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Exam 5: Price Ceilings and Floors

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Question 111

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Setting the maximum legal price above the market price will cause

A) a shortage to develop.
B) the market to reach an equilibrium outcome.
C) quantity supplied to exceed quantity demanded.
D) market inefficiencies.

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Question 112

Multiple Choice

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When a price ceiling is in effect:

A) suppliers get too strong a signal from demanders about their needs.
B) demanders have no incentive to signal their needs to suppliers.
C) all of demanders' needs are met at the lower price, so there is no need to signal anything to suppliers.
D) demanders cannot signal their needs to suppliers.

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Question 113

Multiple Choice

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If quantity supplied equals 40 units and quantity demanded equals 50 units under a price control, then it is a:

If affordable housing is a concern, then a better policy than rent controls may be for the government to provide:

A minimum wage mostly creates unemployment among older workers.

A legal maximum price at which a good can be sold is a price:

The U.S. government establishes a price floor of $1,000 on personal computers. The market price for netbooks (personal computers that specialize in Internet and other basic computer functions) is about $500. How would this price control affect the netbook market?

If a price floor is above the equilibrium price it will have no effect in the market.

Once search and waiting costs are taken into account, price ceilings can cause consumers to spend more for a good than if prices were unregulated.

Which statement(s) about price ceilings are TRUE? I. Price ceilings cause quantity demanded to exceed quantity supplied. II. When including time costs and bribes, consumers pay a total price in excess of the price ceiling. III. All else equal, it is more wasteful to allocate goods based on bribes than on waiting time costs.

Use the following to answer questions: Figure: Costs of Price Ceilings 2 -(Figure: Costs of Price Ceilings 2) Refer to the figure. What is the dollar amount of lost producer surplus after the price ceiling of $4 has been implemented?

During the energy crisis of the 1970s, President Nixon ordered gas stations to close between 9:00 PM Saturday and 12:01 AM Monday, in an attempt to prevent wasteful and unnecessary Sunday driving. This policy:

Price ceilings would create all of the following effects EXCEPT:

Use the following to answer questions: Figure: Costs of Price Ceilings 2 -(Figure: Costs of Price Ceilings 2) Refer to the figure. What is the dollar amount of the deadweight loss after the price ceiling of $4 has been implemented?

Use the following to answer questions: Figure: Minimum Wage -(Figure: Minimum Wage) Refer to the figure. At a minimum wage of $8, firms are willing to hire ________ workers.

Minimum wage laws are an example of price floors.

When he was president, Richard Nixon froze all prices and wages in the United States.

When the price ceilings on oil and gas were lifted in January 1981: I. the price of oil rose immediately. II. the price of oil continued to rise more than 2 years after the controls were eliminated. III. higher prices gave an incentive to suppliers to increase supply, thus leading eventually to lower prices.

A price floor makes it illegal for firms to compete for more customers by lowering prices, causing firms to compete by offering customers higher quality.

Use the following to answer questions: Figure: Effects of Price Ceilings -(Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2: