ECON 201 CHAPTER 8 GRADED HOMEWORK

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

ceiling

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

command economy

Price controls cause resources to be misallocated by: distorting the signals of demanders' willingness to pay and eliminating the incentives for suppliers to supply. distorting the signals of suppliers' willingness to supply and eliminating the incentives for demanders to pay. distorting the incentives for demanders to pay and eliminating the signals of suppliers' willingness to supply. distorting the incentives for suppliers to supply and eliminating the signals of demanders' willingness to pay.

distorting the signals of demanders' willingness to pay and eliminating the incentives for suppliers to supply.

Under a binding price ceiling, one expects the quality of a good to: remain the same. change in an indeterminate direction. fall. rise.

fall

A price floor is: a minimum price allowed by law. a tool used to increase government revenues. a maximum price allowed by law. able to produce an efficient outcome.

a minimum price allowed by law

New housing takes some time to build, so rent control creates larger shortages in the: short run than in the long run because short-run supply is more elastic. long run than in the short run because short-run supply is more elastic. long run than in the short run because long-run supply is more elastic. short run than in the long run because long-run supply is more elastic.

long run than in the short run because long-run supply is more elastic.

When a price ceiling is in effect: some mutually beneficial trades between buyers and sellers do not occur. it is impossible to say if any, some, or all beneficial trades between buyers or sellers fail to occur. all mutually beneficial trades between buyers and sellers occur. no mutually beneficial trades between buyers and sellers occur.

some mutually beneficial trades between buyers and sellers do not occur.

Why do many consumers and politicians advocate for price controls? Most consumers and politicians do not advocate for price controls, because they understand their negative consequences. Price controls appear to be a straightforward response to the problem of price increases. The gains in consumer surplus typically outweigh the loss in producer profits. Price controls are the only way for the poor to obtain certain goods when prices rise.

Price controls appear to be a straightforward response to the problem of price increases.

A rent control is a regulation that: prevents rents from rising to equilibrium levels. controls rents at constant levels. ensures that there are apartments available for rent. upholds rents to above equilibrium levels.

prevents rents from rising to equilibrium levels.

How can sellers increase profits when they face a price ceiling? reduce the quality of the product and provide less customer service charge a higher price for the good charge a lower price for the good to undercut rival sellers produce and sell more output

reduce the quality of the product and provide less customer service

Price floors would create all of the following effects EXCEPT: wasteful decreases in product quality. misallocation of resources. deadweight loss. surpluses.

wasteful decreases in product quality.