Marianna Sidoryanskaya Macroeconomics Quiz 4

Consider Figure​ 4B-3, that represents the market for​ long-stemmed roses. If the market clearing price is​ $15, what is the total value of gains from​ trade?

$400

Many U.S.​ cities, especially those with large populations of​ renters, have rent controls. Suppose that Washington, DC sets a rent control of ​$300 per month on​ one-bedroom apartments. The graph on the right shows this situation. ____________________________________________________________________________________ 1) he rent control will create a _____ of apartments equal to _____ 2) The price of apartments would be ​$_____ if there was no rent control. With the rent​ control, the implicit or black market price is likely to be

1) Shortage; (Qd-Qs) 2) 700; around $1100

Suppose that owners of​ high-rise office buildings are the main employers of custodial workers in a city. The city has decided to impose rent​ controls, and it has established a rent ceiling below the previous equilibrium rental rate for offices throughout the city. 1) How will the quantity of offices that building owners lease​ change? 2) How will the market wage and equilibrium quantity of labor services provided by custodial workers be affected by the imposition of rent​ controls?

1) The quantity of office buildings supplied will decrease. 2) The market wage will fall and the equilibrium quantity will fall.

1) The diagram at right shows the market for pharmaceutical drugs. The pharmaceutical industry has benefited from advances in research and development that enable manufacturers to identify potential cures more quickly and therefore at lower cost. At the same​ time, the aging of our society has increased the demand for new drugs. Using the line drawing tool​, illustrate the impacts of these developments on both the demand and supply. Label the new lines. 2) The equilibrium market quantity will 3) The equilibrium market price will

1) draw the exact same image, but go to the right three times, and up three times ()make sure is still on the right of the image) 2) increase 3) Change in an indeterminate way

The accompanying graph depicts the market for unskilled labor. With the market initially in​ equilibrium, let a minimum wage be set at​ $8 per hour. The amount of unemployment is now

40,000 hours of labor.

What is the economic effect of price​ ceilings?

An effective price ceiling will lead to a shortage.

Refer to the figure at right. The government wants to set an effective price support in the corn market. To be effective the price should be set

At P3

Labor is a key input at​ fast-food restaurants. Suppose that the government boosts the minimum wage above the equilibrium wage of​ fast-food workers. Which of the following best describes the response of the quantity of labor employed at​ restaurants?

Fewer workers will be employed since the wage increase will induce managers to seek to substitute other inputs for the now relatively more expensive labor.

Of the following​ groups, who gains from rent​ controls?

High-income people who live in​ rent-controlled apartments

In a market​ system, what must take place for quantity demanded to continually be equated with quantity​ supplied?

Relative prices must be able to adjust to market clearing levels.

Price floors set above a market equilibrium price cause

Surpluses

What is the economic effect of price​ floors?

Surpluses.

Which of the following statements is NOT​ true? ____________________________________________________________________________________ 1) Transaction costs include the cost of enforcing a contract as well as the informational costs. 2) In voluntary exchange both parties are better off because of the exchange. 3) Terms of exchange only include situations of barter where the market price is irrelevant. 4) Prices indicate what is relatively abundant and what is relatively scarce

Terms of exchange only include situations of barter where the market price is irrelevant.

The concept of consumer surplus is best described by the following situation.

The maximum price that Jackie was willing to pay for an iPhone was​ $400, but she bought it for​ $250 on black Friday.

In a​ market-based economy, what is the role of a system of​ prices?

To address the problem of scarcity.

The effect of a quantity restriction is

a higher price.

An import quota is an example of

a quantity restriction.

One effect of a minimum wage in the market for​ low-skilled labor is

a surplus of​ low-skilled labor

Economists assume that when there is a change in demand​ and/or supply, that prices reach a new equilibrium

after an adjustment period that varies

In which of the following situations will market clearing price decrease and the equilibrium quantity​ increase?

an increase in supply with no change in demand

he publication Car and Driver reduces transactions costs for​ high-performance car buyers

by providing reliable information so that car buyers do not have to spend as much time doing their own research.

When consumers would have been willing to pay higher prices at various quantities consumed than the market clearing​ price, the differences are called

consumer surplus.

Government-enforced prices such as price ceilings

disrupt the rationing function performed by prices in a market system.

As a result of establishing a legal minimum wage above the market clearing​ wage,

firms will hire fewer workers.

With respect to the market clearing price and the equilibrium quantity of good​ X, increases in the demand for and the supply of good X will definitely

increase the equilibrium quantity of good X but have an uncertain impact on the market clearing price of X.

Other things remaining​ equal, a decrease in the world oil supply like those that occurred in​ 1973-74 and 1979 would

increase the price of airline travel and decrease its equilibrium quantity.

If Niki is willing to pay up to​ $5 for an ice−cream bar but she actually pays​ $2 for it. The consumer surplus of the ice−cream bar for Niki

is​ $3.

A price ceiling set above the equilibrium price will cause which of the​ following?

no effect on either the price or quantity

Rent controls are an example of a

price ceiling.

When supply increases and the​ (downward-sloping) demand curve remains in the same​ position,

price falls and equilibrium quantity rises.

In a price​ system,

relative prices change constantly to reflect changes in supply and demand.

Rationing occurs for goods

that have a positive price.

When the government sets a price floor which is below the equilibrium price

the equilibrium price will be maintained.

If demand and supply both​ decrease

the equilibrium quantity definitely will​ decrease, but the change in market clearing price cannot be determined without more information.

Suppose Matt Damon and Cameron Diaz wear matching platinum jewelry in their new movie. After the movie is​ released, suppose that consumers increase their demand for the jewelry and at the same time manufacturers increase the supply of the jewelry. As a​ result,

the equilibrium quantity will​ increase, and there is an indeterminate change in the equilibrium price.

When a government imposes price​ controls, the result is that

the rationing function of prices is not allowed to function freely.

The difference between quantity restrictions and price ceilings as to their effect on the market is that

while some consumers gain from price​ ceilings, no consumers gain from quantity restrictions.