Question 1

Rent controls create large shortages in the long run rather than the short run because the long-run supply curve for apartments is inelastic.

Accepted Answer

A) True 
 B)False

Question 2

An alternative to rent controls that increases the quantity of housing and targets consumers that need low-cost rental property is:

Accepted Answer

A)   tax credits.
B)   vouchers.
C)   subsidies to landlords
D)   not available.E) A) and B)
F) C) and D)

Question 3

Use the following to answer questions: Figure: Price Ceilings and Valuation of Uses 
-(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.E) None of the above
F) B) and C)

Question 4

What would be the LEAST likely result of a price floor in the market for airline travel?

Accepted Answer

A)   rapid replacement of old airliners with new aircraft
B)   narrow seats and basic meals like peanuts or chips with a coffee or soda
C)   special incentives like airline mileage clubs to attract customers
D)   excellent engine maintenanceE) C) and D)
F) B) and D)

Question 5

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 6

Businesses may respond to price ceilings by closing down, reducing product quality, and by accepting bribes to sell their product.

Accepted Answer

A) True 
 B)False

Question 7

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, what is the quality waste?

Accepted Answer

A)   $90,000
B)   $180,000
C)   $480,000
D)   $960,000E) B) and D)
F) A) and D)

Question 8

In Puerto Rico in 1938, the market wage was 3¢ to 4¢ per hour when Congress passed a law raising it to 25¢ per hour. Workers in Puerto Rico were:

Accepted Answer

A)   happy with their raise.
B)   hoping for a higher minimum wage.
C)   devastated.
D)   indifferent.E) All of the above
F) A) and B)

Question 9

Which is NOT a cost of binding price controls?

Accepted Answer

A)   misallocation
B)   deadweight loss
C)   search costs
D)   equity costsE) B) and D)
F) A) and B)

Question 10

When price ceilings are effective, gains from trade are usually lower than if the available goods are allocated to the highest value uses.

Accepted Answer

A) True 
 B)False

Question 11

Economists blame the long lines at gasoline stations in the United States during the 1970s as well as the long delays in construction projects on:

Accepted Answer

A)   consumers who bought gas too frequently.
B)   the Organization of Petroleum Exporting Countries (OPE
C)  .
C)   major oil companies operating in the United States.
D)   U.S. government regulation of gasoline prices.E) B) and D)
F) A) and C)

Question 12

One of the virtues of the market process is that it is open to new ideas, innovations, and:

Accepted Answer

A)   reallocation of property.
B)   central planning by government.
C)   profits.
D)   experiments.E) A) and B)
F) B) and C)

Question 13

The deregulation of the airline industry caused:

Accepted Answer

A)   lower prices and more flights.
B)   higher prices and fewer flights.
C)   higher prices and more flights.
D)   lower prices and fewer flights.E) B) and C)
F) A) and C)

Question 14

Use the following to answer questions: Figure: Losses from Price Ceilings 
-(Figure: Losses from Price Ceilings)  Refer to the figure. At a price ceiling of $1, the area representing the total value of wasted time is ________, and the area of the deadweight loss is ________.

Accepted Answer

A)   ab; de
B)   bd; ce
C)   abdf; ce
D)   bc; deE) All of the above
F) A) and D)

Question 15

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

Accepted Answer

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

Question 17

A free market maximizes the gains from trade, the sum of consumer and producer surplus, meeting all of the following conditions EXCEPT:

Accepted Answer

A)   all buyers who are willing to pay positive prices are able to receive goods from trade.
B)   the supply of goods is bought by the buyers with the highest willingness to pay.
C)   the supply of goods is sold by the sellers with the lowest costs.
D)   there are no unexploited gains from trade between buyers and sellers.E) All of the above
F) C) and D)

Question 18

If firms are unable to lower prices because of a legally mandated price floor, then:

Accepted Answer

A)   firms are better off (higher profits)  at the expense of consumers.
B)   firms will often compete by offering higher-quality goods than consumers are willing to pay for.
C)   consumers will decrease their demand due to the high prices.
D)   quantity supplied will be less than quantity demanded.E) A) and B)
F) None of the above

Question 19

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) None of the above
F) B) and C)

Question 20

The minimum wage is an example of a(n) :

Accepted Answer

A)   price ceiling.
B)   price floor.
C)   wage subsidy.
D)   efficient policy.E) B) and D)
F) C) and D)

Exam 5: Price Ceilings and Floors

Which is NOT a cost of binding price controls?

Correct Answer
verified

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

Correct Answer
verified

Rent controls create large shortages in the long run rather than the short run because the long-run supply curve for apartments is inelastic.

Correct Answer
verified

The minimum wage is an example of a(n) :

Correct Answer
verified

Which statement about price controls is most correct?

Correct Answer
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Use the following to answer questions: Figure: Losses from Price Ceilings -(Figure: Losses from Price Ceilings) Refer to the figure. At a price ceiling of $1, the area representing the total value of wasted time is , and the area of the deadweight loss is .

Correct Answer
verified

If firms are unable to lower prices because of a legally mandated price floor, then:

Correct Answer
verified

When price ceilings are effective, gains from trade are usually lower than if the available goods are allocated to the highest value uses.

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, what is the quality waste?

Correct Answer
verified

One of the virtues of the market process is that it is open to new ideas, innovations, and:

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified
1) Shortage: Since the rent-controlled p...
View Answer

In Puerto Rico in 1938, the market wage was 3¢ to 4¢ per hour when Congress passed a law raising it to 25¢ per hour. Workers in Puerto Rico were:

Correct Answer
verified

Businesses may respond to price ceilings by closing down, reducing product quality, and by accepting bribes to sell their product.

Correct Answer
verified

Economists blame the long lines at gasoline stations in the United States during the 1970s as well as the long delays in construction projects on:

Correct Answer
verified

What would be the LEAST likely result of a price floor in the market for airline travel?

Correct Answer
verified

An alternative to rent controls that increases the quantity of housing and targets consumers that need low-cost rental property is:

Correct Answer
verified

Correct Answer
verified

The deregulation of the airline industry caused:

Correct Answer
verified

A free market maximizes the gains from trade, the sum of consumer and producer surplus, meeting all of the following conditions EXCEPT:

Correct Answer
verified

Exam 5: Price Ceilings and Floors

Which is NOT a cost of binding price controls?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Rent controls create large shortages in the long run rather than the short run because the long-run supply curve for apartments is inelastic.

Correct AnswerverifiedShow Answer

The minimum wage is an example of a(n) :

Correct AnswerverifiedShow Answer

Which statement about price controls is most correct?

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Losses from Price Ceilings -(Figure: Losses from Price Ceilings) Refer to the figure. At a price ceiling of $1, the area representing the total value of wasted time is ________, and the area of the deadweight loss is ________.

Correct AnswerverifiedShow Answer

If firms are unable to lower prices because of a legally mandated price floor, then:

Correct AnswerverifiedShow Answer

When price ceilings are effective, gains from trade are usually lower than if the available goods are allocated to the highest value uses.

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, what is the quality waste?

Correct AnswerverifiedShow Answer

One of the virtues of the market process is that it is open to new ideas, innovations, and:

Correct AnswerverifiedShow Answer

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

In Puerto Rico in 1938, the market wage was 3¢ to 4¢ per hour when Congress passed a law raising it to 25¢ per hour. Workers in Puerto Rico were:

Correct AnswerverifiedShow Answer

Businesses may respond to price ceilings by closing down, reducing product quality, and by accepting bribes to sell their product.

Correct AnswerverifiedShow Answer

Economists blame the long lines at gasoline stations in the United States during the 1970s as well as the long delays in construction projects on:

Correct AnswerverifiedShow Answer

What would be the LEAST likely result of a price floor in the market for airline travel?

Correct AnswerverifiedShow Answer

An alternative to rent controls that increases the quantity of housing and targets consumers that need low-cost rental property is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The deregulation of the airline industry caused:

Correct AnswerverifiedShow Answer

A free market maximizes the gains from trade, the sum of consumer and producer surplus, meeting all of the following conditions EXCEPT:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Use the following to answer questions: Figure: Losses from Price Ceilings -(Figure: Losses from Price Ceilings) Refer to the figure. At a price ceiling of $1, the area representing the total value of wasted time is , and the area of the deadweight loss is .

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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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