Deck 6: Supply, Demand, and Government Policies

Question 1

To be binding, a price ceiling must be set above the equilibrium price.

Answer 1

False

Question 2

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Answer 2

True

Question 3

When a free market for a good reaches equilibrium, anyone who is willing and able to sell at the market price can sell the good.

Answer 3

True

Question 4

Minimum-wage laws dictate the lowest wage that firms may pay workers.

Question 5

A price ceiling set above the equilibrium price is not binding.

Question 6

At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers want to sell.

Question 7

When free markets ration goods with prices, it is both efficient and impersonal.

Question 8

A price ceiling set below the equilibrium price is nonbinding.

Question 9

Rent-control laws dictate a minimum rent that landlords may charge tenants.

Question 10

When a free market for a good reaches equilibrium, anyone who is willing and able to pay the market price can buy the good.

Question 11

Prices are inefficient rationing devices.

Question 12

If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

Question 13

Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

Question 14

A price ceiling set below the equilibrium price causes quantity demanded to exceed quantity supplied.

Question 15

Price is the rationing mechanism in a free, competitive market.

Question 16

Price controls can generate inequities.

Question 17

A price ceiling set below the equilibrium price is binding.

Question 18

A price ceiling is a legal minimum on the price at which a good or service can be sold.

Question 19

If a price ceiling is not binding, then it will have no effect on the market.

Question 20

Economic policies often have effects that their architects did not intend or anticipate.

Question 21

A binding price ceiling causes quantity demanded to be less than quantity supplied.

Question 22

When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

Question 23

When the government imposes a binding price ceiling on a competitive market, a surplus of the good arises, and sellers must ration the scarce goods among the large number of potential buyers.

Question 24

A binding price ceiling may not help all consumers, but it does not hurt any consumers.

Question 25

All buyers benefit from a binding price ceiling.

Question 26

A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied.

Question 27

If a price ceiling of $1.50 per gallon is imposed on gasoline, and the market equilibrium price is $2, then the price ceiling is a binding constraint on the market.

Question 28

One common example of a price ceiling is rent control.

Question 29

If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50, then the price ceiling is a binding constraint on the market.

Question 30

A binding price ceiling causes a shortage in the market.

Question 31

Price ceilings are typically imposed to benefit sellers.

Question 32

A price ceiling set above the equilibrium price causes a surplus in the market.

Question 33

Long lines and discrimination are examples of rationing methods that may naturally develop in response to a binding price ceiling.

Question 34

A price ceiling set below the equilibrium price causes a shortage in the market.

Question 35

Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

Question 36

A price ceiling caused the gasoline shortage of 1973 in the United States.

Question 37

The goal of rent control is to help the poor by making housing more affordable.

Question 38

Price ceilings are typically imposed to benefit buyers.

Question 39

Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price.

Question 40

The rationing mechanisms that develop under binding price ceilings are usually inefficient.

Question 41

Rent control may lead to lower rents for those who find housing, but the quality of the housing may also be lower.

Question 42

A price floor is a legal minimum on the price at which a good or service can be sold.

Question 43

A price floor set above the equilibrium price is not binding.

Question 44

A price floor set above the equilibrium price causes a surplus in the market.

Question 45

A price floor set above the equilibrium price causes quantity supplied to exceed quantity demanded.

Question 46

The primary effect of rent control in the short run is to reduce rents.

Question 47

Renters of rent-controlled apartments will likely benefit from both lower rents and higher quality of apartments.

Question 48

If a price floor is not binding, then it will have no effect on the market.

Question 49

In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

Question 50

The effects of rent control in the long run include lower rents and lower-quality housing.

Question 51

The housing shortages caused by rent control are larger in the long run than in the short run because both the supply of housing and the demand for housing are more elastic in the long run.

Question 52

A price floor set above the equilibrium price is binding.

Question 53

Because the supply and demand of housing are inelastic in the short run, the initial shortage caused by rent control is large.

Question 54

Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

Question 55

A price floor set below the equilibrium price causes a surplus in the market.

Question 56

A binding price floor causes a shortage in the market.

Question 57

To be binding, a price floor must be set above the equilibrium price.

Question 58

A price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded.

Question 59

A binding price floor causes quantity supplied to be less than quantity demanded.

Question 60

When a binding price floor is imposed on a market for a good, some people who want to sell the good cannot do so.

Question 61

If the equilibrium price of an airline ticket is $500 and the government imposes a price floor of $400 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

Question 62

Price floors are typically imposed to benefit sellers.

Question 63

Workers determine the supply of labor, and firms determine the demand for labor.

Question 64

Figure 6-35
Refer to Figure 6-35. A price floor set at $40 would create a surplus of 20 units.

Question 65

The United States is the only country in the world with minimum-wage laws.

Question 66

The rationing mechanisms that develop under binding price floors are usually efficient.

Question 67

Figure 6-35
Refer to Figure 6-35. A price floor set at $60 would create a surplus of 20 units.

Question 68

Not all sellers benefit from a binding price floor.

Question 69

The economy contains many labor markets for different types of workers.

Question 70

A binding price floor may not help all sellers, but it does not hurt any sellers.

Question 71

Figure 6-35
Refer to Figure 6-35. A price ceiling set at $30 would create a shortage of 20 units.

Question 72

If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

Question 73

In an unregulated labor market, the wage adjusts to balance labor supply and labor demand.

Question 74

The goal of the minimum wage is to ensure workers a minimally adequate standard of living.

Question 75

Price floors are typically imposed to benefit buyers.

Question 76

A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.

Question 77

Figure 6-35
Refer to Figure 6-35. A price ceiling set at $70 would create a shortage of 40 units.

Question 78

Binding price floors benefit sellers because they allow sellers to sell all the goods they want at a higher price.

Question 79

One common example of a price floor is the minimum wage.

Question 80

States in the U.S. may mandate minimum wages above the federal level.