Quiz 5

If the government removes a binding price ceiling from a market, then the price received by sellers will increase, and the quantity sold in the market will increase. decrease, and the quantity sold in the market will increase. decrease, and the quantity sold in the market will decrease. increase, and the quantity sold in the market will decrease.

A

Look at Graph Question 11 In this market, a minimum wage of $7.25 creates a labor Surplus of 4,500 workers. shortage of 4,500 workers. surplus of 2,250 workers. shortage of 2,250 workers.

A

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases. demand curve for toothpaste shifts to the left. supply curve for toothpaste shifts to the right. quantity supplied of toothpaste stays the same.

A

You are the president of the United States. In an attempt to make gasoline prices cheaper, you have imposed a binding price ceiling on gas. What would you expect your critics to say? The binding price ceiling will increase the likelihood that customers obtain needed gasoline on the black market. The binding price ceiling will cause firms to produce only gasoline of the highest quality. The binding price ceiling will encourage oil companies to deplete the resource too quickly. The binding price ceiling will cause firms to minimize their spending on the research and development of alternatives to gasoline. The binding price ceiling will discourage individuals from using their personal automobile to commute to work or school.

A

A minimum wage that is set above a market's equilibrium wage will result in an excess demand for labor, that is, a shortage of workers. supply of labor, that is, unemployment. supply of labor, that is, a shortage of workers. demand for labor, that is, unemployment.

B

If a price ceiling is not binding, then None of the above is correct because all price ceilings must be binding. the equilibrium price is below the price ceiling. the equilibrium price is above the price ceiling. it has no legal enforcement mechanism.

B

Look at Graph Question 23 The price ceiling causes quantity supplied to exceed quantity demanded by 45 units. demanded to exceed quantity supplied by 45 units. supplied to exceed quantity demanded by 85 units.

B

Look at Question 2 Graph If the price floor for corn is set at $5.00, what amount and type of disequilibrium will be present in the market for corn? there will be a surplus of 223,000. There will be a surplus of 103,000. There will be a surplus of 120,000. There will be a shortage of 103,000. There will be no shortage or surplus.

B

A binding price floor (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. (i) only (ii) and (iv) only (i) and (iii) only (iii) only

C

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

C

If the government removes a binding price floor from a market, then the price received by sellers will increase, and the quantity sold in the market will decrease. increase, and the quantity sold in the market will increase. decrease, and the quantity sold in the market will increase. decrease, and the quantity sold in the market will decrease.

C

Look at Graph Question 3 The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P3, predict the resulting surplus or shortage. There would be a shortage of 75,000 units. There would be a surplus of 150,000 units. There would be a surplus of 75,000 units. There would be neither a shortage nor a surplus. There would be a shortage of 150,000 units.

C

Look at graph Question 12 In this market, a minimum wage of $7.25 is nonbinding and creates a labor shortage. nonbinding and creates neither a labor shortage nor unemployment. binding and creates unemployment. binding and creates a labor shortage.

C

A price ceiling will be binding only if it is set above the equilibrium price. equal to the equilibrium price. either above or below the equilibrium price. below the equilibrium price.

D

In a competitive market free of government regulation, price adjusts until quantity demanded is greater than quantity supplied. price adjusts until quantity demanded is less than quantity supplied. supply adjusts to meet demand at every price. price adjusts until quantity demanded equals quantity supplied.

D

Look at Table question 19 The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $3 above the equilibrium price in this market. 9 18 15 3

D

Rent-control laws dictate a minimum rent that landlords may charge tenants. the exact rent that landlords must charge tenants. both a minimum rent and a maximum rent that landlords may charge tenants. a maximum rent that landlords may charge tenants.

D

Under rent control, bribery is a mechanism to force the total price of an apartment (including the bribe) to be less than the market price. allocate housing to the poorest individuals in the market. allocate housing to the most deserving tenants. bring the total price of an apartment (including the bribe) closer to the equilibrium price.

D

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because with rent control, the government guarantees landlords a minimum level of profit. they become resigned to the fact that many of their apartments are going to be vacant at any given time. with rent control, it becomes the government's responsibility to maintain rental housing. with shortages and waiting lists, they have no incentive to maintain and improve their property.

D

Which of the following is correct? Workers determine the demand for labor, and firms determine the supply of labor. The labor market is a single market for all different types of workers. The price of the product produced by labor adjusts to balance the supply of labor and the demand for labor. Workers determine the supply of labor, and firms determine the demand for labor.

D

Which of the following is correct? Price controls always hurt those they are designed to help. always help those they are designed to help. never help those they are designed to help. often hurt those they are designed to help.

D

You are a senator from Kansas who wants to help farmers. You have worked to encourage the passage of a law that would impose a binding price floor on wheat. What would you expect your critics to say? The binding price floor will cause a shortage of wheat. The binding price floor will encourage consumers to eat too much wheat. The binding price floor will discourage farmers from using the most productive farming methods available. The binding price floor will cause a surplus of wheat that farmers will be unable to sell. The binding price floor will discourage farmers from planting wheat and they will plant other crops instead.

D

How would an economist explain a teenager's continued unemployment where there exists a minimum wage? The minimum wage law made it illegal to hire teenagers because they likely would have been unable to work a minimum number of hours. The minimum wage law was nonbinding. The minimum wage law made it such that the quantity of labor willing to work at that wage was less than the quantity of labor demanded at that wage. The minimum wage law made it such that the market had reached equilibrium. The minimum wage law made it such that the quantity of labor willing to work at that wage was greater than the quantity of labor demanded at that wage.

E

Look at Question 5 If a minimum wage is set at $5.50, predict the amount of disequilibrium in the labor market. A labor surplus of 25,515,000 would be eliminated because individuals would decide to work in the illegal black market. There would be a labor shortage of 25,515,000. A labor surplus of 25,515,000 would increase as individuals find work in the illegal black market. There would be a labor surplus of 25,515,000. There would be neither a shortage nor a surplus.

E

The presence of a price control in a market for a good or service usually is an indication that the usual forces of supply and demand were not able to establish an equilibrium price in that market. an insufficient quantity of the good or service was being produced in that market to meet the public's need. policymakers correctly believed that price controls would generate no inequities of their own once imposed. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

E