Chapter 8 Micro

A nonbinding price floor leads to a(n):

equilibrium quantity.

Allocating products with long lines, using a first-come, first-served system, is:

inefficient, because waiting wastes time.

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

it controlled both price and entry into the airline market.

(Figure: Government Price Controls) Refer to the figure. The government enacts a price control causing a shortage of 15 units of the good. Therefore, the ________ is set at ________.

price ceiling; $10.

(Figure: Price Ceiling) Refer to the figure. If a price ceiling were set at $12, there would be a:

shortage of 0 units.

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

unskilled workers.

(Figure: Effects of Price Ceilings) Refer to the figure. Suppose that the data represent the retail gasoline market. At a price ceiling of $2, the total value of wasted time from waiting in line is:

$10.

(Figure: Costs of Price Ceilings) Refer to the figure. What is the dollar amount of the value of wasted time if a price ceiling of $4 is implemented?

$160

(Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2 per unit, consumers are willing to pay a maximum of:

$3.00

(Figure: Labor Market 1) If there is a price floor set at $9, how much deadweight loss is created, if any?

$30 million

Refer to the figure. In the figure, there will be 6 unemployed workers at a minimum wage of:

$8

(Figure: Price Ceiling) Refer to the figure. When a price ceiling of $10 is instituted by the government, consumers are able to buy how many units of the product?

270 units

An economy with permanent, universal price controls is in essence a:

Command economy

A nonbinding price ceiling leads to a(n):

Equilibrium quantity

A market with price ceilings fails to maximize all of the following EXCEPT:

Excess supply

A minimum wage mostly creates unemployment among older workers.

False

Although a minimum wage increases unemployment, it doesn't create a deadweight loss.

False

After a hurricane, the prices of many items rise. How BEST might the government help poor people be able to afford to buy goods and services?

Give poor people debit cards for use in purchasing essential items, while leaving prices unregulated.

A deadweight loss is the total of:

Lost consumer and producer surplus when all mutually profitable gains from trade are not exploited.

Refer to the figure. What areas represent the deadweight losses in the labor market as a result of the imposition of a minimum wage at $4?

There is no deadweight loss in this market as a result of the $4 minimum wage.

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

True

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

Vouchers.

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

all buyers who are willing to pay positive prices are able to receive goods from trade.

(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 ________.

bd; ce

(Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2:

bribes of $1 per unit may be common.

(Figure: Losses from Price Ceilings) Refer to the figure. A price ceiling of $1 causes lost consumer surplus equal to area ________, and lost producer surplus equal to area ________.

c; e

Refer to the figure. The deadweight loss from the $8 minimum wage is area:

ce.

(Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. The shaded area may likely represent all of the following EXCEPT:

consumer surplus.

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

All of the answers are correct.

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

No effect on the market

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?

No, paying $92.50 at $3.50 per gallon is more expensive than $75 at $5.00 per gallon.

An alternative to rent control that has been used in some cities since the 1990s is:

Rent regulation that limits the rate of increase in rent.

A binding price ceiling leads to a(n):

Shortage

(Figure: Price Ceiling) Refer to the figure. A price ceiling of $10 results in a:

Shortage of 40 units

Refer to the figure. If the government imposes a price ceiling at the price of $4.00, the result would be a:

Shortage of 40 units

A price ceiling creates a ________ when it is set ________.

Shortage; below the equilibrium price

A binding price floor leads to a(n):

Surplus