CHAPTER 06 - Chapter6 Supply,Demand,and GovernmentPolicies...

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Chapter 6 Supply, Demand, and  Government Policies 1. When the government issues ration coupons, it is an indication that the government has prohibited the use of  which rationing mechanism? a. merit b. need c. price d. age ANSWER: c price SECTION: 1 OBJECTIVE: 1 2. If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread, a. more bread will be produced to meet the increased demand. b. there will be a shortage of bread. c. the demand for bread will decrease because suppliers will reduce their supply. d. a surplus of bread will emerge. ANSWER: b there will be a shortage of bread. SECTION: 1 OBJECTIVE: 1 3. Rent controls typically end up a. increasing rents received by landlords. b. raising property values. c. encouraging landlords to overspend for maintenance. d. discouraging new housing construction. ANSWER: d discouraging new housing construction. SECTION: 1 OBJECTIVE: 1 4. A price ceiling might be an appropriate government response to a  a. period of falling farm prices due to unusually good harvests. b. substantial increase in farm productivity due to applications of new technology in agriculture. c. national security crisis leading to major shortages of essential goods. d. period of extraordinary large surpluses of farm goods. ANSWER: c national security crisis leading to major shortages of essential goods. SECTION: 1 OBJECTIVE: 1 31
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32    Chapter 6/Supply, Demand, and Government Policies 5. Suppose that the government places a price ceiling in the fish market, and that the ration coupons it issues are  bought and sold on a ration coupon market before they are used to purchase fish. The a. excess supply of fish will be eliminated. b. purpose of that price ceiling would be defeated. c. price ceiling must have been too low. d. price of fish set by the price ceiling would rise. ANSWER: b purpose of that price ceiling would be defeated. SECTION: 1 OBJECTIVE: 1 6. Assume that the government sets a ceiling on the interest rate that banks charge on loans. If the ceiling is set  below the market equilibrium interest rate, the result will be a. a surplus of credit. b. a shortage of credit.
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CHAPTER 06 - Chapter6 Supply,Demand,and GovernmentPolicies...

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