Question 1

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

Accepted Answer

A price ceiling of $0.50 is below the equilibrium price, leading to an increase in quantity demanded. According to the table, at $0.50, the quantity demanded is 10 cans.

Question 2

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 3

Suppose that the CFL wants to give the "common fan" the opportunity to attend the Grey Cup,so it sets Grey Cup prices "low"-let's say that they set ticket prices for a regular seat at the Grey Cup to cost just $100.People who have tickets,however,can turn around and sell them online for $1 000 or more.If there are no transaction costs for fans with tickets to sell them,the true cost to a fan of attending the Grey Cup is:
A) at most $100.
B) at least $1 000.
C) the monetary price paid to obtain the ticket.
D) $900 less than the opportunity cost of a ticket.

Accepted Answer

The true cost of attending the Grey Cup for a common fan is at least $1,000 because they will have to buy a ticket from someone else who is selling at a higher price. The fact that the CFL set the ticket prices low does not change the market value of the tickets, which is determined by the supply and demand of the tickets. As long as there are more people who want to attend the Grey Cup than the number of available tickets, the price of the tickets will be driven up by those who are willing to pay more. Therefore, the true cost of attending the game for a common fan is determined by the market price of the ticket, which is likely to be much higher than the face value.

Question 4

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 5

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

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Question 6

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

Rent controls create a situation where the quantity demanded exceeds the quantity supplied, as the lower price encourages more people to demand rental units while discouraging landlords from supplying them. This can lead to long waiting lists for affordable housing, decreased maintenance of rental properties, and even a black market for apartments charging above the rent control price. Additionally, rent control does not necessarily help all poor people as it only benefits those lucky enough to secure a controlled rental unit, while potentially locking others out of the market entirely.

Question 7

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

The price ceiling prevents the price from rising to the equilibrium level, which leads to an excess of demand over supply. This excess demand creates a shortage of the good, meaning that buyers are unable to purchase as much of the good as they would like at the given price. Therefore, the correct choice is (C) a shortage of the good.

Question 8

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

Rent controls set below the market equilibrium price can lead to a decrease in the quantity and quality of rental apartments available. Landlords may not have an incentive to maintain or improve their properties as they cannot charge higher rents to cover the costs. This can lead to inefficiently low-quality rental apartments.

Question 9

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 10

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

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Question 11

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 how high or low a price in a market may go. This can come in the form of a price ceiling (an upper limit on the price of a good) or a price floor (a lower limit on the price of a good). Price controls are often put in place to protect consumers from high prices, but can have negative consequences such as shortages and reduced quality.

Question 12

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 13

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 is usually put in place to keep prices below the equilibrium level. This is done in order to make goods more affordable to consumers. However, it can lead to shortages and other problems.

Question 14

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 market equilibrium price. Choice C represents a price below the equilibrium, making it an effective rent control price.

Question 15

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

A price floor set below the equilibrium price of $0.50 will not affect the market, as the market price is already above the floor.

Question 16

The government decides to impose a price ceiling on a good because it thinks that 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

A price ceiling set below the equilibrium price will lead to a shortage as consumers will want to buy more at the lower price, but producers will supply less.

Question 17

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 given options.

Question 18

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

Accepted Answer

The equilibrium price is where the quantity supplied equals the quantity demanded. At a price of $0.75, the quantity supplied is 100 cans and the quantity demanded is also 100 cans.

Question 19

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 that is set above the equilibrium price will have no immediate effect because it is not binding. In other words, the market is already able and willing to supply and demand goods at a price that is affordable for consumers and provides a profit for producers. The price ceiling only becomes relevant if it is set below the equilibrium price, creating a shortage as demand exceeds supply.

Question 20

Rapidly increasing child daycare costs have been a major political concern since well before 1992.Suppose that the government sets the maximum price for daily child daycare expenses at $20 per day,but the current market price is $40 per day.What is MOST likely to happen?
A) More people will try to get access to the lower-cost child daycare,but there will be fewer daycares with spots available at that price.
B) The same number of people will try to get access to daycare,and the same number of childcare centres are willing to accept them at that price.
C) More people will have access to daycare,since the price is lower.
D) Fewer people will try to enrol their children in daycare,and fewer daycare centres will be accepting new children at that price.

Accepted Answer

When the government sets a maximum price for child daycare expenses, it creates a price ceiling. In this case, the price ceiling is set at $20 per day, which is lower than the current market price of $40 per day. As a result, more people will try to access the lower-cost child daycare, but there will be fewer daycare spots available at that price. This is because some daycare centers may find it unprofitable to offer their services at the lower price, and may either shut down or raise their prices. Therefore, option A is the best choice.

Quiz 4: Price Controls and Quotas: Meddling With Markets

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

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

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 set at Rent₁:

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

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

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 Rent₀:

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 price control 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:

A binding price ceiling is usually designed to:

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?

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

The government decides to impose a price ceiling on a good because it thinks that 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.Without rent controls,the equilibrium quantity is:

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

A price ceiling will have NO immediate effect if:

Rapidly increasing child daycare costs have been a major political concern since well before 1992.Suppose that the government sets the maximum price for daily child daycare expenses at $20 per day,but the current market price is $40 per day.What is MOST likely to happen?

Quiz 4: Price Controls and Quotas: Meddling With Markets

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

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

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 set at Rent1:

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

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

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 Rent0:

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 price control 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:

A binding price ceiling is usually designed to:

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?

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

The government decides to impose a price ceiling on a good because it thinks that 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.Without rent controls,the equilibrium quantity is:

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

A price ceiling will have NO immediate effect if:

Rapidly increasing child daycare costs have been a major political concern since well before 1992.Suppose that the government sets the maximum price for daily child daycare expenses at $20 per day,but the current market price is $40 per day.What is MOST likely to happen?

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 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 Rent₀:

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,renters would be willing to pay a price at least as high as: