Chapter 5

Which of the following events occurred during the 1973-1974 oil crisis in the United States?

-Gas stations were ordered to be closed between 9 PM on Saturday and 12:01 AM on Monday. -Daylight savings time was implemented. -There were shortages of steel drilling equipment.

The U.S. Congress first instituted the minimum wage in:

1938

Ben is willing to work for $4/hour and an employer is willing to hire Ben for $7/hour. Which statement is TRUE?

A minimum wage of $7.50/hour would prevent this mutually beneficial exchange.

Rent controls create large shortages in the long run rather than the short run because the long-run supply curve for apartments is inelastic. True or False.

False

Which statement(s) about price ceilings is TRUE? -I. Price ceilings cause quantity demanded to exceed quantity supplied. -II. When including time costs and bribes, consumers pay a total price in excess of the price ceiling. -III. All else equal, it is more wasteful to allocate goods based on bribes than on waiting time costs.

I and II only

Why is the long-run supply curve of rent-controlled apartments typically more elastic than the short-run supply curve?

In the long run, fewer new apartments are built, and older apartments are torn down or turned into condominiums.

In ancient Egypt, the Bronze Law set maximum prices for wages, preventing them from rising above what rulers perceived as the minimum needed to survive. If this was 10¢ a day for a porter (someone who carries things short distances) and the market wage was 8¢ a day, which of the following would be a plausible consequence of this law?

Nothing unusual would happen.

At a price ceiling of $6 per sheet of drywall, quantity demanded is 100 and quantity supplied is 75. What will happen in the drywall market if there is an increased demand for drywall in the construction industry?

The shortage of drywall will increase above 25 units.

Effective price ceilings cause misallocation of resources because scarce resources are usually not allocated to their highest-value uses. True or False.

True

Price ceilings misallocate resources because with them, resources are not necessarily allocated to their highest-value use. True or False.

True

Because rent controls on apartments reduce profits:

apartment managers will give less consideration to renters' complaints.

When a price ceiling is in effect:

demanders cannot signal their needs to suppliers.

What does the Russian concept of blat refer to?

having connections that enable one to obtain favors

The deregulation of the airline industry caused:

lower prices and more flights.

Regulation of airline fares under the Civil Aeronautics Board:

meant the government prevented the entry of new competitors to maintain high ticket prices.

We commonly associate ______ with agricultural products.

price floors

The most common example of a price being controlled above market levels involves a good for which the:

sellers outnumber the buyers.