Question 1

All else equal, if a price floor above the equilibrium is imposed on a market and the government buys the surplus, consumer surplus will _____ and producer surplus will _____.

Accepted Answer

A price floor set above the equilibrium price will lead to a surplus of goods. The government buying this surplus will not change the fact that consumers are paying higher prices than they would in an equilibrium situation, thus reducing consumer surplus. However, producers benefit from the higher price and guaranteed sales to the government, increasing producer surplus.

Question 2

A binding rent-control price ceiling does NOT result in:

Accepted Answer

A binding rent-control price ceiling results in an inefficiently low quantity of the good being supplied, inefficient allocation of the good to consumers, and wasted resources of consumers caused by time spent searching for the good. However, it does not necessarily result in inefficiently high quality of the good being sold. If landlords are unable to raise rents beyond the price ceiling, they may choose to invest in quality upgrades to differentiate their units from competitors and attract tenants.

Question 3

The United States and the European Union impose price floors on many agricultural products. These price floors lead to unwanted surpluses. To deal with a surplus:

Accepted Answer

Paying farmers to produce more or exporting the surplus overseas would only exacerbate the problem of surpluses and lead to further inefficiencies. Holding auctions may not always be feasible or effective. Destroying the surplus production, while costly, removes the excess supply from the market and prevents prices from falling too low.

Question 4

Which inefficiency is NOT caused by binding price ceilings?

Accepted Answer

Binding price ceilings can cause inefficient allocation to consumers, wasted resources, and potential illegal activity. However, inefficient allocation of sales among sellers is not a result of binding price ceilings but rather of binding price floors.

Question 5

One of the ways rent control is inefficient is that it leads to:

Accepted Answer

Rent control creates shortages in the housing market, as landlords are less incentivized to maintain and improve their properties if they cannot charge market rates. This can lead to a situation where renters must spend significant time searching for acceptable apartments, resulting in higher opportunity costs. While rent control may make housing more affordable for some, it does not lead to the construction of more apartments, higher-quality apartments, or markets that maximize total surplus.

Question 6

Economists in general agree that rent controls are:

Accepted Answer

Economists generally agree that rent controls are inefficient because they can create shortages, reduce the quality of rental units, and cause landlords to convert their rental units into other uses. However, they can sometimes be effective in providing affordable housing for low-income families in areas with high housing costs.

Question 7

Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50. The Saudi government's actions will:

Accepted Answer

When the government sets a price ceiling below the market equilibrium price, it creates a shortage of the product. In this case, Saudi Arabia will likely experience gasoline shortages since the price of $0.25 per gallon is far below the market price of $1.50. Producers may not be willing to supply the quantity demanded at the low price, or they may reduce the quality of gasoline to maintain profits. This shortage could result in long lines at gasoline stations and rationing measures.

Question 8

Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55. This price floor will:

Accepted Answer

A price floor set above the equilibrium price will create a surplus of the good. In this case, the price floor of $2.85 is above the current price of $2.55, so farmers will be incentivized to produce more corn and supply will increase, creating a surplus.

Question 9

(Figure: Supply and Demand) Use Figure: Supply and Demand. A binding price floor is represented by:

Accepted Answer

The answer of (Figure: Supply and Demand) Use Figure: Supply...

Question 10

Price controls encourage black markets because:

Accepted Answer

Price controls set a maximum price that can be charged for a good or service, which may result in a shortage of the product. In order to obtain the product, buyers are willing to pay more than the set price, and sellers are willing to sell at a higher price than what is legally allowed. This creates an incentive for individuals to conduct illegal exchanges, leading to a black market.

Question 11

Use the following to answer questions: 
-(Figure: The Market for Butter) Use Figure: The Market for Butter. If a government price floor of $1.30 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.

Accepted Answer

The answer of Use the following to answer questions: 
-(Figure:...

Question 12

Use the following to answer questions: 
-(Figure: The Market for Butter) Use Figure: The Market for Butter. If a government price floor of $1.20 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.

Accepted Answer

A price floor of $1.20 creates a surplus of 4.5 million pounds of butter because the quantity supplied (9 million pounds) is greater than the quantity demanded (4.5 million pounds) at that price.

Question 13

West African cotton farmers are very upset about the subsidies the U.S. government pays to American cotton farmers. One reason for this could be that subsidized cotton from the United States:

Accepted Answer

Subsidized cotton from the United States leads to cotton surpluses in the United States, which in turn leads to lower prices for West African cotton on world markets. This puts West African cotton farmers at a disadvantage and makes it difficult for them to compete in the global market.

Question 14

In a(n) _____ market, goods or services are bought and sold illegally.

Accepted Answer

The term "black market" specifically refers to marketplaces that operate outside of legal channels, making the buying and selling of goods or services illegal. Choices B, C, and D could all refer to different types of markets but do not specifically denote illegality.

Question 15

Which example would be considered a black market transaction?

Accepted Answer

A black market transaction is one that occurs outside of legal channels, usually involving illegal goods or services or circumventing government regulations. Subletting a rent-controlled apartment at a higher rent is illegal and violates the terms of the lease, making it a black market transaction. Purchasing an inferior radio is not illegal, waiting in line for gasoline during a shortage is not a transaction, and the oil market is a legal market.

Question 16

Rent controls in New York City do NOT cause:

Accepted Answer

Rent controls in New York City do not cause an increase in the quantity supplied of rent-controlled apartments. In fact, rent controls can discourage landlords from building new apartments or maintaining existing ones, leading to a decrease in the quantity and quality of available housing.

Question 17

Use the following to answer question 72: 
-(Table: The Market for Soda) Use Table: The Market for Soda. If the government imposes a price floor of $1 per can of soda, there will be:

Accepted Answer

A price floor set above the equilibrium price creates a surplus because it prevents the price from falling to its equilibrium level where quantity supplied equals quantity demanded. In this scenario, with a price floor of $1, the quantity supplied would exceed the quantity demanded, leading to a surplus of soda cans.

Question 18

(Table: Market for Butter) Use Figure: Market for Butter. If the government imposes a price floor of $0.90 per pound of butter, the quantity of butter actually purchased will be _____ million pounds.

Accepted Answer

The answer of (Table: Market for Butter) Use Figure: Market...

Question 19

A price ceiling below the equilibrium price is likely to result in a persistent _____, a transfer of surplus from _____, and _____ deadweight loss.

Accepted Answer

A price ceiling below the equilibrium price creates excess demand, which leads to a shortage of the product. Producers are forced to sell at a lower price, resulting in a transfer of surplus from producers to some consumers. Deadweight loss occurs because the artificially low price reduces the incentive for producers to supply the product and for consumers to purchase it, leading to a loss of efficiency.

Question 20

Governments continue to impose price controls. Which statement is NOT a valid reason for this?

Accepted Answer

Price controls are not always effective and can often have unintended consequences such as creating shortages or reducing quality of goods and services.

Quiz 4: Price Controls and Quotas: Meddling With Markets

All else equal, if a price floor above the equilibrium is imposed on a market and the government buys the surplus, consumer surplus will _ and producer surplus will _.

A binding rent-control price ceiling does NOT result in:

The United States and the European Union impose price floors on many agricultural products. These price floors lead to unwanted surpluses. To deal with a surplus:

Which inefficiency is NOT caused by binding price ceilings?

One of the ways rent control is inefficient is that it leads to:

Economists in general agree that rent controls are:

Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50. The Saudi government's actions will:

Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55. This price floor will:

(Figure: Supply and Demand) Use Figure: Supply and Demand. A binding price floor is represented by:

Price controls encourage black markets because:

Use the following to answer questions: -(Figure: The Market for Butter) Use Figure: The Market for Butter. If a government price floor of $1.30 is imposed on this market, an inefficiency will result in the form of a _ of _ million pounds of butter.

Use the following to answer questions: -(Figure: The Market for Butter) Use Figure: The Market for Butter. If a government price floor of $1.20 is imposed on this market, an inefficiency will result in the form of a _ of _ million pounds of butter.

West African cotton farmers are very upset about the subsidies the U.S. government pays to American cotton farmers. One reason for this could be that subsidized cotton from the United States:

In a(n) _____ market, goods or services are bought and sold illegally.

Which example would be considered a black market transaction?

Rent controls in New York City do NOT cause:

Use the following to answer question 72: -(Table: The Market for Soda) Use Table: The Market for Soda. If the government imposes a price floor of $1 per can of soda, there will be:

(Table: Market for Butter) Use Figure: Market for Butter. If the government imposes a price floor of $0.90 per pound of butter, the quantity of butter actually purchased will be _____ million pounds.

A price ceiling below the equilibrium price is likely to result in a persistent ___, a transfer of surplus from _, and ___ deadweight loss.

Governments continue to impose price controls. Which statement is NOT a valid reason for this?

Quiz 4: Price Controls and Quotas: Meddling With Markets

All else equal, if a price floor above the equilibrium is imposed on a market and the government buys the surplus, consumer surplus will _____ and producer surplus will _____.

A binding rent-control price ceiling does NOT result in:

The United States and the European Union impose price floors on many agricultural products. These price floors lead to unwanted surpluses. To deal with a surplus:

Which inefficiency is NOT caused by binding price ceilings?

One of the ways rent control is inefficient is that it leads to:

Economists in general agree that rent controls are:

Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at $0.25 per gallon when the market price is $1.50. The Saudi government's actions will:

Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55. This price floor will:

(Figure: Supply and Demand) Use Figure: Supply and Demand. A binding price floor is represented by:

Price controls encourage black markets because:

Use the following to answer questions: -(Figure: The Market for Butter) Use Figure: The Market for Butter. If a government price floor of $1.30 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.

Use the following to answer questions: -(Figure: The Market for Butter) Use Figure: The Market for Butter. If a government price floor of $1.20 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.

West African cotton farmers are very upset about the subsidies the U.S. government pays to American cotton farmers. One reason for this could be that subsidized cotton from the United States:

In a(n) _____ market, goods or services are bought and sold illegally.

Which example would be considered a black market transaction?

Rent controls in New York City do NOT cause:

Use the following to answer question 72: -(Table: The Market for Soda) Use Table: The Market for Soda. If the government imposes a price floor of $1 per can of soda, there will be:

(Table: Market for Butter) Use Figure: Market for Butter. If the government imposes a price floor of $0.90 per pound of butter, the quantity of butter actually purchased will be _____ million pounds.

A price ceiling below the equilibrium price is likely to result in a persistent _____, a transfer of surplus from _____, and _____ deadweight loss.

Governments continue to impose price controls. Which statement is NOT a valid reason for this?

All else equal, if a price floor above the equilibrium is imposed on a market and the government buys the surplus, consumer surplus will _ and producer surplus will _.

Use the following to answer questions: -(Figure: The Market for Butter) Use Figure: The Market for Butter. If a government price floor of $1.30 is imposed on this market, an inefficiency will result in the form of a _ of _ million pounds of butter.

Use the following to answer questions: -(Figure: The Market for Butter) Use Figure: The Market for Butter. If a government price floor of $1.20 is imposed on this market, an inefficiency will result in the form of a _ of _ million pounds of butter.

A price ceiling below the equilibrium price is likely to result in a persistent ___, a transfer of surplus from _, and ___ deadweight loss.