Question 1

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, meaning that they can lead to shortages or surpluses in the market. Black markets can arise in response to price controls, as individuals seek to buy or sell goods and services outside of the controlled prices. Rent controls are a type of price control, so they are not excluded from this category. Therefore, the only correct statement is that price controls interfere with the rationing function of prices.

Question 2

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

Imposing price controls creates a situation where the market price of a good deviates from the equilibrium price. This can cause shortages, surpluses, or black markets where the good is sold at its true market value. Therefore, option A is the best choice as illegal trades can occur due to government-imposed price controls.

Question 3

-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 4

-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 5

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, suppliers will be willing to supply more of the good/service than consumers are willing to buy at that price. Consequently, a surplus will develop.

Question 6

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

If the price ceiling is already below the equilibrium price, there will be a shortage in the market. When policy makers lower the price ceiling, it will create more demand from consumers, but suppliers will not increase their supply because they cannot charge a higher price due to the price ceiling. This will increase the shortage in the market.

Question 7

-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

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Question 8

-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 
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Question 9

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

A price ceiling sets a maximum price that can be charged for a good or service, and if that maximum price is below the equilibrium price, a shortage will result as demand exceeds supply at the lower price. The government does not receive additional revenue from a price ceiling, and while prices may not increase in the short term, there is no guarantee that they won't increase in the future. Therefore, option B is the correct choice as per the question.

Question 10

-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 
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Question 11

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 government-imposed maximum price that can be legally charged for a product or service. It is set below the equilibrium price in order to make goods and services more affordable for consumers.

Question 12

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

A black market typically arises when there is government intervention in the market, such as price controls like a price ceiling set below the equilibrium price. This causes a shortage of the product, and people may turn to an illegal black market to obtain it at a higher price.

Question 13

-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 14

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 15

-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 16

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 17

-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 18

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 charged for a good or service. It is meant to protect producers from receiving lower prices than they want, but it can also result in surpluses of the good or service if consumers are not willing to pay the higher price.

Question 19

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

Minimum wage rates are an example of a price floor, as they set a minimum amount that employers must pay their workers. This creates a floor for wages, preventing them from falling below the specified level. Rent controls and college tuition caps are examples of price ceilings, which set a maximum price that can be charged for a good or service. A freeze on gasoline prices could be an example of either a price floor or ceiling depending on the context, but in this case, it is not a price floor because it does not set a minimum price. Therefore, the correct answer is B.

Question 20

-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.

Quiz 4: Extensions of Demand and Supply Analysis

Price controls

Government imposed price controls often lead to

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

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

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.If the government imposes a price ceiling of $20,

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

An effective government imposed price ceiling will result

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

A price ceiling represents

A black market

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

When a government increases an effective price ceiling for a product

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

A price floor represents

Which of the following is a price floor?

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