Macro chapter 8

(Figure: Costs of Price Ceilings 2) Refer to the figure. What is the dollar amount of lost producer surplus after the price ceiling of $4 has been implemented?

$10

(Figure: Price Ceilings and Consumer Surplus) Refer to the figure. There is a price ceiling of $20. What is the value of consumer surplus if all the goods are allocated randomly?

$120

(Figure: Price Ceilings and Consumer Valuation) Refer to the figure. Suppose a price ceiling of $3 goes into effect. If the goods sold are allocated to buyers randomly, what is the total consumer surplus in this market?

$90

If a seller facing excess demand is unable to raise the price of the good due to a price ceiling, the seller might:

decrease the level of service for that product

Price controls cause resources to be misallocated by:

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

Which would MOST LIKELY result after setting a price ceiling on automobiles?

few safety features

If the minimum wage is lowered and closer to the market level, the:

gains from trade would increase, compared to a higher minimum wage

To what does the Russian concept of blat refer?

having connections that one can use to get favors

If there are 100 tickets to a concert and 200 fans who would like to go to the concert, each placing a slightly different value on the tickets, is it more efficient to hold an auction for the tickets or to hold a random drawing for the tickets?

hold an auction

Deregulation of the airline markets reduced waste, increased efficiency, and:

improved allocation of resources

Ultimately, repealing the price controls on gasoline and oil

led to a higher supply of gasoline and lower prices

New housing takes some time to build, so rent control creates larger shortages in the:

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

Price controls cause resources to be ________ not just geographically, but also across different ________ of those resources.

misallocated; uses

What would be the LEAST likely result of a price floor in the market for airline travel?

narrow seats and basic meals like peanuts or chips with a coffee or soda

In situations of excess demand, sellers might decrease service levels when they are unable to raise prices because they wish to:

raise their profit level

Price ceilings reduce quality because:

sellers facing excess demand cannot raise prices to increase profit

Refer to the figure. In the diagram, a minimum wage of $7 causes a deadweight loss of

x+z

(Figure: Price Floor) Refer to the figure. How much unemployment results from the imposition of a price floor set at $10?

100 units

Refer to the figure. Which statement is correct?

A price floor set at W2 would cause a labor surplus best labeled by A.

Which statement is correct regarding the restrictions on entry into the airline industry?

Resources were misallocated because low-cost airlines were kept out of the industry

Which scenario shows how the Russian concept of blat works during a beef shortage?

a politician acquires some steak through his friendship with the owner of the beef factory

(Figure: Supply and Demand 5) Refer to the figure. In the figure, representing a market for apartments, a rent-controlled price of $800 will cause:

a short-run shortage of 3,000 apartments

If a minimum wage is posted in the labor market:

a surplus of labor would develop

Because of government price controls, a business must now sell soft-serve ice cream at half its original price. This business might respond by:

all of the answers are correct

Price ceilings set by the government:

are generally believed to cause reductions in product quality

The shortages that result from imposing price controls:

are rarely recognized by the public as a result of the price controls themselves.

If quantity supplied equals 80 units and quantity demanded equals 85 units under a price control, then it is a:

binding price ceiling

If quantity supplied equals 85 units and quantity demanded equals 80 units under a price control, then it is a:

binding price floor

Refer to figure. If, in this figure, the government enacts a price ______ by setting the good's price at $6, it will create a ______.

ceiling, shortage of 10 units

(Figure: Supply and Demand 4) Refer to the figure. If the good is purchased by those with the highest willingness to pay, what is the value of consumer surplus in the figure at the price ceiling of $8?

$54

(Figure: Price Ceilings and Consumer Valuation) Refer to the figure. Suppose a price ceiling of $3 goes into effect. What is the loss of consumer surplus due to the random allocation of price-controlled goods compared to the allocation only to the highest-value users?

$60

(Figure: Price Ceilings and Consumer Valuation) Refer to the figure. Suppose a price ceiling of $3 goes into effect. If the goods sold are allocated only to the highest-value users, the total consumer surplus in the market would be:

$150

(Figure: Costs of Price Ceilings) Refer to the figure. What is the dollar amount of the value of wasted time if a price ceiling of $4 is implemented?

$160

(Figure: Supply and Demand 4) Refer to the figure. If the good is randomly allocated between those with the highest and lowest willingness to pay, what is the value of consumer surplus at the price ceiling of $8?

$36

Which statement is TRUE in a market with a price ceiling?

Buyers and sellers experience unexploited gains from trade.

At a price ceiling of $1 per loaf of bread, quantity supplied is 99 loaves, which is less than quantity demanded. What must be true for the 100th loaf of bread?

Consumers value the 100th loaf of bread more than it costs producers to make it

Which statement(s) is TRUE? I. Price floors are legally established minimum prices for goods and services. II. Price floors create surpluses, whereas price ceilings create shortages. III. Price floors reduce quality of goods and services.

I and II only

When the price ceilings on oil and gas were lifted in January 1981: I. the price of oil rose immediately. II. the price of oil continued to rise more than 2 years after the controls were eliminated. III. higher prices gave an incentive to suppliers to increase supply, thus leading eventually to lower prices.

I and III only

Labor unions are composed of high-skilled workers, but generally support minimum wage laws that typically affect only low-skilled workers. Their support makes more sense by considering that low-skilled labor is a ______ for high-skilled labor, and minimum wages ______ the quantity demanded of low-skilled labor.

Substitute; decrease

Mobile homes are housing units installed on a permanent foundation owned by a landlord. Although a resident owns the home, she rents the foundation from the landlord. In theory, owners of mobile homes can transfer their home to a different foundation if the rent becomes too steep, but uninstalling, transporting, and reinstalling the mobile home is usually prohibitively expensive. This "lock-in" effect encourages state legislatures to create rent controls for mobile home foundations. Which statement is a plausible, unintended consequence of these laws?

There are few new mobile home foundations constructed.