Question 1

Which of the following can create a deadweight loss?
I∙price supports
Ii∙price floor
Iii∙price ceiling

Accepted Answer

All three options, price supports, price floors, and price ceilings, can create a deadweight loss by distorting market equilibrium, leading to overproduction or underproduction relative to the efficient market outcome.

Question 2

If the government imposes an effective ________, output decreases and ________ increases.

Accepted Answer

The answer of If the government imposes an effective ________,...

Question 3

What are the effects of a rent ceiling set below the equilibrium rent?

Accepted Answer

The answer of What are the effects of a rent...

Question 4

In the 1980s, one of the most common sights in the socialist countries, such as the former Soviet Union and North Korea, were long lines for bread, sugar, and other necessities.These countries had price ceilings on these necessities.Some of the socialist nations, such as the former Soviet Union, have moved to a market economy by lifting the price ceilings, while others, such as North Korea, have retained their price ceilings.What prediction do you make about the presence (or absence)of long lines today in the former Soviet Union and North Korea? Explain your answer.

Accepted Answer

The answer of In the 1980s, one of the most...

Question 5

Explain why in cities such as New York City that have rent ceiling laws, so many people who work in the city commute from outside the city.

Accepted Answer

The answer of Explain why in cities such as New...

Question 6

A regulation that sets the highest price at which it is legal to trade a good is a

Accepted Answer

A regulation that sets the highest price at which it is legal to trade a good is a price ceiling. Price ceilings are used to protect consumers from high prices, but they can create shortages if the price is below the equilibrium point.

Question 7

Which of the following is true?
I∙A price support is inefficient.
Ii∙A price floor set above the equilibrium price creates a surplus.
Iii∙A price ceiling set above the equilibrium price creates a black market.

Accepted Answer

The answer of Which of the following is true?
I∙A price...

Question 8

In the housing market, if a rent ceiling of $600.00 is imposed when the equilibrium rent is $500.00, why will nothing change?

Accepted Answer

The answer of In the housing market, if a rent...

Question 9

In order to have an impact, a ________ must be set below the equilibrium price and when this occurs, ________.

Accepted Answer

A price ceiling set below the equilibrium price decreases producer surplus because producers are forced to sell at a lower price than what the market would naturally allow, reducing their potential earnings.

Question 10

The surplus created by a price floor will likely be

Accepted Answer

The answer of The surplus created by a price floor...

Question 11

Which of the following is true?
I∙A price ceiling is inefficient but fair.
Ii∙A price floor is inefficient and unfair.
Iii∙A price support increases the quantity produced.

Accepted Answer

Option i is incorrect because a price ceiling can be both efficient and fair if it is set at the market price. Option iii is incorrect because a price support does not necessarily increase the quantity produced, it just ensures that the price does not fall below a certain level. Option ii, however, is correct as a price floor is inefficient because it leads to a surplus of goods (quantities supplied exceed quantities demanded) and unfair because it benefits suppliers at the expense of consumers.

Question 12

Which of the following is true?
I∙A price ceiling set below the equilibrium price decreases search activity.
Ii∙A minimum wage is an example of a price ceiling.
Iii∙A price support decreases the quantity consumed.

Accepted Answer

The answer of Which of the following is true?
I∙A price...

Question 13

If the government imposes an effective ________, a deadweight loss ________.

Accepted Answer

A price ceiling creates a situation where the market price is below the equilibrium price, causing a shortage and a deadweight loss. The imposition of a price floor or price support creates a situation where the market price is above the equilibrium price, causing a surplus and potentially a deadweight loss. However, the question specifically asks for an effective policy, which implies that the government has successfully managed to enforce the policy and prevent the market from reaching equilibrium. Therefore, only a price ceiling (choice C) would result in a deadweight loss when effectively imposed.

Question 14

Which of the following is true?
I∙A price ceiling set above the equilibrium price has no effects.
Ii∙A price ceiling set below the equilibrium price creates a surplus.
Iii∙A price floor set above the equilibrium price has no effects.

Accepted Answer

The answer of Which of the following is true?
I∙A price...

Question 15

Following a major natural disaster that destroys housing, a rent ceiling ________ be an effective policy to increase the quantity of more affordable housing for displaced residents because it would ________.

Accepted Answer

A rent ceiling would discourage rebuilding as landlords would not be able to charge enough rent to cover the cost of rebuilding and maintenance, resulting in a shortage of available housing.

Question 16

A regulation that sets the lowest price at which it is legal to trade a good is a

Accepted Answer

A regulation that sets the lowest price at which it is legal to trade a good is called a price floor. It prevents the price of a good from falling below a certain level and is usually set above the equilibrium price.

Question 17

Producers favor a ________ because ________.

Accepted Answer

Producers favor a price support because it ensures that the price of their product does not fall below a certain level. This allows them to earn higher revenue and make a profit, as opposed to a price ceiling which would limit their ability to charge a higher price and make a profit.

Question 18

Assume a market is producing efficiently.Which type of government intervention in this market might create a deadweight loss?
I∙a price ceiling
Ii∙a price floor
Iii∙a price support

Accepted Answer

All three types of government intervention—price ceilings, price floors, and price supports—can create deadweight losses by distorting market equilibrium, leading to either excess supply or demand and reducing overall economic efficiency.

Question 19

Which of the following describes a difference between a price support and a price ceiling?

Accepted Answer

A price support is a government intervention to maintain the price of a good at a certain level, typically above the equilibrium price, to benefit producers. A price ceiling, on the other hand, is a maximum price set by the government below the equilibrium price to make goods more affordable to consumers. Therefore, E accurately describes a difference between the two: a price support aims to raise the price above equilibrium to benefit producers, while a price ceiling is set to prevent prices from going above a certain level to protect consumers.

Question 20

Both price supports and a price floor can

Accepted Answer

Both price supports and a price floor can lead to a situation where the price of a good or service is held artificially above the market equilibrium price. This results in a deadweight loss, which represents a loss of economic efficiency that occurs when the cost of production exceeds the value that is created for the consumers. As such, both price supports and price floors can create a deadweight loss, which reduces the overall welfare of society.

Quiz 7: Government Actions in Markets

Which of the following can create a deadweight loss? I∙price supports Ii∙price floor Iii∙price ceiling

If the government imposes an effective , output decreases and increases.

What are the effects of a rent ceiling set below the equilibrium rent?

Explain why in cities such as New York City that have rent ceiling laws, so many people who work in the city commute from outside the city.

A regulation that sets the highest price at which it is legal to trade a good is a

Which of the following is true? I∙A price support is inefficient. Ii∙A price floor set above the equilibrium price creates a surplus. Iii∙A price ceiling set above the equilibrium price creates a black market.

In the housing market, if a rent ceiling of $600.00 is imposed when the equilibrium rent is $500.00, why will nothing change?

In order to have an impact, a must be set below the equilibrium price and when this occurs, .

The surplus created by a price floor will likely be

Which of the following is true? I∙A price ceiling is inefficient but fair. Ii∙A price floor is inefficient and unfair. Iii∙A price support increases the quantity produced.

Which of the following is true? I∙A price ceiling set below the equilibrium price decreases search activity. Ii∙A minimum wage is an example of a price ceiling. Iii∙A price support decreases the quantity consumed.

If the government imposes an effective , a deadweight loss .

Which of the following is true? I∙A price ceiling set above the equilibrium price has no effects. Ii∙A price ceiling set below the equilibrium price creates a surplus. Iii∙A price floor set above the equilibrium price has no effects.

Following a major natural disaster that destroys housing, a rent ceiling be an effective policy to increase the quantity of more affordable housing for displaced residents because it would .

A regulation that sets the lowest price at which it is legal to trade a good is a

Producers favor a because .

Assume a market is producing efficiently.Which type of government intervention in this market might create a deadweight loss? I∙a price ceiling Ii∙a price floor Iii∙a price support

Which of the following describes a difference between a price support and a price ceiling?

Both price supports and a price floor can