Question 1

Quantity controls usually take the form of price ceilings or price floors established by the government.

Accepted Answer

Quantity controls, such as quotas, directly limit the amount of a good that can be bought or sold, rather than setting price ceilings or floors which indirectly affect quantity by capping prices or setting minimum prices.

Question 2

If the demand curve for clams is downward sloping,a quota that is set below the equilibrium quantity will result in a demand price that is lower than the equilibrium price.

Accepted Answer

The quota will limit the quantity of clams available in the market, causing the price to increase. Therefore, the demand price will be higher than the equilibrium price, not lower.

Question 3

If the demand curve for clams is downward sloping and the supply curve is upward sloping,a quota that is set below the equilibrium quantity will result in a supply price higher than the demand price.

Accepted Answer

A quota set below the equilibrium quantity will result in a shortage, causing the demand price to exceed the supply price as consumers compete for the limited available supply.

Question 4

The government might impose a price ceiling if _____ in a market can make a strong moral or political argument for _____ prices.
A) consumers;lower
B) producers;lower
C) consumers;higher
D) producers;higher

Accepted Answer

A price ceiling is a legal maximum price that can be charged for a good or service. It is typically imposed by the government to protect consumers from high prices. Therefore, a price ceiling is most commonly imposed when there is a strong moral or political argument for lower prices, which would benefit consumers.

Question 5

The government might impose a price floor if _____ in a market can make a strong moral or political argument for _____ prices.
A) consumers;lower
B) producers;lower
C) consumers;higher
D) producers;higher

Accepted Answer

The question suggests that a group in the market can make a "strong moral or political argument" for higher prices, which is likely to be producers rather than consumers. Therefore, the government is more likely to impose a price floor to support producers and ensure they receive a minimum price for their products.

Question 6

A rent-control scheme that sets the maximum allowable rent at a price below the equilibrium rental price would MOST likely be supported by:
A) people who wish to rent an apartment.
B) people who own rental apartments.
C) both renters and owners.
D) neither renters nor owners.

Accepted Answer

Renters would benefit from a rent-control scheme that sets the maximum allowable rent below the equilibrium rental price, as they would be able to secure housing at a lower cost. Owners would likely be opposed to such a scheme, as it would limit their ability to charge market rates for their rental properties.

Question 7

A price floor or a price ceiling is an example of:
A) a quantity control.
B) a price control.
C) market equilibrium price.
D) a quota.

Accepted Answer

A price floor or price ceiling is a government-imposed limit on the price of a product or service. This is an example of a price control because it manipulates the price, which can create either a shortage or surplus of goods.

Question 8

A quota rent for tuna is the difference between the demand price and the supply price if a quota limit is imposed in the tuna market.

Accepted Answer

A quota rent is the difference between the demand price and the supply price that arises when a government imposes a quota limit on a particular market. In the case of tuna, if a government imposes a quota limit on fishermen, the price of tuna may increase due to a decrease in supply. The quota rent would be the difference between the higher price that consumers are willing to pay for a limited supply of tuna and the lower price that fishermen are willing to sell their tuna for. This difference represents a profit for those who hold the quota rights, as they are able to sell their catch at a higher price.

Question 9

If the demand curve for clams is downward sloping and the supply curve is upward sloping,a quota that is set above the equilibrium quantity will have no immediate effect on the market.

Accepted Answer

A quota set above the equilibrium quantity means that the quantity of clams allowed to be produced/imported is greater than the quantity demanded by consumers. This means that there will be no immediate effect on the market, as the market is already in a state where there is excess supply. However, in the long run the quota may have other effects such as reduced competition and potential price increases.

Question 10

A limit on the amount of a foreign currency people are allowed to buy is an example of a quota.

Accepted Answer

A quota is a limit on the amount of a particular commodity or service that can be imported or exported, bought or sold. In this case, the foreign currency is the commodity and the limit on the amount people are allowed to buy is the quota.

Question 11

If the supply curve for clams is upward sloping,a quota that is set below the equilibrium quantity will result in a supply price that is lower than the equilibrium price.

Accepted Answer

The answer of If the supply curve for clams is...

Question 12

The demand price of a given quantity of doughnuts is the price at which consumers will demand that quantity.The supply price for a given quantity is the price at which doughnut producers will supply that quantity.

Accepted Answer

This is true. The demand price and supply price are based on the willingness of consumers and producers to buy or sell a particular quantity of a product at a given price. The point where the demand and supply curves intersect is the equilibrium price and quantity of the product.

Question 13

A quota is the minimum amount of some good that can be bought and sold in the market.

Accepted Answer

A quota is actually a maximum limit on the amount of a specific good that can be imported or exported or produced in a particular period.

Question 14

The quota rent is the result of a supply price that is above the demand price.

Accepted Answer

Quota rent is the economic rent a producer receives from the difference between the domestic price of a good, which is elevated due to the quota, and the world price. It does not result from a supply price being above the demand price but from the limitation on quantity supplied, which increases the domestic price above the world price.

Question 15

If the demand curve for clams is downward sloping,a quota that is set below the equilibrium quantity will decrease the price that consumers pay for clams.

Accepted Answer

A quota set below the equilibrium quantity will restrict supply, leading to a higher price for consumers due to the reduced availability of clams.

Question 16

Quotas,price ceilings,and price floors are all types of quantity controls that the government may impose.

Accepted Answer

Quotas are a type of quantity control, but price ceilings and price floors are types of price controls, not quantity controls.

Question 17

The Canadian Football League does not license quarterbacks.This means that the free market determines the standards that an aspiring quarterback must achieve.

Accepted Answer

The Canadian Football League does not have a quarterback licensing system, and therefore, the standards and requirements for aspiring quarterbacks are determined by the free market.

Question 18

Theoretically,the quota rent for a New York taxicab owner is equal to the market price of the licence that allows him to drive the cab.

Accepted Answer

The quota rent for a New York taxicab owner is equal to the market price of the licence because the owner can charge a higher fare than the cost of operating the cab, due to limited supply of cabs allowed on the road. This limited supply is created by the quota system that requires a licence to operate a taxi in NYC.

Question 19

The minimum wage,which sets a lower limit on the wages that workers can earn,is often above the equilibrium price.The minimum wage is an example of a(n):
A) price floor.
B) price ceiling.
C) quota.
D) equilibrium price.

Accepted Answer

The minimum wage is a legal minimum price set by the government above the equilibrium wage rate. This creates a price floor which means that firms are not allowed to pay wages below the minimum wage level.

Question 20

The Canadian Medical Association licenses doctors.This licensing has probably led to lower earnings for doctors over time.

Accepted Answer

The fact that the Canadian Medical Association licenses doctors does not necessarily lead to lower earnings for doctors over time. Other factors such as changes in healthcare policies or market demand for healthcare services can also impact physician earnings.

Quiz 4: Price Controls and Quotas: Meddling With Markets