Question 1

-Refer to the above figure.If the government imposes a price floor of $60,
A)the quantity of goods that will be traded is 100.
B)the quantity of goods that will be traded is 200.
C)the quantity of goods that will be traded is 150.
D)the quantity of goods that will be traded is 0.

Accepted Answer

The answer of 
-Refer to the above figure.If the government...

Question 2

-Refer to the above figure.A shortage occurs if the government imposes
A)a price floor at $60.
B)a price floor at $20.
C)a price ceiling at $60.
D)a price ceiling at $20.

Accepted Answer

A shortage occurs when the price is set below the equilibrium price, leading to higher demand than supply. A price ceiling at $20 would set the price below the equilibrium, causing a shortage.

Question 3

-Refer to the above figure.If the government imposes a price floor of $20,
A)the quantity traded will be 150,and the price will be $20.
B)the quantity traded will be 100,and the price will be $20.
C)the quantity traded will be 200,and the price will be $20.
D)none of the above.

Accepted Answer

The answer of 
-Refer to the above figure.If the government...

Question 4

When a government increases an effective price ceiling for a product
A)the shortage in the market will be reduced.
B)the shortage in the market will be increased.
C)the surplus in the market will be reduced.
D)the surplus in the market will increase.

Accepted Answer

When a government increases an effective price ceiling for a product, it allows the price to move closer to the equilibrium price, thereby reducing the shortage in the market.

Question 5

-Refer to the above figure.Suppose the government imposes a minimum wage rate of $20.00 per hour.This will likely result in
A)a surplus of labor.
B)a shortage of labor.
C)an equilibrium in the labor market.
D)an increase in the demand for labor.

Accepted Answer

Imposing a minimum wage of $20.00 per hour sets the wage above the equilibrium level, leading to a surplus of labor because the quantity of labor supplied exceeds the quantity of labor demanded at this wage rate.

Question 6

Suppose a price ceiling is set above the equilibrium price.Now suppose that policy makers decide to raise the price ceiling.This increase in the price ceiling will cause which of the following to occur?
A)The surplus in the market will increase.
B)The surplus in the market will decrease.
C)The shortage in the market will increase.
D)None of the above.

Accepted Answer

The answer of Suppose a price ceiling is set above...

Question 7

-Refer to the above figure.A price floor of $60 results in
A)a shortage of 100 units.
B)a shortage of 200 units.
C)a surplus of 100 units.
D)a surplus of 200 units.

Accepted Answer

A price floor set above the equilibrium price (which is lower than $60 in this case) leads to a surplus because the quantity supplied at that price is greater than the quantity demanded, resulting in excess supply or a surplus.

Question 8

When the government sets a price floor which is above the equilibrium price,
A)a surplus will develop.
B)a shortage will develop.
C)the equilibrium price will be maintained.
D)a price ceiling will follow.

Accepted Answer

When the government sets a price floor which is above the equilibrium price, it creates an artificial price level that is higher than what the market would naturally determine. This leads to a surplus of goods or services because suppliers are producing more than consumers are willing to buy at that higher price. As a result, the excess supply accumulates, leading to a surplus.

Question 9

Suppose a price ceiling is currently set below the equilibrium price.Now suppose that policy makers decide to lower the price ceiling.This reduction in the price ceiling will cause which of the following to occur?
A)The shortage in the market will decrease.
B)The shortage in the market will increase.
C)The surplus in the market will decrease.
D)The surplus in the market will increase.

Accepted Answer

When a price ceiling is set below the equilibrium price, it creates a shortage of the good or service. Lowering the price ceiling further will only exacerbate this shortage, pushing it further from equilibrium. Therefore, the shortage in the market will increase.

Question 10

-Refer to the above figure.A surplus occurs if the government imposes
A)a price floor at $60.
B)a price floor at $20.
C)a price ceiling at $60.
D)a price ceiling at $20.

Accepted Answer

A surplus occurs when the price is set above the equilibrium price, which is the case with a price floor at $60, leading to excess supply.

Question 11

-Refer to the above figure.If the government imposes a price ceiling of $60,
A)the quantity traded will be 150,and the price will be $40.
B)the quantity traded will be 100,and the price will be $60.
C)the quantity traded will be 200,and the price will be $60.
D)the quantity traded will be 150,and the price will be $60.

Accepted Answer

The answer of 
-Refer to the above figure.If the government...

Question 12

A price ceiling represents
A)a maximum price that can be legally charged for a product or service.
B)a minimum price that can be legally charged for a good or service.
C)a lottery imposed upon producers by the government.
D)a first come,first served mechanism for controlling prices.

Accepted Answer

A price ceiling is a maximum price that can be legally charged for a product or service. It is usually set by the government in an attempt to protect consumers by keeping prices affordable, especially for essential goods and services. The price ceiling means that producers cannot charge a price higher than the ceiling, which can create shortages and other market inefficiencies.

Question 13

Price controls
A)do not include black markets.
B)are another name for the price system.
C)do not include rent controls.
D)interfere with the rationing function of prices.

Accepted Answer

Price controls interfere with the rationing function of prices by preventing market forces from adjusting supply and demand to reach equilibrium. This can lead to shortages or surpluses of goods and services. Black markets and rent controls are separate issues that may or may not be affected by price controls.

Question 14

Which of the following is a price floor?
A)rent controls
B)minimum wage rates
C)a freeze on upward-moving gasoline prices
D)college tuition caps

Accepted Answer

A price floor is a government-imposed minimum price that is higher than the market equilibrium price, which leads to excess supply. Minimum wage rates are an example of a price floor because they set a legal minimum wage that employers must pay their employees, which is typically higher than the prevailing market rate. Rent controls and college tuition caps are examples of price ceilings, which are government-imposed maximum prices that are lower than the market equilibrium price. A freeze on upward-moving gasoline prices is not an example of either a price floor or a price ceiling, but rather a form of price stabilization that is intended to keep prices from rising too quickly.

Question 15

A price floor represents
A)a maximum price that can be legally charged for a product or service.
B)a minimum price that can be legally charged for a good or service.
C)a lottery imposed upon producers by the government.
D)a first come,first served mechanism for controlling prices.

Accepted Answer

A price floor is a government-imposed minimum price that must be paid for a good or service. It is designed to protect producers by ensuring that they receive a minimum price for their product. This can lead to surpluses if the minimum price is set above the market price, as there will be a greater supply than demand at that price.

Question 16

-Refer to the above figure.A price ceiling of $20 results in
A)a shortage of 100 units.
B)a shortage of 200 units.
C)a surplus of 100 units.
D)a surplus of 200 units.

Accepted Answer

A price ceiling set below the equilibrium price (which appears to be above $20 based on the context) would result in a shortage because the quantity demanded at $20 exceeds the quantity supplied at that price. The specific number (100 units) indicates the difference between quantity demanded and quantity supplied at the price ceiling of $20.

Question 17

A black market
A)can arise when government imposes a price ceiling below the market clearing price.
B)can arise when government imposes a price floor below the market clearing price.
C)was created when after hours trading was permitted on some stock exchanges.
D)is a market where products with outdated expiration dates are sold.

Accepted Answer

When the government imposes a price ceiling below the market clearing price, it creates a shortage. This means that the quantity demanded exceeds the quantity supplied at the government-mandated price. Sellers may then choose to sell their goods on the black market for a higher price, since the demand is high and the supply is low. Thus, a black market can arise when the government imposes a price ceiling below the market clearing price.

Question 18

An effective government imposed price ceiling will result
A)in a surplus on the market.
B)in a shortage on the market.
C)in additional revenue for the government.
D)in prices for the product falling in the future.

Accepted Answer

An effective government imposed price ceiling will result in a shortage on the market. This is because the price ceiling sets a maximum price for a product or service that is below the market equilibrium price. As a result, there will be an increase in demand and a decrease in supply, causing a shortage as consumers try to purchase the limited supply of the product at the lower price.

Question 19

Government imposed price controls often lead to
A)illegal trades of the good.
B)the most efficient use of resources.
C)the equilibrium solution in terms of price and quantity.
D)maximization of profits.

Accepted Answer

When the government imposes price controls, it usually sets the price either below or above the market equilibrium price. If the price is set below the market price, there will be excess demand for the good, and if it is set above the market price, there will be excess supply. In either case, this leads to illegal trades of the good, as some individuals are willing to pay more or accept less than the controlled price. Therefore, option A is the correct answer. Option B is incorrect because price controls often lead to inefficient allocation of resources. Option C is also incorrect because price controls disrupt the equilibrium solution. Option D is incorrect because price controls are not designed to maximize profits but rather to achieve some other social or economic objective.

Question 20

-Refer to the above figure.If the government imposes a price ceiling of $20,
A)the quantity of goods that will be traded is 100.
B)the quantity of goods that will be traded is 200.
C)the quantity of goods that will be traded is 150.
D)the quantity of goods that will be traded is 0.

Accepted Answer

The answer of 
-Refer to the above figure.If the government...

Quiz 3: Extensions of Demand and Supply Analysis

-Refer to the above figure.If the government imposes a price floor of $60,

-Refer to the above figure.A shortage occurs if the government imposes

-Refer to the above figure.If the government imposes a price floor of $20,

When a government increases an effective price ceiling for a product

-Refer to the above figure.Suppose the government imposes a minimum wage rate of $20.00 per hour.This will likely result in

Suppose a price ceiling is set above the equilibrium price.Now suppose that policy makers decide to raise the price ceiling.This increase in the price ceiling will cause which of the following to occur?

-Refer to the above figure.A price floor of $60 results in

When the government sets a price floor which is above the equilibrium price,

Suppose a price ceiling is currently set below the equilibrium price.Now suppose that policy makers decide to lower the price ceiling.This reduction in the price ceiling will cause which of the following to occur?

-Refer to the above figure.A surplus occurs if the government imposes

-Refer to the above figure.If the government imposes a price ceiling of $60,

A price ceiling represents

Price controls

Which of the following is a price floor?

A price floor represents

-Refer to the above figure.A price ceiling of $20 results in

A black market

An effective government imposed price ceiling will result

Government imposed price controls often lead to

-Refer to the above figure.If the government imposes a price ceiling of $20,