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Question
Government officials who impose price controls
a. understand that their action causes a trade-off: giving up fairness to get efficiency.
b. understand that their action will induce a better achievement of the gains from trade.
c. understand that their action is supported by most economists, and hence best for society.
d. might not understand that their action causes confusion in the price signaling mechanism that directs the allocation of resources.
e. might not understand that their action will not get them the votes they seek.
Answer
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The economic entity most likely to engage in price gouging is
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What will an individual do differently as a buyer in the black market in the long run?
a. He or she will substitute away from the product.
b. He or she will substitute toward the product.
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d. When a binding price ceiling exists, he or she will be willing to pay a lower price.
e. What he or she does as a buyer in the long run will be no different from what he or she does in the short run.
Q:
What is the long-run consequence of a price ceiling law?
a. A surplus will continue to exist and will grow larger over time.
b. A surplus will continue to exist and will grow smaller over time.
c. A shortage will continue to exist and will grow larger over time.
d. A shortage will continue to exist and will grow smaller over time.
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Q:
Suppose Solomon lives in a community with no price controls. What do you expect will happen if his town borders a community where there is a binding price ceiling on most products?
a. Prices in the legal market in the community with a binding price ceiling will rise.
b. Prices in the legal market in the community with a binding price ceiling will fall.
c. There will be shortages in the community with a binding price ceiling.
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Q:
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a. Demand for jelly will increase along with the price.
b. Demand for jelly will decrease along with the price.
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d. Both the supply and demand for jelly will increase along with the price.
e. The supply of jelly will decrease and the price will increase.
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