ECN150:Chapter 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? 290 units 310 units 270 units 40 units

270 units

(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: $5. $10. $15. $20.

$10.

(Figure: Minimum Wage) Refer to the figure. How many workers are unemployed at a minimum wage of $8? 10 20 25 35

20

(Figure: Minimum Wage) Refer to the figure. At a minimum wage of $8, firms are willing to hire ________ workers. 45 25 35 more than 45

25

A binding price floor leads to a(n): shortage. surplus. equilibrium quantity. quantity of zero units.

surplus.

(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 ________. ab; de bd; ce abdf; ce bc; de

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. seller discounts of $1 may be common. bribes of $3 per unit may be common. seller discounts of $3 per unit may be common.

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 bc; de a; f d; b

c; e

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

ce.

A legal maximum price at which a good can be sold is a price: stabilization. ceiling. support. floor.

ceiling.

An economy with permanent, universal price controls is in essence a: market economy. social economy. free economy. command economy.

command economy.

(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: value of wasted time. the amount that buyers bribe sellers. the amount of corruption. consumer surplus.

consumer surplus.

A nonbinding price ceiling leads to a(n): shortage. surplus. equilibrium quantity. quantity of zero units.

equilibrium quantity.

A nonbinding price floor leads to a(n): shortage. surplus. equilibrium quantity. quantity of zero units.

equilibrium quantity.

A market with price ceilings fails to maximize all of the following EXCEPT: the gains from trade. consumer surplus. excess supply. producer surplus.

excess supply.

A price ceiling: is a maximum price allowed by law. is a minimum price allowed by law. has an effect only when it is set above the market price. has little effect on market activity.

is a maximum price allowed by law.

Airline regulation from 1938 to 1978 was successful in keeping prices high because: it controlled price, but not entry into the airline market. it controlled both price and entry into the airline market. it listened to the requests of suppliers during this time at the expense of consumers. of declining production costs.

it controlled both price and entry into the airline market.

An increase in the minimum wage would likely increase unemployment among which group of workers? college graduates unskilled workers female workers older workers

unskilled workers

(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: $2.00. $2.50. $3.00. $4.00.

$3.00.

(Figure: Labor Market 1) If there is a price floor set at $9, how much deadweight loss is created, if any? $15 million $30 million $60 million There is no deadweight loss.

$30 million

Refer to the figure. Which statement is correct? A price floor set at W1 would cause a labor surplus best labeled by A. A price floor set at W1 would cause a labor surplus best labeled by B. A price floor set at W2 would cause a labor surplus best labeled by A. A price floor set at W2 would cause a labor surplus best labeled by B.

A price floor set at W2 would cause a labor surplus best labeled by A.

(Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. As a result: The quantity supplied in the market is Qs. Buyers' willingness to pay for the good is Pd. The quantity demanded in the market is Qd. All of the answers are correct.

All of the answers are correct.

A minimum wage mostly creates unemployment among older workers. True False

False

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

False

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. Yes, paying $52.50 at $3.50 is cheaper than $75 at $5.00 per gallon. Yes, gas is cheaper at $3.50 per gallon because the waiting costs keep gas prices low. No, $5.00 per gallon would insure that buyers could always buy as much as they want.

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

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? Areas (C + F) Areas (B + C) Area D There is no deadweight loss in this market as a result of the $4 minimum wage.

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

Refer to the figure. In the diagram, a minimum wage of $7 causes a deadweight loss of: W + X. X + Z. V + Y. Y + W.

X + Z.

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. the supply of goods is bought by the buyers with the highest willingness to pay. the supply of goods is sold by the sellers with the lowest costs. there are no unexploited gains from trade between buyers and sellers.

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

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? institute price controls at pre-hurricane prices set prices at zero, so consumers can buy what they need without financial distress give poor people debit cards for use in purchasing essential items, while leaving prices unregulated institute a wage freeze to keep the costs of production from rising too rapidly

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

A deadweight loss is the total of: consumer and producer surplus when all mutually profitable gains from trade are exploited. consumer and producer surplus when all mutually profitable gains from trade are not exploited. lost consumer and producer surplus when all mutually profitable gains from trade are exploited. lost consumer and producer surplus when all mutually profitable gains from trade are not exploited.

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

(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be: a shortage of 15 units. a surplus of 15 units. a supply of 20 units. no effect on the market.

no effect on the 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 floor; $31 price floor; $17 price ceiling; $10 price ceiling; $17

price ceiling; $10

An alternative to rent control that has been used in some cities since the 1990s is: confiscation of property from landlords. policies that prevent evictions. rent regulation that limits the rate of increase in rent. higher taxes on rental income of landlords.

rent regulation that limits the rate of increase in rent.

(Figure: Price Ceiling) Refer to the figure. If a price ceiling were set at $12, there would be a: shortage of 50 units. surplus of 40 units. shortage of 0 units. surplus of 20 units.

shortage of 0 units.

Refer to the figure. If the government imposes a price ceiling at the price of $4.00, the result would be a: surplus of 40 units. shortage of 40 units surplus of 20 units. shortage of 20 units.

shortage of 40 units

(Figure: Price Ceiling) Refer to the figure. A price ceiling of $10 results in a: shortage of 270 units. shortage of 40 units. surplus of 270 units. surplus of 40 units.

shortage of 40 units.

A binding price ceiling leads to a(n): shortage. surplus. equilibrium quantity. quantity of zero units.

shortage.

A price ceiling creates a ________ when it is set ________. surplus; below the equilibrium price surplus; above the equilibrium price shortage; below the equilibrium price shortage; above the equilibrium price

shortage; below the equilibrium price

An alternative to rent controls that increases the quantity of housing and targets consumers that need low-cost rental property is: tax credits. vouchers. subsidies to landlords not available.

vouchers.