Government Policies

This table shows the quantity of gasoline supplied and demanded at various prices in a country. If the government sets a price floor of $2.75 on a gallon of gasoline, what is the price per gallon?

$3.25

If the government imposes a price ceiling of $2 per gallon on milk, which of the following will result?

(A)A shortage of 60 gallons

Assume that the government increases the unit excise tax on insulin suppliers and also that people are getting diabetes at a faster rate. As a result, the equilibrium price and quantity of insulin will most likely change in which of the following ways?

(A)Price = Go up ; Quantity = Indeterminate

A long-run surplus of a product will occur when which of the following goes up?

(A)The price, if it was already set by law above the equilibrium price

If an effective rent ceiling is eliminated, which of the following is most likely to occur in the rental housing market?

(B)An increase in rents, resulting in an increase in the quantity of housing supplied

This graph shows the supply and demand curves for milk. If the government establishes a price ceiling of $12 per gallon, what will happen?

(B)Neither a surplus nor a shortage

If a price floor is set at A, what will happen to the value of quantity demanded?

(B)decrease from OD to OC

If a price ceiling is set at P4, what areas represent each of the following values?

(C)Consumer Surplus = a + b + d ; Producer Surplus = f ; Deadweight Loss = c + e

Assume an upward sloping supply curve and a downward sloping demand curve in the market for a product. How will the implementation of a sales tax on this product impact the producer surplus, the consumer surplus, and the total surplus?

(C)Producer Surplus = Goes Down ; Consumer Surplus = Goes Down ; Total Surplus = Goes Down

Following a big snow storm, the price of snow shovels normally increases significantly. If the government passed laws preventing price increases for snow shovels, during snow storms such laws would most likely

(C)create a shortage of snow shovels

If the market depicted in this diagram is initially in equilibrium, which of the following will result from the government's setting a price ceiling at P3?

(D)Market price will be unaffected.

In this diagram, if there is a price ceiling set at P1 consumer surplus will be represented by the area

(D)P3ACP1

If the government imposes a tariff on imports of wine, how will the price and quantity of imported wine change?

(E)Price = Go Up ; Quantity = Go Down

This diagram depicts demand and supply curves in a city's rental housing market. If a price ceiling of $1,000 is imposed on the market, which of the following will occur?

(E)The quantity of rental housing demanded will increase.

If a government eliminated an effective price floor in a market, all of the following would occur EXCEPT:

(E)The supply of the good would increase.

What will happen if the government implements a price floor above the equilibrium price of a good?

(E)There will be a surplus in the market.