Chapter 6

When the government uses price supports in agriculture: a.buyers get the product at discount prices b.government sometimes buys up the extra food that is produced c.buyers and sellers both gain, only the taxpayer loses d.sellers gain but less food is produced

government sometimes buys up the extra food that is produced

The imposition of a binding price ceiling on a market causes quantity demanded to be a.equal to quantity supplied. b.greater than quantity supplied. c.Both (a) and (b) are possible. d.less than quantity supplied.

greater than quanity supplied

According to the lecture, agricultural price supports are sometimes combined with: a. restrictions on the amount of the good that people in the home country can purchase b. increases in exports as the good now sells for more c. import restrictions, to prevent other countries from bringing the good into the home country d. export restrictions, to prevent the country's farmers from shipping the product overseas

import restrictions, to prevent other countries from bringing the good into the home country

If the government removes a binding price ceiling from a market, then the price paid by buyers will a. increase and the quantity sold in the market will increase. b. increase and the quantity sold in the market will decrease. c. decrease and the quantity sold in the market will decrease. d. decrease and the quantity sold in the market will increase.

increase and the quantity sold in the market will increase.

Refer to Figure 6-8. When the price ceiling applies in this market and the supply curve for gasoline shifts from S 1 to S 2, the resulting quantity of gasoline that is bought and sold is a. less than Q3. b. at least Q1. c. between Q1 and Q3. d. Q3.

less than Q3

Under rent control, tenants can expect: a.lower rent and higher quality housing. b.lower rent, with housing quality remaining the same c.higher rent and a surplus of rental housing. d.lower rent and lower quality housing.

lower rent and lower quality housing

A minimum wage that is set below a market's equilibrium wage will result in a. an excess demand for labor, that is, unemployment. b. an excess demand for labor, that is, a shortage of workers. c. an excess supply of labor, that is, unemployment. d. None of the above is correct.

none of the above is correct

A binding price floor is shown in a. neither panel (a) nor panel (b). b. both panel (a) and panel (b). c. panel (a) but not panel (b). d. panel (b) but not panel (a).

panel (b) but not panel (a)

In the housing market, rent control causes a. quantity supplied and quantity demanded to rise. b. quantity supplied to fall and quantity demanded to rise. c. quantity supplied to rise and quantity demanded to fall. d. quantity supplied and quantity demanded to fall.

quantity supplied to fall and quantity demanded to rise

An example of a price floor is a. the regulation of gasoline prices in the U.S. in the 1970s. b. rent control. c. the minimum wage. d. any restriction on price that leads to a shortage.

the minimum wage

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price floor of $250 per physical. As a result of the price floor, a.the quantity demanded of physicals decreases and the quantity supplied of physicals increases. b.the supply curve for physicals shifts to the right. c.the number of physicals performed stays the same, but the price changes d.the demand curve for physicals shifts to the left.

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

If a price floor is not binding, then a. the market will be less efficient than it would be without the price floor. b. there will be a shortage in the market. c. there will be no effect on the market price or quantity sold. d. there will be a surplus in the market.

there will be no effect on the market price or quantity sold

Refer to Table 6-1. Which of the following price floors would be binding in this market? a. $3 b. $4 c. $2 d. $1

$4

Refer to Table 6-1. Suppose the government imposes a price ceiling of $5 on this market. What will be the size of the shortage in this market? a. 8 units b. 0 units c. 2 units d. 10 units

0 units

Table 4-1 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. The following question(s) are based on this Table. Refer to Table 4-1. The minimum wage of $7.50 results in how much unemployment? a. 10,000 people b. 20,000 people c. 40,000 people d. none

20,000 people

Refer to Table 6-1. Compared to equilibrium, how many units will be produced and sold in this market under a price floor of $5? a. the same number of units as in equilibrium b. more units than in equilibrium c. 4 units less than equilibrium d. 2 units less than equilibrium

4 units less than equilibrium

Refer to Table 6-1. Suppose the government imposes a price ceiling of $1 on this market. What will be the size of the shortage in this market? a. 2 units b. 0 units c. 8 units d. 10 units

8 units

Refer to Table 6-2. Which of the following statements is correct? a. A price ceiling set at $5 will be binding and will result in a shortage of 75 units. b. A price ceiling set at $5 will be binding and will result in a shortage of 50 units. c. A price ceiling set at $5 will be binding and will result in a shortage of 125 units. d. A price ceiling set at $5 will not be binding.

A price ceiling set at $5 will be binding and will result in a shortage of 125 units.

Refer to Figure 6-1. Which of the following statements is correct? a. A price ceiling set at $6 will be binding and will result in a shortage of 8 units. b. A price ceiling set at $16 will be binding and will result in a shortage of 12 units. c. A price ceiling set at $6 will be binding and will result in a shortage of 4 units. d. A price ceiling set at $16 will be binding and will result in a shortage of 6 units.

A price ceiling set at $6 will be binding and result in a shortage of 8 units

Which of the following statements is correct? a. A price floor set at $6 will be binding and will result in a surplus of 8 units. b. A price floor set at $6 will be binding and will result in a surplus of 4 units. c. A price floor set at $16 will be binding and will result in a surplus of 12 units. d. A price floor set at $16 will be binding and will result in a surplus of 6 units.

A price floor set at $16 will be binding and will result in a surplus of 12 units

Refer to Figure 6-8. When the price ceiling applies in this market and the supply curve for gasoline shifts from S 1 to S 2: a. a surplus will occur at the new market price of P2. b. the market price will increase to P3. c. a shortage will occur at the new market price of P2. d. the market price will stay at P1.

A shortage will occur at the new market price of P2

You have responsibility for economic policy in the country of Freedonia. Recently, the neighboring country of Sylvania has cut off all exports of oranges to Freedonia. Otto, who is one of your advisors, suggests that you should impose a binding price ceiling in order to avoid a shortage of oranges. Charles, another one of your advisors, argues that without a binding price floor, a shortage will certainly develop. George a third advisor, says that the best way to avoid a shortage of oranges is to take no action at all. Which of your three advisors is most likely to have studied economics? a. A shortage will develop under any circumstance, since there are no more oranges being imported into the country from Sylvania. b. Otto c. Charles d. George

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? a. He fears that rent controls will cause a construction boom, which will make the city crowded and more polluted. b. He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city. c. He fears that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. d. He fears that low rents will cause low-income people to move into the city, reducing the quality of life for other people.

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

Suppose that in a free market, 15,000 patients receive a kidney transplant. Although the organ is donated to the patients, the price of a transplant is still a hefty $250,000 to cover hospital and doctors' fees. And advocate of medical care reform argues that the government should put a maximum price of $80,000 on kidney transplants to make the surgery more affordable. Suppose patients will die without a kidney transplant. What is likely to happen if a ceiling of $80,000 is imposed, ceteris paribus? Compared to the free market outcome with no government intervention. a. More kidneys will now be donated. b. The price ceiling benefits all patients in need of the surgery. c. More doctors will be willing to perform the surgery. d. More patients will now die from kidney problems.

More patients will now die from kidney problems

Refer to Figure 4-5. With the rent control, the quantity supplied is Q1. Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get. What is the highest rent they can get? a. R1 b. it could be any rent they desire c. R0 d. R*

R1

Refer to the graph below. Which is most likely to happen, were a price floor of $125 to be instituted in this market? A.The government could set a quota of 21.5 million printers, to prevent overproduction. B.The government could set a quota of 19.5 million printers, to prevent overproduction. C.The government could set a quota of 20.5 million printers, to prevent overproduction. D.The government could set a quota of 18.5 million printers, to prevent overproduction.

The government could set a quota of 18.5 million printers, to prevent overproduction.

Table 4-1 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. The following question(s) are based on this Table. According to the lecture, what is one consequence of a minimum wage of $8? a. There is an increase in job training workers receive. b. There is increased time spent in job search. c. There is equilibrium. d. There is an increase in job benefits (like paid vacation) given to workers.

There is increased time spent in job search

Refer to Table 6-2. Which of the following statements is correct? a. A price floor set at $20 will be binding and will result in a surplus of 250 units. b. A price ceiling set at $20 will be binding and will result in a surplus of 250 units. c. A price floor set at $20 will be binding and will result in a surplus of 100 units. d. A price floor set at $20 will not be binding.

a price floor set at $20 will be binding and will result in a surplus of 250 units

In panel (b), there will be a. equilibrium in the market. b. lines of people waiting to buy wheat. c. a shortage of wheat. d. a surplus of wheat.

a surplus of wheat

Which of the following is not likely to happen when a rent control is in place? a. an increase in the supply of rentals b. spending more time searching for housing c. a "black market" for rentals d. longer waiting lists for rentals

an increase in the supply of rentals