Deck 3: Government Control of Prices in Mixed Systems: Who Are the Winners and Losers

Question 1

To be effective,a price ceiling must be set

A)By the market
B)Above equilibrium
C)Below equilibrium
D)At equilibrium
E)By producers

Answer 1

C

Question 2

A maximum allowable price for a good or service is a

A)Price ceiling
B)Price floor
C)Minimum wage
D)Market equilibrium
E)Price support

Answer 2

A

Question 3

Which of the following is true of the first U.S.minimum wage?

A)It was set under the Fair Labor Standards Act
B)It was instituted in 1938
C)It set the minimum wage at 25 cents per hour
D)It applied only to certain designated industries
E)All of the above

Answer 3

E

Question 4

The Following Questions Refer to the graph below.
If the demand for rental housing is DD and the supply of rental housing is SS,the equilibrium rent and quantity (number of units in thousands)are

A)$800 and 25
B)$625 and 30
C)$600 and 20
D)$400 and 25
E)$600 and 25

Question 5

In a mixed economy,governments may intervene in markets in which of the following ways?

A)Price ceilings
B)Minimum wages
C)Agricultural price supports
D)Both a)and b)
E)All of the above

Question 6

Which of the following is true of how markets react to government intervention? They react

A)To provide the intended results
B)In ways that offset intended impacts
C)Quickly to reverse intended effects
D)In completely unpredictable ways
E)So slowly that policies never work as they are intended

Question 7

Some states also have their own minimum wage legislation.Generally these laws set the state minimum wage

A)Above the federal minimum wage
B)Below the federal minimum wage
C)Equal to the federal minimum wage
D)To either a)or c)
E)To any of the above

Question 8

As of summer 2009,the U.S.federal minimum wage is set at what rate per hour?

A)$5.15
B)$5.85
C)$6.55
D)$7.25
E)$8.00

Question 9

The consequences of government intervention

A)Are generally as planned by policy makers
B)Often involve unintended consequences
C)Fall on low income individuals
D)Are not felt until the next fiscal year
E)Serve to increase efficiency in markets

Question 10

During the 1970's about how many cities in the U.S.had rent controls?

A)1,000
B)200
C)50
D)15
E)5

Question 11

A minimum allowable price for a good or service is known as

A)A price floor
B)A minimum wage
C)A price support
D)All of the above
E)None of the above

Question 12

Which of the following is true of the U.S.minimum wage over the 1980s and 1990s?

A)It was unchanged
B)It increased significantly through the 1980s and was constant through the 1990s
C)It was constant through the 1980s and then increased significantly through the 1990s
D)It fell during the 1990s
E)It was eliminated in the 1990s

Question 13

In 1981,the U.S.federal minimum wage was increased to

A)$2.00 per hour
B)$2.50 per hour
C)$3.35 per hour
D)$4.00 per hour
E)$5.15 per hour

Question 14

Price ceilings may be used on a selective basis to

A)Control inflation in the economy
B)Make a good cheaper to produce
C)Boost the income of firms
D)Make a good accessible to all income levels
E)Increase workers' incomes

Question 15

In a market economy,if the market supply of a product decreases relative to its demand,the product's price will

A)Fall
B)Rise
C)Be unchanged
D)Fall and then rise
E)Rise and then fall

Question 16

As the price of rental housing falls,which of the following occurs?

A)The quantity demanded of housing increases
B)People take in roommates to share costs
C)Individuals move back in with their families
D)More rental housing is constructed
E)All of the above

Question 17

The purpose of a price ceiling may be to hold down

A)Inflation
B)Unemployment
C)Interest rates
D)Wages
E)All of the above

Question 18

Price floors are often instituted for which of the following purposes?

A)To prevent inflation
B)To make goods and services accessible to all income levels
C)To increase the income of sellers
D)To increase the wages of workers
E)To do all of the above

Question 19

As the price of rental housing increases,which of the following will happen?

A)Property will be switched from commercial property to rental housing
B)More rental housing will be built
C)Renters will be induced to buy housing
D)The average number of renters per rental unit will increase
E)All of the above

Question 20

The Following Questions Refer to the graph below.
If demand and supply are DD and SS and demand increases to D₁D₁,the new equilibrium rent and quantity (number of units in thousands)are

A)$800 and 25
B)$625 and 30
C)$600 and 20
D)$400 and 25
E)$600 and 25

Question 21

The Following Questions Refer to the graph below.
If rent is controlled at $600,there will be a ______ equal to ____ thousand units in the market.

A)Surplus; 10
B)Surplus; 20
C)Shortage; 10
D)Shortage; 20
E)Excess supply; 10

Question 22

In the short-run,who "wins" from rent control laws?

A)All people who want to rent housing
B)Owners of rent controlled property
C)People who buy housing
D)Governments that pay to enforce rent control laws
E)None of the above

Question 23

The Following Questions Refer to the graph below.
An increase in rent that leads to increased profitability of producing rental housing will lead to which of the following shifts in the long run?

A)DD to D₁D₁
B)D₁D₁ to DD
C)S₁S₁ to SS
D)SS to S₁S₁
E)None of the above

Question 24

The Following Questions Refer to the graph below.
If rent is controlled at $600,the quantity of rental housing supplied will be

A)0
B)30
C)40
D)50
E)More than 50

Question 25

The Following Questions Refer to the graph below.
If the supply and demand for rental housing are DD and SS,what effect will a rent control law that sets the maximum allowable rent at $800 have on the market? It will lead to

A)A surplus of 5 thousand units
B)A shortage of 5 thousand units
C)A surplus of 10 thousand units
D)A shortage of 10 thousand units
E)No change in equilibrium rent or quantity

Question 26

The Following Questions Refer to the graph below.
The equilibrium rent and quantity (1,000s of units)are

A)$900 and 30
B)$750 and 40
C)$600 and 30
D)$900 and 50
E)$600 and 50

Question 27

Owners of rent controlled property may attempt to increase profits by

A)Raising rents
B)Improving the quality of their rental units
C)Taking under-the-table payments
D)Converting commercial properties to rental properties
E)All of the above

Question 28

Rent control laws may lead to which of the following unintended effects?

A)Under-the-table payments
B)Increased forced commuting
C)Higher search costs
D)Lost profit incentives to change the supply of rental housing
E)All of the above

Question 29

The additional revenue that accrues to a firm when an additional worker is hired is

A)The marginal revenue product of labor
B)The marginal product of labor
C)The marginal revenue of labor
D)The marginal utility of labor
E)None of the above

Question 30

The marginal product of labor is the additional

A)Revenue received when a worker's output is sold
B)Production cost of hiring an additional labor
C)Output produced as a result of giving workers additional capital
D)Output produced as a result of hiring an additional worker
E)Product developed as a result of ideas generated by workers

Question 31

Rent control laws will _____________ the search costs of potential renters.

A)Increase
B)Decrease
C)Eliminate
D)Mitigate
E)Reimburse

Question 32

The Following Questions Refer to the graph below.
If rent is controlled at $600,the quantity of rental housing demanded will be

A)0
B)30
C)40
D)50
E)More than 50

Question 33

The Following Questions Refer to the graph below.
If rent is controlled at $900,the quantity of rental housing supplied will be

A)0
B)30
C)40
D)50
E)More than 50

Question 34

The Following Questions Refer to the graph below.
If the supply and demand for rental housing are DD and SS,what effect will a rent control law that sets the maximum allowable rent at $400 have on the market? It will lead to

A)A surplus of 5 thousand units
B)A shortage of 5 thousand units
C)A surplus of 10 thousand units
D)A shortage of 10 thousand units
E)No change in equilibrium rent or quantity

Question 35

The Following Questions Refer to the graph below.
If rent is controlled at $900,the quantity of rental housing demanded will be

A)0
B)30
C)40
D)50
E)More than 50

Question 36

In the short-run,who "loses" from rent control laws?

A)Those who cannot find rental housing
B)People who are forced to commute
C)Individuals who experience increased search costs for rental housing
D)Those who must make under-the-table payments to secure rental housing
E)All of the above

Question 37

The additional revenue a firm receives as a result of selling an additional unit of output is called

A)Price
B)Profit
C)Total revenue
D)Marginal revenue
E)Marginal revenue product

Question 38

The demand for labor is a derived demand because it is dependent on

A)The demand for the product being produced
B)The marginal revenue of the product being produced
C)The marginal productivity of the workers producing the product
D)All of the above
E)None of the above

Question 39

If people are forced to commute as a result of a rent control law in a city,which of the following results? An increase in

A)Rent paid by commuters
B)Direct commuting costs
C)Opportunity costs for commuters
D)Pollution and traffic congestion in cities
E)All of the above

Question 40

A firm increases the number of workers it hires from 50 to 52 and,as a result,output increases from 100 to 110.Each of the additional units of output can be sold for $2.What is the marginal product of the 52^nd worker?

A)2
B)5
C)10
D)20
E)50

Question 41

The Following Questions Refer to the table below.
The marginal product of the first worker is

A)0
B)10
C)40
D)50
E)Unable to be determined

Question 42

An increase in the wage from $6 per hour to $6.50 per hour causes a worker to increase her hours worked from 40 to 45 hours per week.For this worker,which effect dominates?

A)Substitution
B)Income
C)Wage
D)Wealth
E)Leisure

Question 43

Which effect dominates if a workers supply curve for labor is negatively sloped?

A)Substitution
B)Income
C)Wage
D)Wealth
E)Leisure

Question 44

Which of the following measures the change in the hours of work that occurs when there is a change in income,other things equal?

A)The supply of labor curve
B)The substitution effect
C)The income effect
D)Marginal productivity
E)The wage effect

Question 45

The Following Questions Refer to the table below.
If each unit of output is sold for $2,the marginal revenue product of the 6^th worker is

A)2
B)4
C)10
D)20
E)170

Question 46

The Following Questions Refer to the graph below.
If the wage rate is $10,what is the quantity of labor demanded?

A)0
B)8
C)16
D)22
E)25

Question 47

The Following Questions Refer to the graph below.
At a wage of $10,the MRP of labor is

A)$8
B)$10
C)$80
D)$216
E)Impossible to determine using this graph

Question 48

If an increase in the wage rate from $6.00 per hour to $6.50 per hour causes a worker to decrease his hours worked from 40 to 35 hours per week,which effect dominates?

A)Substitution
B)Income
C)Wage
D)Wealth
E)Leisure

Question 49

A firm increases the number of workers it hires from 50 to 52,and as a result,output increases from 100 to 110.Each of the additional units of output can be sold for $2.What is the marginal revenue product of the 52^nd worker?

A)2
B)5
C)10
D)20
E)50

Question 50

A firm increases the number of workers it hires from 50 to 52 and,as a result,output increases from 100 to 110.Each of the additional units of output can be sold for $2.What is marginal revenue for the last 10 units produced?

A)2
B)5
C)10
D)20
E)50

Question 51

The Following Questions Refer to the graph below.
If the wage rate is $10,what is the quantity of labor supplied?

A)0
B)8
C)16
D)22
E)25

Question 52

The Following Questions Refer to the graph below.
Equilibrium wage and quantity in the labor market are

A)$3 and 8
B)$5 and 22
C)$7 and 16
D)$10 and 8
E)$10 and 22

Question 53

The Following Questions Refer to the table below.
If each unit of output is sold for $5,the marginal revenue of the second unit of output sold is

A)$5
B)$10
C)$40
D)$50
E)$200

Question 54

The Law of Diminishing Returns states that,as additional units of a variable input are added to a given amount of a fixed input,increases in output will

A)Increase
B)Decline
C)Stay the same
D)Accelerate
E)Become erratic

Question 55

A firm has a given amount of capital.When it hires 10 workers,output is 30.When it hires 11 workers,output is 40.If the Law of Diminishing Returns applies,which of the following is the most likely amount of output when the firm hires 12 workers?

A)70
B)60
C)50
D)45
E)-10

Question 56

A change in the hours of work that occurs in response to a wage change,other things equal,is known as the

A)Supply of labor
B)Substitution effect
C)Income effect
D)Wage effect
E)Opportunity cost of labor

Question 57

The Following Questions Refer to the table below.
If each unit of output is sold for $5,the marginal revenue product of the 3^rd worker is

A)5
B)50
C)200
D)250
E)300

Question 58

As the wage increases,a worker will choose to work

A)More
B)Less
C)The same amount
D)Overtime
E)An amount that cannot be determined

Question 59

Which of the following represents the demand curve for labor for a firm?

A)The MR curve
B)The MP curve
C)The MRP curve
D)The MC curve
E)None of the above

Question 60

The Following Questions Refer to the table below.
The marginal product of the 4^th worker is

A)20
B)40
C)100
D)140
E)160

Question 61

The Following Questions Refer to the graph below.
If a minimum wage is set at $4,the quantity of labor demanded in the market will be

A)0
B)15
C)25
D)35
E)More than 35

Question 62

The Following Questions Refer to the graph below.
A minimum wage set at $4 would result in a shortage of

A)0
B)10
C)20
D)35
E)None of the above

Question 63

There are examples of rent controls from as early as the 1700s.

Question 64

Which of the following is true of the minimum wage?

A)It has significantly reduced poverty in the United States
B)A worker earning the minimum wage will keep a family of three out of poverty
C)It results in a much more equal distribution of income in the United States
D)Unemployment rates are unaffected by the minimum wage
E)None of the above is true

Question 65

The Following Questions Refer to the graph below.
A minimum wage of $12 would lead to a quantity of labor demanded equal to

A)0
B)15
C)25
D)35
E)More than 35

Question 66

In a mixed economy,governments intervene in markets to control inflation.

Question 67

Many rent controls were established as a result of World War II and were kept even after the war endeD.

Question 68

In a mixed economy,governments intervene in markets to affect the prices of individual goods.

Question 69

According to the alternative analysis of the minimum wage,which of the following might lead the demand curve for labor to be vertical over the relevant range?

A)Firms offset higher wages by allowing longer lines during peak hours
B)Higher wages are offset by increased efficiency
C)Prices are increased for goods that are not price-sensitive
D)All of the above
E)None of the above

Question 70

Which of the following groups most suffers the costs of minimum wage laws?

A)College graduates
B)Senior citizens
C)Teenagers
D)Manufacturing workers
E)Agricultural workers

Question 71

Given that a firm is selling its product in a competitive market,meaning that its marginal revenue is constant,what would the Law of Diminishing Returns to labor inputs imply about the demand for labor?

A)That the demand for labor would be constant if the market is stable
B)That the firm would pay increasing wages to attract qualified employees
C)The demand would diminish with the output of new workers
D)The demand curve for labor has a negative slope resulting from declining marginal product
E)The Law of Diminishing Returns has no effect on labor demand

Question 72

If there is a price ceiling set for milk at $2.50 per gallon and the current equilibrium price is $2.25 per gallon,then we can conclude

A)That the price ceiling is doing its job,keeping prices low
B)That the price ceiling is non-binding and has no effect on the market equilibrium
C)That milk imports are reducing the price
D)That grocery stores are afraid to raise the price to the ceiling level,for fear of prosecution by the government
E)That price ceilings set a minimum price

Question 73

Research suggests that as the minimum wage is increased by 10%,the associated increase in the teenage unemployment rate is nearly

A)1 percent
B)10 percent
C)20 percent
D)25 percent
E)30 percent

Question 74

The Following Questions Refer to the graph below.
A minimum wage set at $12 per hour would result in a surplus of

A)0
B)10
C)20
D)35
E)None of the above

Question 75

The alternative analysis of the minimum wage indicates that which of the following may be true?

A)The demand curve is vertical over the relevant range
B)The supply curve is vertical over the relevant range
C)There is only a very slight unemployment effect of a minimum wage
D)All of the above
E)None of the above

Question 76

Approximately 20 U.S.cities have rent control laws.

Question 77

The Following Questions Refer to the graph below.
A minimum wage of $12 would lead to a quantity of labor supplied equal to

A)0
B)15
C)25
D)35
E)More than 35

Question 78

The fact that we observe positively sloped market labor supply curves implies that

A)The substitution effect is stronger that the income effect for most workers
B)The income effect is stronger than the substitution effect for most workers
C)Most workers don't have income or substitution effects
D)The income effect plus substitution effect results in the positive slope
E)Labor laws require workers to work at least 40 hours per week

Question 79

In a mixed economy,markets adjust freely and all markets are cleareD.

Question 80

Which of the following individuals lose as a result of an effective minimum wage law?

A)Those who remain employed after the minimum wage is instituted
B)Teenagers who lose their jobs and valuable on-the-job training
C)Skilled workers who earn wages above the minimum wage
D)All of the above
E)None of the above