Question 1

​Figure 6-32 
-​Refer to Figure 6-32. Which of the following statements is NOT accurate regarding the situation reflected by this diagram?

Accepted Answer

The statement "the price will reflect the scarcity of the good when a price floor is imposed at a price of $14" is not accurate as a price floor above the equilibrium price results in a surplus of the good, not scarcity. The other statements are accurate as a price ceiling below the equilibrium price results in scarcity and a price ceiling above the equilibrium price has no effect on scarcity. Likewise, a price floor below the equilibrium price has no effect on scarcity.

Question 2

Figure 6-31  ​
-Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30 and market demand for the good subsequently increases. This would

Accepted Answer

With the price ceiling at $30, the market is already in a state of shortage. If demand increases, this will exacerbate the shortage and increase the size of the shortage. This is because the quantity demanded will exceed the quantity supplied even more than before, and buyers will be unable to purchase as much of the good as they desire at the capped price. Therefore, Option D is the correct choice.

Question 3

​Rent controls can cause

Accepted Answer

All of these choices are possible results of rent controls. Rent controls limit the amount landlords can charge for rent, which can create disincentives for landlords to maintain or improve their properties. This can lead to a decline in the quality of housing available for rent. Additionally, rent controls can create a shortage of available apartments, leading to longer search times for renters attempting to locate an apartment. This shortage can also lead to the development of a black market, where landlords charge higher prices than allowed by the rent control policies.

Question 4

​Suppose that a binding rent control law is repealed in San Francisco. As a result, we would expect the total number of units rented in the city to

Accepted Answer

If the rent control law is repealed, landlords can charge higher prices for their units. This will incentivize them to provide more rental units, as they will be able to make more profit. As a result, the total number of units rented in the city is likely to increase.

Question 5

Which of the following would not interfere with market equilibria?

Accepted Answer

A non-binding price floor would not interfere with market equilibria because it does not set a price above the equilibrium price, so it would have no effect on the market. A minimum wage and a binding price ceiling both set a price below the equilibrium price, which would affect the market by either creating a surplus of labor or a shortage of goods. Rent control sets a legal limit on the price landlords can charge for rent, which can also create shortages or surpluses in the housing market.

Question 6

​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?

Accepted Answer

The answer of ​Consider the US market for chocolate, a...

Question 7

Which of the following is correct?

Accepted Answer

Workers decide how much labor they are willing to supply at a given wage level, while firms decide how much labor they are willing to demand at a given wage level. Therefore, workers determine the supply of labor and firms determine the demand for labor. Option B is incorrect as workers cannot determine the demand but they can determine the number of hours they are willing to work or the wage they will accept. Option C is incorrect as different types of workers belong to separate labor markets, such as the market for skilled labor, market for unskilled labor, etc. Option D is incorrect as the price of the product is determined by the intersection of the supply and demand for that particular product, not the labor market.

Question 8

Long lines

Accepted Answer

Choice C correctly identifies both long lines and discrimination according to seller bias as inefficient rationing mechanisms. Long lines waste buyers' time, while discrimination means the good may not go to the buyer who values it most highly. Together, they create an inefficient system of allocation.

Question 9

​In a market with a binding price control,

Accepted Answer

A binding price control, such as a price ceiling or price floor, creates a situation where the price is not able to adjust to the market equilibrium price. This leads to a situation where either the quantity demanded exceeds the quantity supplied (in the case of a price ceiling) or the quantity supplied exceeds the quantity demanded (in the case of a price floor). Therefore, there is an imbalance between the quantity supplied by sellers and the quantity demanded by buyers. Choices B and C are not necessarily true with a binding price control in place.

Question 10

Figure 6-31  ​
-Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30. The effect of this price ceiling would be ​

Accepted Answer

When a price ceiling is imposed at $30, it is below the equilibrium price of $40. This price ceiling is binding as it prevents suppliers from increasing the price. At the same time, consumers are willing and able to buy 80 units at the lower price of $30, but only 30 units are supplied. Hence, there is excess demand or shortage of 50 units.

Question 11

​A shortage is eliminated when

Accepted Answer

When a binding price ceiling is removed, the market price is allowed to rise to the equilibrium level, eliminating the shortage. A binding price ceiling is set below the equilibrium price, leading to excess demand (or a shortage) in the market. By allowing the price to rise, producers are encouraged to produce more, while consumers are discouraged from buying as much, thus bringing the market into equilibrium.

Question 12

As a rationing mechanism, discrimination according to seller bias is

Accepted Answer

Discrimination according to seller bias, where sellers can choose who they want to sell to based on their own preferences, can be inefficient as it may not result in goods being distributed to those who value them the most. It can also be potentially unfair as it may result in certain groups being excluded from accessing goods, particularly if there is prejudice or discrimination on the part of the seller. Therefore, D is the most appropriate answer.

Question 13

The Earned Income Tax Credit is an example of a

Accepted Answer

The Earned Income Tax Credit is a wage subsidy program where low-income workers receive a refundable tax credit. This credit is intended to supplement the wages of low-income workers to ensure they have a livable income.

Question 14

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

Accepted Answer

The answer of A minimum wage that is set above...

Question 15

Which of the following is correct? Price controls

Accepted Answer

Price controls can lead to shortages or surpluses, which can hurt the intended beneficiaries of the controls. For example, if the government sets a maximum price for housing to make it more affordable for low-income families, landlords may not be able to cover their costs and will stop renting out their properties. This can lead to a shortage of affordable housing and hurt the very people the controls were intended to help. However, there may be some situations where price controls can be effective, such as during periods of extreme market volatility or emergencies.

Question 16

​Figure 6-32 
-​Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market?

Accepted Answer

A price floor is a minimum price that can be charged for a good or service, and a surplus will develop when the price floor is set above the equilibrium price. In this case, the equilibrium price is $10, so setting a price floor at $12 (which is above the equilibrium price) will result in a surplus of goods. None of the other options (a price ceiling of $10, a price floor of $8, or a price ceiling of $14) will result in a surplus or shortage.

Question 17

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 18

After OPEC raised the price of crude oil in the 1970's, which of the following was the most important reason that there were shortages of gasoline?

Accepted Answer

The answer of After OPEC raised the price of crude...

Question 19

Unlike minimum wage laws, wage subsidies

Accepted Answer

Wage subsidies provide financial assistance to employers for hiring workers from disadvantaged groups, such as the working poor. This encourages firms to hire these workers and can lead to an increase in employment. Unlike minimum wage laws, which can lead to reduced employment opportunities, wage subsidies can raise the living standards of the working poor without creating unemployment. Therefore, the best answer is D.

Question 20

As rationing mechanisms, prices

Accepted Answer

The answer of As rationing mechanisms, prices
...

Quiz 6: Supply, Demand, and Government Policies

Figure 6-32 -Refer to Figure 6-32. Which of the following statements is NOT accurate regarding the situation reflected by this diagram?

Figure 6-31 -Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30 and market demand for the good subsequently increases. This would

Rent controls can cause

Suppose that a binding rent control law is repealed in San Francisco. As a result, we would expect the total number of units rented in the city to

Which of the following would not interfere with market equilibria?

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?

Which of the following is correct?

Long lines

In a market with a binding price control,

Figure 6-31 -Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30. The effect of this price ceiling would be

A shortage is eliminated when

As a rationing mechanism, discrimination according to seller bias is

The Earned Income Tax Credit is an example of a

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

Which of the following is correct? Price controls

Figure 6-32 -Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market?

One disadvantage of government subsidies over price controls is that subsidies

After OPEC raised the price of crude oil in the 1970's, which of the following was the most important reason that there were shortages of gasoline?

Unlike minimum wage laws, wage subsidies

As rationing mechanisms, prices

Quiz 6: Supply, Demand, and Government Policies

​Figure 6-32 -​Refer to Figure 6-32. Which of the following statements is NOT accurate regarding the situation reflected by this diagram?

Figure 6-31 ​ -Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30 and market demand for the good subsequently increases. This would

​Rent controls can cause

​Suppose that a binding rent control law is repealed in San Francisco. As a result, we would expect the total number of units rented in the city to

Which of the following would not interfere with market equilibria?

​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?

Which of the following is correct?

Long lines

​In a market with a binding price control,

Figure 6-31 ​ -Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30. The effect of this price ceiling would be ​

​A shortage is eliminated when

As a rationing mechanism, discrimination according to seller bias is

The Earned Income Tax Credit is an example of a

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

Which of the following is correct? Price controls

​Figure 6-32 -​Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market?

One disadvantage of government subsidies over price controls is that subsidies

After OPEC raised the price of crude oil in the 1970's, which of the following was the most important reason that there were shortages of gasoline?

Unlike minimum wage laws, wage subsidies

As rationing mechanisms, prices

Figure 6-32 -Refer to Figure 6-32. Which of the following statements is NOT accurate regarding the situation reflected by this diagram?

Figure 6-31 -Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30 and market demand for the good subsequently increases. This would

Rent controls can cause

Suppose that a binding rent control law is repealed in San Francisco. As a result, we would expect the total number of units rented in the city to

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?

In a market with a binding price control,

Figure 6-31 -Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30. The effect of this price ceiling would be

A shortage is eliminated when

Figure 6-32 -Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market?