Question 1

​In a market with a binding price control,

Accepted Answer

A binding price control, such as a price ceiling, creates a situation where the price is artificially held below the market equilibrium price. This results in an excess demand for the product, meaning that the quantity demanded by buyers exceeds the quantity supplied by sellers. As a result, shortages may occur and sellers may ration the product or create other non-price methods of allocating the limited supply. The other options, B and C, do not necessarily hold true in a market with a binding price control.

Question 2

Advocates of the minimum wage

Accepted Answer

Advocates of the minimum wage often highlight the low annual incomes of those who work for the minimum wage, which is usually not enough to lift someone out of poverty. They argue that a higher minimum wage is necessary to provide a basic standard of living for workers. They may acknowledge that there could be some adverse effects, but ultimately prioritize the benefits to workers. While they may also mention the benefits to teenagers, this is not the main focus of their argument. Option A is incorrect because advocates of the minimum wage may acknowledge that there could be some adverse effects, such as potential job losses or higher prices for consumers. Option D is incorrect because Option A is not entirely true, and Option B is not the main focus of their argument.

Question 3

Unlike minimum wage laws, wage subsidies

Accepted Answer

Wage subsidies provide financial assistance to employers for hiring and retaining workers from disadvantaged groups, such as the working poor. This incentive encourages firms to hire workers who might otherwise be overlooked due to their economic status, thus raising the living standards of the working poor without causing unemployment. Unlike minimum wage laws, which can result in increased labor costs for employers and potentially lead to job loss, wage subsidies are a more targeted and effective way to address income inequality.

Question 4

Which of the following would not interfere with market equilibria?

Accepted Answer

A non-binding price floor would not interfere with market equilibria as it is a price floor set above the equilibrium price and has no effect on the market. A minimum wage, rent control, and a binding price ceiling would interfere with market equilibria by distorting the price signals and causing either a surplus or a shortage of goods or services.

Question 5

A binding minimum wage tends to

Accepted Answer

The answer of A binding minimum wage tends to
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Question 6

The Earned Income Tax Credit is an example of a

Accepted Answer

The Earned Income Tax Credit is a wage subsidy, which means it provides assistance to low-income workers by supplementing their earnings. It is not a minimum-wage law or a price ceiling, and it is not related to rent subsidies.

Question 7

A minimum wage that is set above a market's equilibrium wage will result in an excess

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Question 8

​Consider the US market for chocolate, a market in which the government has imposed a price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling?

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Question 9

There are several criticisms of the minimum wage. Which of the following is not one of those criticisms? The minimum wage

Accepted Answer

This statement is not a criticism of the minimum wage. The other three options are commonly cited criticisms of the minimum wage by economists and policy analysts.

Question 10

The minimum wage, if it is binding, lowers the incomes of

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Question 11

The proportion of minimum-wage earners who are in families with incomes below the poverty line is

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Question 12

As rationing mechanisms, prices

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Question 13

One disadvantage of government subsidies over price controls is that subsidies

Accepted Answer

Subsidies require government spending, which often necessitates higher taxes to fund these subsidies. Unlike price controls, which directly manipulate market prices, subsidies provide financial support but can lead to increased tax burdens to finance this support.

Question 14

The minimum wage, if it is binding, raises the incomes of

Accepted Answer

The minimum wage only raises the incomes of workers whose current jobs would pay less than the minimum wage if it didn't exist. If the minimum wage is higher than the wage a worker is currently earning, their employer will have to raise their pay to comply with the law. However, if the worker is already earning above the minimum wage, the law doesn't affect their pay. Additionally, if the minimum wage is set too high, employers may not be able to afford to hire as many workers, leading to job losses for some workers.

Question 15

Which of the following is correct?

Accepted Answer

In a market economy, workers determine the supply of labor based on their willingness to work at various wage rates, while firms determine the demand for labor based on their willingness to pay various wage rates to hire workers. Therefore, option A accurately describes how the labor market works. Option B is incorrect as workers cannot determine the demand for labor since they cannot force firms to hire them at a specific wage rate. Option C is incorrect as the labor market consists of different markets for different types of workers based on their skills and qualifications. Option D is also incorrect as the price of the product depends on various factors such as production costs, market demand, and competition, and not just on the supply and demand for labor.

Question 16

Long lines

Accepted Answer

Long lines waste the time of buyers and are therefore an inefficient rationing mechanism. Discrimination according to seller bias is also an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it most highly. Therefore, both long lines and discrimination according to seller bias are inefficient rationing mechanisms.

Question 17

Which of the following is correct? Price controls

Accepted Answer

Price controls, such as price ceilings, can lead to shortages and reduced supply, which can ultimately harm the very consumers they are intended to help. Additionally, price controls can disincentivize producers from entering the market, further exacerbating the issue of reduced supply. While price controls may temporarily lower prices, the long-term consequences can result in negative effects for the intended beneficiaries.

Question 18

As a rationing mechanism, discrimination according to seller bias is

Accepted Answer

Discrimination according to seller bias can lead to inefficient allocation of resources, as it may not reflect market demand or supply. Additionally, it can lead to potential unfairness as certain groups may be favored over others. Therefore, it is inefficient and potentially unfair as a rationing mechanism.

Question 19

Minimum wage laws

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Question 20

Opponents of the minimum wage point out that the minimum wage

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Quiz 6: Supply, Demand, and Government Policies