Micro test 2 chaper 6 study guide

The presence of a price control in a market for a good or service usually is an indication that

policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or seller.

In a free, competitive market, what is the rationing mechanism?

price

suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

quantity demanded of physicals increases, and the quantity supplied of physicals decreases.

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor,

A. quantity demanded decreases. B. quantity supplied increases. C. there is a surplus. D. All of the above are correct. D. All of the above are correct.

Suppose the government has imposed a price floor on the market for soybeans. Which of the following events could transform the price floor from one that is not binding into one that is binding?

Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans.

You have the responsibility for economic policy in the country of Freedonia. Recently, the neighboring country of sylvania has cut off all exports of oranges to Freedonia. George, whos is one of your advisors, says that the best way to avoid a shortage of oranges is to take no action at all. Charles, another one of your advisors, argues that without a binding price floor, a shortage will certainly develop. Otto, a third advisor, suggests that you should impose a binding price ceiling in order to avoid a shortage of oranges. Which of your three advisors is most likely to have studied economics?

George

one economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

He fears that rent control will eliminate the incentive to maintain building, leading to deterioration of the city.

After OPEC raised the price of crude oil in the 1970's, which of the following was the most important reason that there were shortages of gasoline?

The effects of price ceiling on gasoline prices imposed by the US government.