Question 1

Economic models predict that a binding minimum wage will generally cause increased unemployment for low-skilled workers.

Accepted Answer

This is a widely accepted prediction based on economic theory, as employers may not be able to afford to hire as many low-skilled workers at the higher wage level, leading to potential layoffs or a decrease in new job opportunities. However, some studies have shown mixed results on the actual impact of minimum wage increases on employment.

Question 2

To dispose of the unwanted surplus resulting from agricultural price floors,the European Union pays exporters to sell products at a loss overseas.

Accepted Answer

This practice is known as export subsidies and is used by the European Union to dispose of agricultural surpluses resulting from price floors. Export subsidies involve paying exporters to sell products at a loss overseas in order to make them more competitive and reduce the surplus stock. However, this practice has been criticized for distorting international trade and disadvantaging farmers in developing countries.

Question 3

Use the following to answer questions:
Figure: The Market for Sandwiches 
-(Figure: The Market for Sandwiches)Use Figure: The Market for Sandwiches.Suppose that a price floor is set at $7.At this price,consumer surplus is equal to _____ and producer surplus is equal to _____.

Accepted Answer

At a price floor of $7, the quantity demanded is 4 and the quantity supplied is 8. 
Consumer surplus = 0.5*(9-7)*4 = $4
Producer surplus = (7-3)*4 = $16
Total surplus = $20, which is the sum of consumer and producer surplus. 
Therefore, the correct choice is D) $32; $40.

Question 4

If the province of Quebec established a price floor in the market for pumpkins that was double the current market-clearing price,this would lead to an inefficient number of pumpkins sold in Quebec.

Accepted Answer

When a price floor is established above the market-clearing price, it creates a surplus of the product as producers are incentivized to produce more than the consumers demand at that higher price. This would mean that there would be an inefficient number of pumpkins sold in Quebec, as there would be more pumpkins produced than the market demands at that higher price.

Question 5

Use the following to answer questions:
Figure: The Shrimp Market 
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 kilograms,it will have the same effect on transactions as a price floor of:

Accepted Answer

A quota limiting sales to 250 kilograms would create a situation where the quantity supplied is less than the equilibrium quantity, similar to a price floor that raises the price to $17.50, where the quantity demanded equals 250 kilograms.

Question 6

Use the following to answer questions:
Figure: The Shrimp Market 
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 1 000 kilograms,the quota rent per kilogram is:

Accepted Answer

The answer of Use the following to answer questions:
Figure: The...

Question 7

Suppose that the federal government imposes a price ceiling of $5 per ATM transaction.If the average market-clearing price for an ATM transaction is $2,the price ceiling will not be binding in this instance.

Accepted Answer

A price ceiling is binding only if it is set below the market-clearing price. Since $5 is above the $2 market-clearing price, it is not binding.

Question 8

Although they cost more than $200 000 when they were issued in the 1930s,the New York taxicab medallions are relatively inexpensive today,selling for around $3 000.

Accepted Answer

This statement is outdated and no longer true. As of 2021, the prices of New York taxicab medallions have significantly increased and can cost upwards of $200,000 again due to various economic, regulatory, and technological changes in the industry.

Question 9

A rent ceiling must be set above the equilibrium rent to be binding.

Accepted Answer

A rent ceiling is only binding if it is set below the equilibrium rent, causing a shortage of rental units. If it is set above the equilibrium rent, it will have no effect on the market.

Question 10

Licences allowing taxis to operate issued by New York City in the 1930s are called medallions.

Accepted Answer

This statement is correct. Medallions are licenses issued by New York City that allow taxis to operate. These licenses were first introduced in the 1930s and are still in use today.

Question 11

Use the following to answer questions:
Figure: The Market for Sandwiches 
-A binding price ceiling will cause a persistent _____,and a binding price floor will cause a persistent _____.

Accepted Answer

A binding price ceiling, set below the equilibrium price, causes a shortage because the quantity demanded exceeds the quantity supplied. A binding price floor, set above the equilibrium price, causes a surplus because the quantity supplied exceeds the quantity demanded.

Question 12

A price ceiling benefits all consumers.

Accepted Answer

A price ceiling may benefit some consumers who are able to purchase goods or services at a lower price due to the artificial limit, but it can also have negative effects such as shortages, decreased quality, and the eroding of incentives for producers. Additionally, some consumers who are willing to pay a higher price for a product may not be able to obtain it at all due to the ceiling, resulting in lost utility.

Question 13

Price controls are always set below the market equilibrium price.

Accepted Answer

Price controls can be set above or below the market equilibrium price. A price ceiling is set below the market equilibrium to keep prices lower for consumers, while a price floor is set above the market equilibrium to ensure producers receive a minimum price.

Question 14

Use the following to answer questions:
Figure: The Shrimp Market 
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 500 kilograms,the quota rent per kilogram is:

Accepted Answer

The quota rent is the difference between the price consumers are willing to pay and the price producers receive. If the quota limits sales to 500 kilograms, the quota rent is $5 per kilogram, as it is the difference between the demand price and the supply price at that quantity.

Question 15

Suppose that the province of Ontario sets a price floor in the market for peaches.If the floor is set below the market-clearing price of peaches,the floor will cause a surplus of peaches.

Accepted Answer

If the price floor is set below the market-clearing price, it will have no effect on the market as it will be lower than the equilibrium price. Therefore, there will be no surplus of peaches. If the price floor is set above the equilibrium price, it will create a surplus.

Question 16

Critics of the pharmaceutical industry often argue that price ceilings should be imposed on drug manufacturers.If this happened,the quality of drugs would improve.

Accepted Answer

Imposing price ceilings on drug manufacturers may lead to lower quality of drugs as companies may cut corners on research and development or use cheaper, lower-quality ingredients to maintain profitability. Lower profits would also reduce the incentive for companies to invest in expensive research and development for new drugs.

Question 17

Use the following to answer questions:
Figure: The Market for Sandwiches 
-(Figure: The Market for Sandwiches)Use Figure: The Market for Sandwiches.How much total surplus would be lost if there were a quota of eight sandwiches that could be legally exchanged?

Accepted Answer

The answer of Use the following to answer questions:
Figure: The...

Question 18

In New York City,there are more than 100 000 licensed taxicabs.

Accepted Answer

As of 2021, there are only about 13,500 licensed taxicabs operating in New York City.

Question 19

When transatlantic airfares were set artificially high by an international treaty,airlines offered customers an inefficiently high quality of service.

Accepted Answer

When airfares are set artificially high, airlines tend to offer a higher quality of service that is inefficiently high to justify the high cost of tickets to customers.

Question 20

Use the following to answer questions:
Figure: The Shrimp Market 
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 kilograms,the quota rent per kilogram is:

Accepted Answer

The answer of Use the following to answer questions:
Figure: The...

Quiz 4: Price Controls and Quotas: Meddling With Markets

Economic models predict that a binding minimum wage will generally cause increased unemployment for low-skilled workers.

To dispose of the unwanted surplus resulting from agricultural price floors,the European Union pays exporters to sell products at a loss overseas.

Use the following to answer questions: Figure: The Market for Sandwiches -(Figure: The Market for Sandwiches) Use Figure: The Market for Sandwiches.Suppose that a price floor is set at $7.At this price,consumer surplus is equal to _ and producer surplus is equal to _.

If the province of Quebec established a price floor in the market for pumpkins that was double the current market-clearing price,this would lead to an inefficient number of pumpkins sold in Quebec.

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 kilograms,it will have the same effect on transactions as a price floor of:

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 1 000 kilograms,the quota rent per kilogram is:

Suppose that the federal government imposes a price ceiling of $5 per ATM transaction.If the average market-clearing price for an ATM transaction is $2,the price ceiling will not be binding in this instance.

Although they cost more than $200 000 when they were issued in the 1930s,the New York taxicab medallions are relatively inexpensive today,selling for around $3 000.

A rent ceiling must be set above the equilibrium rent to be binding.

Licences allowing taxis to operate issued by New York City in the 1930s are called medallions.

Use the following to answer questions: Figure: The Market for Sandwiches -A binding price ceiling will cause a persistent _,and a binding price floor will cause a persistent _.

A price ceiling benefits all consumers.

Price controls are always set below the market equilibrium price.

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 500 kilograms,the quota rent per kilogram is:

Suppose that the province of Ontario sets a price floor in the market for peaches.If the floor is set below the market-clearing price of peaches,the floor will cause a surplus of peaches.

Critics of the pharmaceutical industry often argue that price ceilings should be imposed on drug manufacturers.If this happened,the quality of drugs would improve.

Use the following to answer questions: Figure: The Market for Sandwiches -(Figure: The Market for Sandwiches) Use Figure: The Market for Sandwiches.How much total surplus would be lost if there were a quota of eight sandwiches that could be legally exchanged?

In New York City,there are more than 100 000 licensed taxicabs.

When transatlantic airfares were set artificially high by an international treaty,airlines offered customers an inefficiently high quality of service.

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 kilograms,the quota rent per kilogram is:

Quiz 4: Price Controls and Quotas: Meddling With Markets

Economic models predict that a binding minimum wage will generally cause increased unemployment for low-skilled workers.

To dispose of the unwanted surplus resulting from agricultural price floors,the European Union pays exporters to sell products at a loss overseas.

Use the following to answer questions: Figure: The Market for Sandwiches -(Figure: The Market for Sandwiches) Use Figure: The Market for Sandwiches.Suppose that a price floor is set at $7.At this price,consumer surplus is equal to _____ and producer surplus is equal to _____.

If the province of Quebec established a price floor in the market for pumpkins that was double the current market-clearing price,this would lead to an inefficient number of pumpkins sold in Quebec.

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 kilograms,it will have the same effect on transactions as a price floor of:

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 1 000 kilograms,the quota rent per kilogram is:

Suppose that the federal government imposes a price ceiling of $5 per ATM transaction.If the average market-clearing price for an ATM transaction is $2,the price ceiling will not be binding in this instance.

Although they cost more than $200 000 when they were issued in the 1930s,the New York taxicab medallions are relatively inexpensive today,selling for around $3 000.

A rent ceiling must be set above the equilibrium rent to be binding.

Licences allowing taxis to operate issued by New York City in the 1930s are called medallions.

Use the following to answer questions: Figure: The Market for Sandwiches -A binding price ceiling will cause a persistent _____,and a binding price floor will cause a persistent _____.

A price ceiling benefits all consumers.

Price controls are always set below the market equilibrium price.

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 500 kilograms,the quota rent per kilogram is:

Suppose that the province of Ontario sets a price floor in the market for peaches.If the floor is set below the market-clearing price of peaches,the floor will cause a surplus of peaches.

Critics of the pharmaceutical industry often argue that price ceilings should be imposed on drug manufacturers.If this happened,the quality of drugs would improve.

Use the following to answer questions: Figure: The Market for Sandwiches -(Figure: The Market for Sandwiches) Use Figure: The Market for Sandwiches.How much total surplus would be lost if there were a quota of eight sandwiches that could be legally exchanged?

In New York City,there are more than 100 000 licensed taxicabs.

When transatlantic airfares were set artificially high by an international treaty,airlines offered customers an inefficiently high quality of service.

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 kilograms,the quota rent per kilogram is:

Use the following to answer questions: Figure: The Market for Sandwiches -(Figure: The Market for Sandwiches) Use Figure: The Market for Sandwiches.Suppose that a price floor is set at $7.At this price,consumer surplus is equal to _ and producer surplus is equal to _.

Use the following to answer questions: Figure: The Market for Sandwiches -A binding price ceiling will cause a persistent _,and a binding price floor will cause a persistent _.