer
verified

Minimum wage laws are an example of price floors.

Correct Answer
verified

How can sellers increase profits when they face a price ceiling?

Correct Answer
verified

Once one accounts for time costs and bribes,it may be more expensive to make purchases at the government-controlled price than at the free-market price.

Correct Answer
verified

Prices ceilings misallocate resources because with them resources are not necessarily allocated to their highest-valued use.

Correct Answer
verified

Use the following to answer questions Figure: Costs of Price Ceilings 2 -(Figure: Costs of Price Ceilings 2) Refer to the figure.What is the dollar amount of lost producer surplus after the price ceiling of $4 has been implemented?

Correct Answer
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Correct Answer
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If a price floor is above the equilibrium price it will have no effect in the market.

Correct Answer
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Rent controls are:

Correct Answer
verified

Correct Answer
verified

Exam 5: Price Ceilings and Floors

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

Correct AnswerverifiedShow Answer

Setting the maximum legal price above the market price will cause

Correct AnswerverifiedShow Answer

Which statement about price controls is most correct?

Correct AnswerverifiedShow Answer

Which statement about price ceilings is correct?

Correct AnswerverifiedShow Answer

If price controls are imposed,gains from trade,including consumer and producer surplus,are likely to increase.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The price controls of the early 1970s caused:

Correct AnswerverifiedShow Answer

The blat economy described in the text results when price controls are:

Correct AnswerverifiedShow Answer

A price ceiling is a legal maximum on the price of the good or service.

Correct AnswerverifiedShow Answer

The quantity traded with a binding price ceiling is lower than the quantity traded without a price ceiling,which means that price ceilings create lost gains from trade.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Minimum wage laws are an example of price floors.

Correct AnswerverifiedShow Answer

How can sellers increase profits when they face a price ceiling?

Correct AnswerverifiedShow Answer

Once one accounts for time costs and bribes,it may be more expensive to make purchases at the government-controlled price than at the free-market price.

Correct AnswerverifiedShow Answer

Prices ceilings misallocate resources because with them resources are not necessarily allocated to their highest-valued use.

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: Costs of Price Ceilings 2 -(Figure: Costs of Price Ceilings 2) Refer to the figure.What is the dollar amount of lost producer surplus after the price ceiling of $4 has been implemented?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a price floor is above the equilibrium price it will have no effect in the market.

Correct AnswerverifiedShow Answer

Rent controls are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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