Question 1

All renters benefit from rent control and all landlords lose.

Accepted Answer

Rent control can provide some benefits for certain renters who are able to secure and maintain affordable housing. However, it can also have negative impacts on the rental market as a whole, such as discouraging new development and reducing the quality of rental units due to landlords being unable to raise rents enough to cover maintenance costs. Landlords may also be less motivated to provide good service and upkeep for their properties if they cannot charge market rates. Therefore, rent control can result in a loss for landlords and potentially harm the rental market as a whole.

Question 2

The cities of Francistown and Nalady are five miles apart. Francistown enacts a rent control
law that puts a ceiling on rents well below their equilibrium market value. Predict the short-run impact of this law on the competitive equilibrium rent in Nalady, which does not have a rent control law.
a. Illustrate your answer with one demand and supply graph for the apartment market in Francistown and another demand and supply graph for the apartment market in Nalady.
b. Make sure that your graphs clearly show (1) the initial equilibrium before the rent control in both markets and (2) what happens after the imposition of rent control.
c. Clearly show any shifts in the demand or supply curves, and the movement along the curves for each market.
d. Label your graphs fully and provide written explanation for your graphs.

Accepted Answer

The answer of The cities of Francistown and Nalady are...

Question 3

Rent control is an example of a price floor.

Accepted Answer

Rent control is an example of a price ceiling, not a price floor, because it sets a maximum price that can be charged for rental housing.

Question 4

What is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price, where must price ceilings and price floors be set to have an effect on the market.

Accepted Answer

The answer of What is the difference between a price...

Question 5

What is a black market?

Accepted Answer

The answer of What is a black market?...

Question 6

What is the difference between scarcity and a shortage?

Accepted Answer

The answer of What is the difference between scarcity and...

Question 7

Explain how both renters and landlords could be either winners or losers with the imposition of rent control.

Accepted Answer

The answer of Explain how both renters and landlords could...

Question 8

Price ceilings result in shortages.

Accepted Answer

Price ceilings set a maximum price lower than the equilibrium price, which creates a situation where the quantity demanded exceeds the quantity supplied, resulting in a shortage of the good or service.

Question 9

Shortage means the same thing as scarcity.

Accepted Answer

The answer of Shortage means the same thing as scarcity....

Question 10

Rent control is an example of a price ceiling.

Accepted Answer

Rent control sets a maximum amount that landlords can charge for rent, which is an example of a price ceiling.

Question 11

Table 4-9
  Table 4-9 above contains information about the corn market. Answer the following questions based on this table.
-Refer to Table 4-9. An agricultural price floor is a price that the government guarantees farmers will receive for a particular crop. Suppose the federal government sets a price floor for corn at $12 per bushel.
a. What is the amount of shortage or surplus in the corn market as result of the price floor?
b. If the government agrees to purchase any surplus output at $12, how much will it cost the government?
c. If the government buys all of the farmers' output at the floor price, how many bushels of corn will it have to purchase and how much will it cost the government?
d. Suppose the government buys up all of the farmers' output at the floor price and then sells the output to consumers at whatever price it can get. Under this scheme, what is the price at which the government will be able to sell off all of the output it had purchased from farmers? What is the revenue received from the government's sale?
e. In this problem we have considered two government schemes: (1) a price floor is established and the government purchases any excess output and (2) the government buys all the farmers' output at the floor price and resells at whatever price it can get. Which scheme will taxpayers prefer?
f. Consider again the two schemes. Which scheme will the farmers prefer?
g. Consider again the two schemes. Which scheme will corn buyers prefer?

Accepted Answer

The answer of Table 4-9
  Table 4-9 above contains...

Question 12

Government intervention in agriculture began in the United States in the 1890s.

Accepted Answer

Government intervention in agriculture in the United States began earlier, notably with the Morrill Act of 1862, which established land-grant colleges for agricultural education, and the establishment of the U.S. Department of Agriculture in 1862.

Question 13

Figure 4-13 -Refer to Figure 4-13 which shows the market for watermelons. Suppose the government imposes a price floor of P_w. How will the price floor affect the quantity supplied, quantity demanded, and quantity exchanged?

Accepted Answer

The answer of Figure 4-13 
-Refer to Figure 4-13 which...

Question 14

Price ceilings are illegal in the United States.

Accepted Answer

Price ceilings are not illegal in the United States, but they are heavily regulated and can only be implemented in certain situations, such as during a natural disaster or emergency. However, they often have unintended consequences and are not a long-term solution to controlling prices.

Question 15

A price ceiling is a legally determined maximum price that sellers may charge.

Accepted Answer

A price ceiling is a maximum price that is set by a government or regulatory body, and sellers are not allowed to charge a higher price than the ceiling. This is done to protect consumers from excessively high prices for goods or services.

Question 16

Black markets only exist in developing nations.

Accepted Answer

Black markets can exist in any country, regardless of its level of development. It is a phenomenon that arises when goods or services are exchanged outside of legal channels, often due to high taxes or prohibitions on certain items. While black markets may be more prevalent in developing nations, they can also be found in developed countries.

Question 17

Figure 4-12 -Refer to Figure 4-12 which shows the market for vitamins. Suppose the government imposes a price ceiling of P_v. How will the price ceiling affect the quantity supplied, quantity demanded, and quantity exchanged?

Accepted Answer

The answer of Figure 4-12 
-Refer to Figure 4-12 which...

Question 18

There is a shortage of every good that is scarce.

Accepted Answer

Scarcity refers to the basic economic problem that resources are limited while desires and needs are unlimited. A good being scarce means it is not available in sufficient quantities to satisfy all the desires for it, but this does not necessarily mean there is a shortage. A shortage occurs when the quantity demanded of a good exceeds the quantity supplied at a given price, which can happen with or without scarcity.

Question 19

The minimum wage is an example of a price ceiling.

Accepted Answer

The answer of The minimum wage is an example of...

Question 20

Price floors are illegal in the United States.

Accepted Answer

Price floors are not illegal in the United States. However, they are not as commonly used as price ceilings. Price floors are minimum prices set by the government that are intended to artificially raise the price of a good or service above the equilibrium price. They are often used in agriculture to support farmers by ensuring a minimum price for their crops.

Quiz 4: Economic Efficiency, Government Price Setting, and Taxes