Economics 210 Test #1 -- Chapter 8

A. quantity demanded exceeds quantity supplied

1. A shortage occurs when, at the current price, the: A. quantity demanded exceeds quantity supplied. B. quantity demanded equals quantity supplied. C. quantity supplied exceeds quantity demanded. D. demand equals supply.

D. the distance between price A and price B

After a price ceiling of price B is imposed on the market in Figure 8.1, the vertical distance that represents the maximum time cost that consumers are willing to bear waiting in line is: A. price A. B. price B. C. the distance between price C and price B. D. the distance between price A and price B.

D. improvements in product quality

All of the following are typical effects of price ceilings, EXCEPT: A. shortages. B. a loss of gains from trade. C. a misallocation of resources. D. improvements in product quality.

D. I plus J

In Figure 8.1, the area that represents the deadweight loss due to a price ceiling of price B is: A. I. B. J. C. K. D. I plus J.

A. I

In Figure 8.1, the area that represents the lost consumer surplus due to a price ceiling of price B is: A. I. B. J. C. K. D. I plus J.

A. E

In Figure 8.1, the consumer surplus with a free market is represented by area EFI. With a price ceiling of price B, the lost gains from trade plus the total value of the wasted time will reduce consumer surplus to area: A. E. B. F. C. I. D. E and F.

D. Q3 and Q1

In Figure 8.1, the shortage created by the price ceiling of price level B is represented by the different between: A. Q1 and Q0. B. Q2 and Q1. C. Q3 and Q2. D. Q3 and Q1.

B. B

In Figure 8.1, which of the price levels would be an effective price ceiling? A. A B. B C. C D. A and B

C. information and incentives

Price ceilings interfere with the ______ that prices provide in free markets. A. information B. incentives C. information and incentives D. profits

C. when a shortage of the particular good is a desired outcome by society

Price controls could be a good idea: A. in all markets. B. when trying to help sellers of a good. C. when a shortage of the particular good is a desired outcome by society. D. never.

C. the public typically does not connect the negative outcomes of a price ceiling directly to the existence of a price ceiling

Price controls exist despite the analysis of economists because: A. economists are wrong in their analysis. B. price controls really do benefit countries in most cases. C. the public typically does not connect the negative outcomes of a price ceiling directly to the existence of a price ceiling. D. price controls never harm consumers because price ceilings result in lower prices.

C. decreases in quality

Price floors create all of the following effects, EXCEPT: A. surpluses. B. a loss of gains from trade (deadweight loss). C. decreases in quality. D. a misallocation of resources.

C. P4; surplus

Refer to Figure 8.2. A price floor at the price level of ______ would result in a _______ of the quantity Q3 minus Q1. A. P2; surplus B. P2; shortage C. P4; surplus D. P4; shortage

A. have no effect on the market equilibrium

Refer to Figure 8.2. A price floor of price level P2, would: A. have no effect on the market equilibrium. B. increase the price paid by consumers. C. result in a shortage of Q3 - Q1. D. result in a surplus of Q3 - Q1.

B. CD

Refer to Figure 8.2. The lost gains from trade (deadweight loss) from a price floor of P4 are represented by the area: A. AB. B. CD. C. BE. D. EF.

D. P4

Refer to Figure 8.2. The price level that would represent an effective price floor is: A. P1. B. P2. C. P3. D. P4.

A. smaller in the shirt run than in the long run

Rent control is an artificial reduction in the market price for apartments. The percentage change in quantity supplied will be _______ for a given percentage change in price. A. smaller in the short run than in the long run B. smaller for wealthy renters than for poor renters C. larger in the short run than in the long run D. larger for wealthy renters than for poor renters

C. F and G

The areas in Figure 8.1 that represent the total maximum value of wasted time with the price ceiling of price B are: A. G and H. B. E and F. C. F and G. D. I and J.

D. a price ceiling

The shortage of gasoline in Iraq in 2003 was directly caused by: A. black marketers. B. refineries. C. the United States taking all the gasoline. D. a price ceiling.

C. reduce quality

With price ceilings, sellers will typically have more customers than they have goods. As a result, sellers will have an incentive to: A. raise price and increase profits. B. reduce costs. C. reduce quality. D. reduce price.