MicroEconomics Chapter 8 Part 2

An employer is willing to hire Alice at up to $10 per hour, Bob at up to $6 per hour, and Cindy at up to $5 per hour. In a free market, the equilibrium wage is $4 per hour. If the government enacts a minimum wage of $7, who receives a higher wage? A. Alice only B. Alice and Bob only C. Bob and Cindy only D. Alice, Bob, and Cindy E. None of the above

A.

Before the 1970s, regulations imposed a price floor on all airlines flying within the United States. Which of the following was a predictable consequence of imposing a price floor? A. Airlines created lavish amenities for customers like fancy meals and wide seats. B. Airlines chronically ran out of seats on their flights. C. Airlines stopped offering frequent-flyer clubs. D. Airlines provided narrow, uncomfortable seats and eliminated free food. E. Discount, no-frills airlines arose to compete with established, luxurious airlines.

A.

Douglas Holtz-Eakin, former director of the Congressional Budget Office, estimated the effects of a higher minimum wage on employment. What did he find? A. Under a wide range of assumptions, a $15 minimum wage decreases employment. B. Under a wide range of assumptions, a $15 minimum wage increases employment. C. Under some assumptions, employment falls. Under other assumptions, employment rises.

A.

Which of the following is a predicted outcome of a minimum wage? A. Lower employment among low-skilled workers B. Lower employment among high-skilled workers C. Shortage of workers D. (A) and (C) are correct. E. (B) and (C) are correct.

A.

The government imposes a $30 minimum wage. The economy enters a recession, and labor demand decreases. What happens? A. The labor surplus shrinks. B. The labor surplus widens. C. The labor shortage shrinks. D. The labor shortage widens.

B.

When the government imposes a $30 minimum wage, how much is a worker willing to give back to the employer to get a job? A. $30 B. $20 C. $10 D. Nothing E. None of the above

B.

When the government imposes a price floor of $30 on this market, what happens? A. There is a surplus of 150 units. B. There is a surplus of 100 units. C. There is a shortage of 150 units. D. There is a shortage of 100 units.

B.

A ban on selling kidneys creates... A. surplus. B. concessions by sellers. C. black markets. D. (A) and (B) are correct. E. (B) and (C) are correct.

C.

A ban on selling kidneys is equivalent to... A. a price floor at zero dollars. B. a price floor at the marginal value of the kidney. C. a price ceiling at zero dollars. D. a price ceiling at the marginal value of the kidney. E. a price ceiling at the equilibrium price in a free market for kidneys.

C.

Douglas Holtz-Eakin, former director of the Congressional Budget Office, estimated the effects of a higher minimum wage on aggregate income for households in poverty. What did he find? A. Under a wide range of assumptions, a $15 minimum wage decreases income. B. Under a wide range of assumptions, a $15 minimum wage increases income. C. Under some assumptions, income falls. Under other assumptions, income rises.

C.

In the 1980s, the federal government allowed several New England states to place a price floor on dairy products. Which of the following was a predictable consequence of imposing a price floor? A. Long lines formed at grocery stories as New England buyers were unable to find enough dairy products. B. Grocery stories began mandating the bundling of dairy products with over-priced products that were not covered by the price floor.. C. New England dairy farmers had millions of pounds of surplus dairy products. D. More dairy products were sold after the price floor was enacted.

C.

The government imposes a price floor of $10. How much is the customer willing to pay for the quantity available? A. More than $30 B. $30 C. $20 D. $10

C.

When the government imposes a $30 minimum wage, what happens? A. There are no unemployed workers. B. There are 50 unemployed workers. C. There are 100 unemployed workers. D. There are 150 unemployed workers. E. None of the above

C.

Which of the following is an example of a price floor that causes a surplus? A. Rent controls B. Setting a maximum legal price of $1.00 when the equilibrium price is $1.80 C. Minimum wage D. All of the above

C.

Which of the following statements are true? A. The minimum wage exists under current law, but wage subsidies do not. B. The minimum wage is more effective than wage subsidies at reducing poverty. C. The minimum wage is more likely than wage subsidies to reduce employment of low-skilled workers. D. All of the above are correct.

C.

Economists have several criticisms of the minimum wage. Which of the following is NOT one of them? A. The minimum wage encourages illegal payments to employers. B. The minimum wage prevents some low-skilled workers from getting work experience. C. The minimum wage contributes to the problem of unemployment. D. The minimum wage cannot raise the legal wage of a low-skilled worker.

D.

In the low-skilled labor market, the equilibrium wage is $3. The government enacts a minimum wage of $5. The following year, it raises the minimum wage to $10. Which of the following is a predicted outcome? A. Unemployment rises. B. Quantity of labor supplied rises. C. Quantity of labor demanded rises. D. (A) and (B) are correct. E. (B) and (C) are correct.

D.

The labor market changes from a free market to a market with a $30 minimum wage. How does it affect the quantity of employed workers? A. Quantity rises from 100 to 150. B. Quantity rises from 50 to 150. C. Quantity falls from 150 to 50. D. Quantity falls from 100 to 50. E. None of the above

D.

There are 93,000 people on the kidney waiting list in the United States. Why? A. Obesity and unhealthy diets B. Taboos on kidney donation C. Increased use of car safety features have reduced the number of deceased donors. D. The price of kidneys is too low. E. Medicare coverage of kidney transplants encourages people to get kidney transplants, even when they are medically unnecessary.

D.

What is a difference between price floors and subsidies? A. Price floors cause shortages; subsidies cause surpluses. B. Price floors cause surpluses; subsidies cause shortages. C. Price floors cause shortages; subsidies cause neither shortages nor surpluses. D. Price floors cause surpluses; subsidies cause neither shortages nor surpluses.

D.

Which of the following statements about a $15 minimum wage in the United States is correct? A. After adjusting for inflation, the minimum wage was over $15 in the 1960s, which was a period of broad prosperity and fast employment growth. B. After adjusting for inflation, the minimum wage was over $15 in the 2000s, which was a period of growing inequality and slow employment growth. C. After adjusting for inflation, the minimum wage has always been above $15. D. After adjusting for inflation, the minimum wage has never been above $15.

D.

Which of the following statements about price floors is correct? A. When the price floor is below the equilibrium price, there will be a shortage. B. When the price floor is below the equilibrium price, there will be a surplus. C. When the price floor is above the equilibrium price, there will be a shortage. D. When the price floor is above the equilibrium price, there will be a surplus.

D.

What is the difference between a price ceiling and a price floor? A. A price ceiling keeps prices high, and a price floor keeps prices low. B. A price ceiling is for goods, and a price floor is for services. C. A price ceiling increases producer surplus only, and a price floor increases consumer surplus only. D. A price ceiling is a minimum legal price, and a price floor is a maximum legal price. E. A price ceiling is a maximum legal price, and a price floor is a minimum legal price.

E.