Question 1

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₁: A) rental apartments may be of inefficiently low quality. B) there will be an efficient allocation of rentals. C) some landlords may break the law by renting below the mandated price. D) new apartments will be constructed.

Accepted Answer

If rent controls are set at Rent₁, rental apartments may be of inefficiently low quality. The graph shows that at this rent control price, the quantity supplied is much lower than the quantity demanded, resulting in a shortage. Landlords may not have the incentive to maintain or improve the quality of their rental apartments due to the lack of competition in the market.

Question 2

The government imposes a price ceiling below the equilibrium price. The price ceiling will cause:
A) demand to decrease.
B) supply to increase.
C) a shortage of the good.
D) an increase in the quality of the good.

Accepted Answer

When a price ceiling is imposed below the equilibrium price, it creates a situation where the quantity demanded exceeds the quantity supplied, leading to a shortage of the good. This is because buyers are willing to buy a larger quantity at a lower price, but suppliers are unwilling or unable to produce enough to meet that demand at the lower price. A price ceiling does not directly impact demand, supply, or the quality of the good.

Question 3

Use the following to answer questions: 
-(Table: The Market for Soda) Use Table: The Market for Soda. If the government does NOT impose a price control, the price of a can of soda will equal:
A) $0.50.
B) $0.75.
C) $1.00.
D) $1.25.

Accepted Answer

B

Question 4

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₁: A) the shortage of rental units is the distance Q₃ - Q₁. B) some renters will be willing to pay a price as high as Rent₄ for Q₁ units. C) no one will have to pay a higher actual price than Rent₀, nor will anyone be willing to do so. D) there will be a surplus of rental units, but it is impossible to tell how large the surplus is based on the information provided.

Accepted Answer

The answer of Use the following to answer questions: 
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Question 5

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₃: A) the shortage of rental units is the distance Q₃ - Q₁. B) some renters will be willing to pay a price as high as Rent₄ for Q₃ units. C) no one will have to pay a higher actual price than Rent₀, nor will anyone be willing to do so. D) rent will remain at Rent₂.

Accepted Answer

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Question 6

Suppose the NFL wants to give the "common fan" the opportunity to attend the Super Bowl, so it sets Super Bowl prices "low"-let's say they set ticket prices for a regular seat at Super Bowl LI to cost just $400. People who have tickets, however, can turn around and sell them online for $1,500 or more. If there are no transaction costs for fans with tickets to sell them, the true cost to a fan of attending Super Bowl LI is:
A) at most $400.
B) at least $1,500.
C) the monetary price paid to obtain the ticket.
D) $1,100 less than the opportunity cost of a ticket.

Accepted Answer

The true cost of attending Super Bowl LI is not the low ticket price set by the NFL, but rather the amount that people are willing to pay for the tickets on the secondary market, which is at least $1,500 or more. Therefore, even though the NFL set the ticket prices low, the actual cost to attend the Super Bowl is the higher market price.

Question 7

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are imposed and the government wants them to be immediately effective, they will most likely be set at either _____ or _____. A) Rent₀; Rent₁ B) Rent₁; Rent₃ C) Rent₃; Rent₄ D) Rent₂; Rent₄

Accepted Answer

From the graph, it appears that Rent₀ or Rent₁ would cause an immediate decrease in rent price to the desired level without causing a shortage in rental units.

Question 8

A binding price ceiling is usually designed to:
A) keep prices below the equilibrium level.
B) increase the quality of the good.
C) prevent shortages.
D) increase efficiency.

Accepted Answer

A binding price ceiling sets a maximum price below the equilibrium level, meaning that prices are kept artificially low. This is usually done in order to make goods or services more affordable for consumers. However, this often results in shortages, as suppliers are not willing to produce as much at the lower price. Therefore, A is the best answer.

Question 9

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Without rent controls, the equilibrium rent is: A) Rent₄. B) Rent₁. C) Rent₂. D) Rent₃.

Accepted Answer

Without rent controls, the equilibrium rent is determined by the intersection of the supply and demand curves, which is represented by option C.

Question 10

Rent controls set a price ceiling below the equilibrium price, and therefore:
A) quantity supplied exceeds the quantity demanded.
B) quantity demanded exceeds the quantity supplied.
C) a surplus of rental units will result.
D) all poor people will be helped.

Accepted Answer

Since the rent control sets a price ceiling below the equilibrium price, the quantity demanded will increase while the quantity supplied will decrease. This creates a shortage, where the quantity demanded exceeds the quantity supplied.

Question 11

The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If the government imposes the price ceiling below the equilibrium price:
A) consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price.
B) producers will respond to the lower price and offer more units for sale.
C) consumers will be able to purchase more of the good after the price ceiling is imposed.
D) it will not be binding.

Accepted Answer

When a price ceiling is set below the equilibrium price, it makes the good cheaper than what the market has determined, leading consumers to want to buy more of it. Producers, however, will not want to supply more at this lower price, leading to a shortage rather than an increase in the quantity purchased.

Question 12

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₀: A) the shortage of rental units is the distance Q₁ - Q₃. B) some renters will be willing to pay a price as high as Rent₄ for Q₀ units. C) no one will have to pay a higher actual price than Rent₀, nor will anyone be willing to do so. D) there will be a surplus of rental units.

Accepted Answer

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Question 13

A price ceiling will have NO immediate effect if:
A) it is set above the equilibrium price.
B) the equilibrium price is above the price ceiling.
C) it is set below the equilibrium price.
D) it creates a shortage.

Accepted Answer

A price ceiling will have no immediate effect if it is set above the equilibrium price because the market is already functioning at the equilibrium price, so any higher price ceiling will not affect the market outcomes.

Question 14

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What is MOST likely to happen?
A) More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price.
B) The same number of people will try to visit the doctor, and the same number of doctors are willing to see patients at that price.
C) More people will be able to see the doctor, since the price is lower.
D) Fewer people will try to see the doctor, and fewer doctors are willing to see patients at that price.

Accepted Answer

Setting a maximum price below the market equilibrium price (price ceiling) typically results in a shortage. More people will want to see the doctor due to the lower price, but fewer doctors will be willing to provide services at that price, leading to a shortage of available appointments.

Question 15

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Suppose that rent controls are imposed. If the government wanted a rent control ceiling to be effective immediately, what is one possible price to set? A) Rent₃ B) Rent₄ C) Rent₁ D) Rent₂

Accepted Answer

For a rent control ceiling to be effective immediately, it must be set below the current equilibrium price. Choice C represents a price below the equilibrium, making it an effective rent control price.

Question 16

A price control is:
A) control of the price of a good by the firm that produces it.
B) a legal restriction on how high or low a price in a market may go.
C) an upper limit on the quantity of some good that can be bought or sold.
D) a tax on the sale of a good that controls the market price.

Accepted Answer

A price control is a legal restriction on the price of a good in a market. It can be either a price ceiling (an upper limit on the price that can be charged) or a price floor (a minimum price that must be charged). This is often used by governments to regulate markets and protect consumers from high prices or producers from low prices.

Question 17

Use the following to answer questions: 
-(Table: The Market for Soda) Use Table: The Market for Soda. If the government imposes a price ceiling of $0.50 per can of soda, the quantity of soda demanded will be _____ cans.
A) 10
B) 8
C) 6
D) 4

Accepted Answer

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Question 18

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Without rent controls, the equilibrium quantity is: A) Q₄. B) Q₁. C) Q₂. D) Q₃.

Accepted Answer

The equilibrium quantity is where the supply and demand curves intersect, which is represented by Q₂ in the figure.

Question 19

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₀, renters would be willing to pay a price at least as high as: A) Rent₄ for Q₀ units. B) Rent₄ for Q₁ units. C) Rent₃ for Q₁ units. D) No one would be willing to pay a higher actual price than Rent₀.

Accepted Answer

Rent controls set below the equilibrium price create a shortage, leading to a higher willingness to pay by renters to secure the limited available units.

Question 20

The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the market at a price of $0.40 per pound:
A) quantity demanded will decrease.
B) quantity supplied will increase.
C) there will be a shortage of apples.
D) the price floor will not affect the market price or output.

Accepted Answer

Since the price floor is set below the equilibrium price of $0.50 per pound, it will not be binding. The market will continue to operate at the equilibrium price, meaning the price floor at $0.40 will not affect the market price or output.

Quiz 4: Price Controls and Quotas: Meddling With Markets

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₁:

The government imposes a price ceiling below the equilibrium price. The price ceiling will cause:

Use the following to answer questions: -(Table: The Market for Soda) Use Table: The Market for Soda. If the government does NOT impose a price control, the price of a can of soda will equal:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₁:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₃:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are imposed and the government wants them to be immediately effective, they will most likely be set at either _ or _.

A binding price ceiling is usually designed to:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Without rent controls, the equilibrium rent is:

Rent controls set a price ceiling below the equilibrium price, and therefore:

The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If the government imposes the price ceiling below the equilibrium price:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₀:

A price ceiling will have NO immediate effect if:

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What is MOST likely to happen?

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Suppose that rent controls are imposed. If the government wanted a rent control ceiling to be effective immediately, what is one possible price to set?

A price control is:

Use the following to answer questions: -(Table: The Market for Soda) Use Table: The Market for Soda. If the government imposes a price ceiling of $0.50 per can of soda, the quantity of soda demanded will be _____ cans.

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Without rent controls, the equilibrium quantity is:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₀, renters would be willing to pay a price at least as high as:

The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the market at a price of $0.40 per pound:

Quiz 4: Price Controls and Quotas: Meddling With Markets

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent1:

The government imposes a price ceiling below the equilibrium price. The price ceiling will cause:

Use the following to answer questions: -(Table: The Market for Soda) Use Table: The Market for Soda. If the government does NOT impose a price control, the price of a can of soda will equal:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent1:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent3:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are imposed and the government wants them to be immediately effective, they will most likely be set at either _____ or _____.

A binding price ceiling is usually designed to:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Without rent controls, the equilibrium rent is:

Rent controls set a price ceiling below the equilibrium price, and therefore:

The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If the government imposes the price ceiling below the equilibrium price:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent0:

A price ceiling will have NO immediate effect if:

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What is MOST likely to happen?

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Suppose that rent controls are imposed. If the government wanted a rent control ceiling to be effective immediately, what is one possible price to set?

A price control is:

Use the following to answer questions: -(Table: The Market for Soda) Use Table: The Market for Soda. If the government imposes a price ceiling of $0.50 per can of soda, the quantity of soda demanded will be _____ cans.

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. Without rent controls, the equilibrium quantity is:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent0, renters would be willing to pay a price at least as high as:

The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the market at a price of $0.40 per pound:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₁:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₁:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₃:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are imposed and the government wants them to be immediately effective, they will most likely be set at either _ or _.

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₀:

Use the following to answer questions: -(Figure: Rent Controls) Use Figure: Rent Controls. If rent controls are set at Rent₀, renters would be willing to pay a price at least as high as: