Unit 3 Mod 8-9 Practice Test

(Table 8-2: Market for a Can of Soda) If the government does not impose a price control, the price of a can of soda will equal:

$0.75

(Scenario 9-1 Market for Taxi Rides) The figure represents a competitive market for taxi rides. If a government quota limit at 9 million rides is now imposed on this market (in the name of quality), then the quota rent that will accrue to the owner of a taxi medallion will be _________, but there will be a missed opportunity (inefficiency) to consumers of ___________.

$1 per ride; 1 million rides

(Figure 9-2: Shrimp Market) If the government imposes a quota limiting sales of shrimp to 250 pounds, the quota rent per pound is:

$10

(Table 8-6: Quantity Supplied and Quantity Demanded) A government institutes a price control and as a result too few resources are allocated for the production of a good. The price control in this market is equal to:

$10

Melanie has a license to be a gadget seller. The table above shows how many gadgets she can supply, and how many gadgets her consumers will buy, at a variety of prices. If the government sets a quota limit at 10 gadgets per year, the quota rent Melanie receives on each gadget is equal to:

$2

(Table 8-7: Quantity Supplied and Quantity Demanded) Excess supply would exist in this market if a price floor equal to __________ was imposed in this market.

$20

(Scenario 9-1 Market for Taxi Rides) The figure represents a competitive market for taxi rides. If a government quota limit at 7 million rides is now imposed on this market (in the name of quality), then the quota rent that will accrue to the owner of a taxi medallion will be _________, but there will be a missed opportunity (inefficiency) to consumers of ___________.

$3 per ride; 3 million rides

(Scenario 9-1 Market for Taxi Rides) The figure represents a competitive market for taxi rides. If a government quota limit at 6 million rides is now imposed on this market (in the name of quality), then the quota rent that will accrue to the owner of a taxi medallion will be _________, but there will be a missed opportunity (inefficiency) to consumers of ___________.

$4 per ride; 4 million rides

(Figure 9-1: Market for Clams) The government imposes a quota limiting sales of clams to 1,000 pounds. According to the figure, the quota rent per pound in this case is:

.$2.50

(Table 8-5: Market for Butter) If the government imposes a price floor of $0.90 per pound of butter, the quantity of butter actually purchased will be:

10.0 million pounds

(Figure 8-16: Market I) If a price floor of $15 was imposed on this market, the government would need to buy __________ units of the good, and spend a total amount of __________ on its purchase.

5; $75

(Table 8-6: Quantity Supplied and Quantity Demanded) A price ceiling of $20 would result in

70 unites demanded and 70 units supplied

(Table 8-5: Market for Butter) If the government imposes a price ceiling of $0.80 per pound of butter, suppliers will produce _______ pounds of butter and there will exist ____ in the market

8 million; a shortage of 3 million pounds

(Table 8-2: Market for a Can of Soda) If the government imposes a price ceiling of $1.00 per can of soda, the quantity of soda demanded will be:

8 units

(Table 8-3: Market for Butter) If the government imposes a price ceiling of $0.90 per pound of butter, the quantity of butter actually purchased will be:

9.0 million pounds

If the equilibrium price for wheat is defined by the graph, how could the government help increase farmers' income?

A price floor could be set at P4, causing a surplus of Q3-Q0

Which of the following is an outcome of a binding price floor?

A surplus in the market with dead weight loss

The likely result of a price floor is:

A surplus of the good at a price above the market equilibrium price

(Figure 8-10: Market for Hybrid Cars) An effective price floor would be:

At point P1 creating a difference in quantity from Q3 to Q1

Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55. This price floor will:

Cause a surplus of corn

Suppose the government sets a price floor below the current. Price of the goods. This price floor will:

Have no effect on the price of the good.

To be binding, a price floor must be set at a price:

Higher than the equilibrium price

(Figure 8-12: Market for Milk) If there is a binding price floor in the market for milk, the price would be equal to ______, consumers would demand ______, and producers would supply _____.

P1;Q1;Q3

(Figure 8-9: Price Control) An effective price floor would be the price indicated at _______ and a ________ would exist as the difference between________,

Point b; surplus; points f and e

If the government feels that the price in the market is too low for the ______, it can impose a _____.

Producers; price floor

(Figure 8-5: Rent Controls) Without rent controls, the equilibrium quantity is ______.

Q2

(Figure 8-9: Price Control) With a price floor at point b:

Quantity demand would decrease to e

(Figure 8-1: Rent Controls) If rent controls are imposed, they will most likely be set at either ____ or _____.

Rent0; Rent1

(Figure 8-5: Rent Controls) If rent controls are set at Rent0, the renters would be willing to pay a price as high as ______.

Rent4 for Q0 units

A price ceiling will create a persistent _______ and a price floor will create a persistent _________.

Shortage; surplus

(Scenario 8-2: Market for Butter) The figure represents a competitive market for butter. If a government price floor at $1.10 is now imposed on this market (in the name of fairness), then an inefficiency will result in the form of a:

Surplus of 1.5 million pounds of butter

(Scenario 8-2: Market for Butter) The figure represents a competitive market for butter. If a government price floor at $1.40 is now imposed on this market (in the name of fairness), then an inefficiency will result in the form of a:

Surplus of 6.0 million pounds of butter

Suppose that a binding price floor is in place in a particular market. If the market is deregulated and the price floor is removed, then Which of the following effects could occur?

There would be a decrease in the quality of the good supplied

A price control is:

a legal restriction on how high or low a price in a market may go

A price ceiling is:

a maximum price sellers are allowed to charge for a good or service

A price ceiling is likely to result in:

a persistent shortage, a transfer of surplus from producers to consumers, and inefficient allocation of the good to consumers

A price floor or a price ceiling is an example of:

a price control

An effective price ceiling will lead to:

a resulting excess demand or a shortage

(Figure 8-4: Market for Blue Jeans) If a price ceiling at $55 exists in the market for jeans, the market outcome would be:

a shortage of 17 jeans

(Table 8-2: Market for a Can of Soda) If the government imposes a price ceiling of $0.50 per can of soda, there will be:

a shortage of 3 units

The government imposes a price ceiling below the equilibrium price. The price ceiling will cause:

a shortage of the good

Suppose the average cost of a doctor's visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor's visit, there will be:

an excess demand for doctor's visits

An effective price ceiling will most likely result in which of the following?

an increase in consumer surplus

A price ceiling on a good often results in:

black market or underground transactions of the good

Suppose the government of the oil-rich country of Oiland sets gasoline prices at $0.25 per gallon, when the market price is $1.50. The Oiland government's actions will:

cause gasoline shortages even in an oil-rich country

Suppose an effective price ceiling is imposed in the market above. The former area of producer surplus that is transferred to the consumer as consumer surplus is given by the area___.

ckhd

(Table 8-7: Quantity Supplied and Quantity Demanded) A price floor imposed by the government equal to $20 would result in:

excess supply in the amount of 25

(Figure 9-2: Shrimp Market) If the government imposes a quota limiting sales of shrimp to 250 pounds, it would have the same effect as a price ________ of ___________.

floor; $17.50

(Figure 8-16: Market I) If a price floor of $6 was imposed on this market, this would:

have no effect on this market

If the US government imposes a quota on the amount of French wine allowed into the United States (the quota is set at a quantity below equilibrium), the price of French wine in the United States will _______________ while the price of US produced wine will ____________.

increase;increase

Suppose the US government imposes a quota on the number of Japanese-made cars allowed in the United States (the quota is set at a quantity below equilibrium). Then we would expect the price of Japanese cars to ________________ and the price of U.S.-made cars to ___________.

increase;increase

A price floor in the market for wheat:

increases the price paid by consumers

Black markets may develop with price controls because:

individuals can profit by illegal exchanges

If the government imposes rent control:

it may result in some landlords leaving the business because they cannot cover costs

(Table 9-2 The Market for Acupuncture) A small town has a thriving market for acupuncture treatments. In an effort to regulate this market, the town requires each acupuncture therapist to purchase a license. Initially the government issues only enough licenses to provide for 20 treatments per month. Suppose this quota is in place for many years and, over time, the population of the town has substantially grown. This would result in:

larger quota rents and more missed opportunities as the demand curve has shifted to the right.

Price ceilings that lead to shortages will impose costs on society because they:

lead to a smaller quantity offered on the market

West African cotton farmers are very upset about the subsidies the US government pays to American cotton farmers. One reason for this could be the subsidized cotton form the United States:

leads to global cotton surpluses and lower prices for West African farmers.

A price floor is a ______ set ________ the equilibrium price.

minimum price; above

Rapidly increasing health costs have been a major political concern for several decades. Suppose that to control rising health costs the government sets the maximum price for a normal doctor's visit at $20, but the current market price is $40. Then:

more people will try to visit the doctor, but the doctor will see fewer patients

(Figure 8-6: Supply and Demand) In the market shown in the figure, a price ceiling of P1 causes:

no change to the market

A maximum price set below the equilibrium price is a:

price ceiling

The dictator of a war-torn country dictates that the most anyone can pay for a car is equivalent to $1,200 (a price below the equilibrium price for cars). If such a policy was put in place, it would be an example of a:

price ceiling

Inefficient allocations of goods to consumers often result from:

price ceilings

When price controls take the form of maximum prices set below the equilibrium price they are:

price ceilings

(Figure 8-14: Market for Blue Jeans) Suppose the government believes that producers of blue jeans are not profitable and the government wants to make sure blue jeans producers and profitable. This type of price control is called a _______ and the price would be set equal to __________.

price floor; $100

A quota is essentially a:

quantity restriction

An upper limit on the quantity of a good that can be bought and sold is a:

quota limit

(Figure 8-1: Rent Controls) If rent controls are set at Rent3:

rent would remain at Rent2

(Figure 8-1: Rent Controls) If rent controls are set at Rent1:

rental apartments may be of inefficiently low quality

(Scenario 8-1:Market for Apartments) This figure represents a competitive market for apartments. If a government price ceiling at $700 is now imposed on this market (in the name of fairness), then an inefficiency will result in the form of a:

shortage of 0.6 million apartments

(Figure 8-1: Rent Controls) If rent controls are set at Rent0:

some renters would be willing to pay a price as high as Rent4 for Q0 units

(Table 8-4: Market for a can of Soda) If government imposes a price floor of $1.00 per can of soda, there will be a(n):

surplus of 3 units

(Figure 9-3: Market for Round-Trip Airline Flights) The supply and demand graph represents the market for round-trip airline flights between Boston and New York. Suppose the mayor of NYC decides to limit the number of flights to Q1 to reduce air pollution. After the quota is in place:

the demand price will be high than the supply price

The quota rent refers to:

the difference between the demand price and the supply price at the quota limit

A persistent shortage may occur if:

the government imposes a price ceiling

(Figure 8-6: Supply and Demand) In the market shown in the figure, a binding price ceiling is represented by:

the price P3

(Figure 8-1: Rent Controls) If rent controls are set at Rent1:

the shortage of rental units is the distance Q3-Q1

The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price ceiling in the market at a price of $0.40 per pound, then

there will be a shortage of the good

The government decides to impose a price ceiling on a good because it thinks that market-determined price is "too high". If it imposes the price ceiling above the equilibrium price:

there will be no change to either the price or quantity in the market

When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling:

we say that the transaction takes place on a black market