SCAN0807_000 - Chapter Five Name Date 1 A price control is...

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Unformatted text preview: Chapter Five. Name: Date: 1. A price control is: A) 13) C) D) when a from controls the price of the good it produces. a legal restriction on how high or low a price in a market may go. an upper limit on the quantity of some good that can be bought or sold. a tax placed on the sate of a good which controls the market price. 2. A binding price ceiling is designed to: A) B) C) D) keep prices low. increase the quality of the good. prevent shortages. increase efficiency. 3. Rapidly increasing health costs have been a major political concern since at least 1992. Suppose that to controi rising heaith costs the government sets the maximum price for a normal doctor's visit at $20, but the current market price is $40. Then: A) B) C) 13) more people will try to visit the doctor, but the doctor will see fewer patients. the same number of people wilt try to visit the doctor, and the doctor will see the same number of patients. more people will be able to see the doctor, since the price is lower. fewer people wiil tr},r to see the doctor, and the doctors will see fewer patients. 4. The government decides to impose a price ceiling on a good, because it thinks the market—determined price is “too high.” if the government imposes the price ceiling beiow the equilibrium price: A) B) C) D) consumers will respond to the lower price and therefore wish to purchase more of the good than at the equilibrium price. producers will respond to the lower price and therefore offer more units for sale. consumers will be able to purchase more of the good after the price ceiling is imposed. it will not be binding. 5. The government imposes a price ceiling below the equilibrium price. The price ceiling will cause: A) B) C) D) quantity demanded to decrease. quantity supplied to increase. a shortage of the good. an increase in the quality of the good. Chapter Five Page 1 10. Which of the following is an example of a black market? A) a tenant in a rent-controlled apartment subletting at a higher rent B) the purchase of an inferior radio at a department store C) waiting in line during the gasoline shortages of the 19705 D) the oil market . One of the ways rent control is inefficient is that it leads to: A) B) C) D) higher~quality apartments. high opportunity costs associated with wasted time. markets that maximize total surplus. the construction of more apartments. . Rent controls in New York City cause all of the following except: A) inefficiently low quality. B) wasted resources resulting from the opportunity cost of time associated with trying to find an apartment. C) black markets. D) an increase in the quantity supplied of rent—controlled apartments. . Suppose the government of Coffeeland sets coffee prices at $1 per pound, when the market price is $10. The government's actions will: A) improve efficiency since the low prices will force producers to find cheaper production methods. result in coffee surpluses even in a coffee~rich country. cause coffee shortages even in a coffee-rich country. improve equality between rich and poor since the poor can now afford coffee. 13) C) D) The government decides to impose a price ceiling on a good because it thinks the market-determined price is “too high.” If it imposes the price ceiling above the equilibrium price: A) consumers will respond to the higher price and therefore wish to purchase less of the good than at the equilibrium price. producers will respond to the higher price and therefore offer fewer units for sale. consumers will purchase less of the good after the price ceiling is imposed. there will he no change to either the price or quantity in the market. 3) C) D) Chapter Five Page 2 11. 12. 13. 14. 15. 16. The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price ceiling in the market at a price of $0.40 per pound, then: A) quantity demanded will decrease. B) quantity supplied will increase. C) there will be a shortage of the good. D) the price ceiling will not affect the market price or output. A maximum price set below the equilibrium price is a: A) demand price. l3) supply price. C) price floor. D) price ceiling. Rent controls set a price ceiling below the equilibrium price and therefore: A) quantity supplied exceeds the quantity demanded. B) quantity demanded exceeds the quantity suppiied. C) a surplus of rental units will result. D) poor people will obviously be helped. A price ceiling will have no effect if: A) it is set above the equilibrium price. B) the equilibrium price is above the price ceiling. C) it is set below the equilibrium price. D) it creates a shortage. West African cottori farmers are very upset about the subsidies the U.S. government pays to American cotton farmers. One reason for this could be that subsidized cotton from the United States: A) leads to global cotton surpluses and lower prices for West African farmers. B) raises the world price of cotton. C) has led to a global shortage of cotton. D) has led to an increase in the demand for West African cotton. The United States and the European Union impose price floors on many agricultural products. These price floors lead to unwanted surpluses. To deai with a surplus: A) the US. government typically pays farmers to produce as much as possible. B) the U.S. government, in some cases, has destroyed the surplus production. C) the European Union pays farm exporters to sell products for a profit overseas. D) the US. government holds auctions to sell the surplus to the highest bidder. Chapter Five Page 3 17. 18. 19. 20. 21. 22. Suppose the government sets a price floor of $2.85 per bushel on corn when the cunent price is $2.55. This price floor will: A) cause a surplus of corn. B) cause a shortage of corn. C) have no effect on the price of corn. D) increase the supply of corn. Govemments continue to impose price controls. Which of the following is not a valid reason for this? A) Some people do benefit from such price controls. B) People fear that prices will change dramatically if the price controls were removed. C) It is politically expedient to enact regulations that benefit influential voting groups. D) Price controls are always effective. One of the consequences of increasing the minimum wage has been: A) decreased unemployment for low-skill workers. B) workers offering to work “off the books” for less than the minimum wage. C) lower production costs for small businesses. D) increased employment for high-skill workers. Which of the following is a reason for governments imposing or maintaining price controls? A) Both consumers and producers benefit from price controls. B) it may be politically expedient to impose price controls that benefit influential voting groups. The government benefits item price controls. Price controls improve the efficiency of the market. C) D) To be binding, a price floor must be set at a price: A) lower than the equilibrium price. B) higher than the equilibrium price. C) at which quantity demanded exceeds quantity supplied. D) lower than the equilibrium price and at a price at which quantity demanded exceeds quantity supplied. When the minimum wage increases: A) unemployment among skilled workers decreases. B) fewer workers are willing to work “off the books.” C) employment of unskilled workers increases. D) unemployment among unskilled workers increases. Chapter Five Page 4 23. A minimum price set above the equilibrium price is a: A) demand price. B) supply price. C) price floor. D) price ceiling. 24. Suppose the government sets a price floor below the current price of the good. This price floor will: A) result in an excess supply of the good. B) result in an excess demand for the good. C) have no effect on the price of the good. D) increase the quantity supplied of the good. 25. If New York City had no medallion system for taxicabs, the price of a taxicab ride would: A) increase because of the higher safety hazards. B) not change from its current level. C) decrease. D) increase, but only slightly. 26. If the government imposes rent control: A) rent will be set at a price above the equilibrium price. B) it may result in some landlords leaving the business because they cannot cover costs. C) it will lead to rental units being higher in quality because landlords are guaranteed a high price. D) it will create a surplus of housing. Chapter Five Page 5 ...
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This note was uploaded on 02/03/2012 for the course ECONOMICS 202 taught by Professor Black during the Spring '08 term at Boise State.

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SCAN0807_000 - Chapter Five Name Date 1 A price control is...

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