Q&A Hero

Q: What is a black market? a. It is an illegal market that emerges when binding and nonbinding price controls are in place. b. It is an illegal market that emerges when binding price ceilings are in place. c. It is an illegal market that emerges when binding price floors are in place. d. It is an illegal market that emerges when only binding price ceilings and binding price floors are in place. e. It is an illegal market that emerges when no price controls are present.

Q: The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements would be an example of aa. minimum wage law. b. fair wage law. c. price ceiling.d. black market price.e. ration price.

Q: Many states have laws that limit the maximum amount of interest that a lender can charge a borrower. Such a law is an example of a(n)a. equilibrium price. b. price ceiling. c. price floor.d. black market price.e. ration price.

Q: Price controls can be traced back as far as a. ancient Babylon of 4,000 years ago. b. ancient Greece of 2,500 years ago c. ancient Rome of 2,000 years ago. d. ancient Egypt of 3,000 years ago. e. recent times, since organized markets under organized government and legal systems are necessary to effectively impose such controls.

Q: 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.

Q: CHAPTER 6: Price ControlsWhy do government leaders impose price controls?a. They are trying to promote the formation of black markets.b. They are trying to ensure that the market reaches equilibrium.c. They are trying to ensure that all consumers are able to purchase a specific product.d. They are trying to ensure that a social goal is satisfied.e. They are trying to increase the demand curve.

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Q: SHORT ANSWER1. When market participants are allowed through their interactions to find the price, there will be equilibrium where the quantity supplied by buyers equals the quantity supplied by sellers. If this is the case, why does the government intervene in certain markets by imposing a price floor? Why does the government intervene in certain markets by imposing a price ceiling? Which market participant (the buyer or the seller) will lobby the government to secure passage of a binding price floor? Which one will lobby for a binding price ceiling?

Q: In the U.S. sugar marketa. subsidies costs taxpayers $10 billion per year.b. California grows the most sugarcane in the country.c. sugar subsidies cause sugar to be cheaper than high-fructose corn syrup.d. sugar price ceilings cause regular shortages of sugar.e. U.S. sugarcane is more expensive than in Canada.

Q: In the South African labor market a. workers celebrated minimum wages above market equilibrium wages. b. above-market equilibrium wages have been shown to work and keep most workers employed. c. workers begged the government to allow below-minimum wage factories to stay open, reasoning that any job is better than no job. d. despite unemployment, minimum wage laws have made incomes more equal. e. the minimum wage works because it is nonbinding.

Q: As a politician, you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would a. remain below the equilibrium wage and be binding. b. remain above the equilibrium wage and be binding. c. remain below the equilibrium wage and be nonbinding. d. remain above the equilibrium wage and be nonbinding. e. be equal to the equilibrium wage.

Q: Which of the following is true, holding all other things constant, when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage? a. In regions with the highest minimum wage, most of the jobs require low skills, and workers are not productive enough to get paid the higher wage. b. In regions with the lowest minimum wage, most of the jobs require technical skills and no one works minimum-wage jobs. c. In regions with the lowest minimum wage, the price control is nonbinding; in the regions with the highest minimum wage, the price control is binding. d. In regions with the lowest minimum wage, the price control is binding; in the regions with the highest minimum wage, the price control is nonbinding. e. In regions with the highest minimum wage, the minimum wage law is legally enforced; in regions with the lowest minimum wage, the law is not strongly enforced.

Q: Why is raising the minimum wage generally ineffective? a. Most employers purchase labor on the black market, where the binding price floor is not present. b. The minimum wage is an amount suggested by the government, and employers are under no obligation to pay their employees the suggested basic wage. c. The minimum wage is usually set below the prevailing equilibrium wage and is frequently nonbinding. d. Employees are often unconcerned with their wages and care more about the benefits that come with the job. e. Most employees who hold low-wage jobs work in the black market, where the binding price floor doesnt exist.

Q: What wage system will dominate? a. The federal governments minimum wage dominates all states minimum wage laws. b. A states minimum wage law will dominate the federal governments wage law if the states minimum wage is higher. c. A states minimum wage law will dominate the federal governments wage law since the Constitution specifies that any provisions not specified in the Constitution are delegated to the states. d. The federal government will challenge a states minimum wage if the states minimum wage is higher and the federal government wishes to force the state to comply. e. Poor states can make their own minimum wages lower than the federal government wishes.

Q: How would an economist explain a teenagers continued unemployment where there exists a minimum wage? a. The minimum wage law made it such that the quantity of labor willing to work at that wage was less than the quantity of labor demanded at that wage. b. The minimum wage law made it illegal to hire teenagers because they likely would have been unable to work a minimum number of hours. c. The minimum wage law made it such that the quantity of labor willing to work at that wage was greater than the quantity of labor demanded at that wage. d. The minimum wage law made it such that the market had reached equilibrium. e. The minimum wage law was nonbinding.

Q: Use the following table to answer the following questions.Wage RateQuantity of Labor DemandedQuantity of Labor Supplied$5.00175,550,000120,000,000$5.50162,000,000136,485,000$6.00153,300,020153,300,020$6.50148,600,579155,250,000$7.00142,050,000157,132,360$7.50139,630,000159,800,000$8.00135,000,000161,000,785If a minimum wage is established at $7.50, what would be the amount of disequilibrium in the labor market?a. There would be a shortage of labor of 20,170,000.b. There would be a surplus of labor of 20,170,000.c. There would be neither a shortage nor a surplus.d. A labor shortage of 20,170,000 would be eliminated because individuals would decide to work in the illegal black market.e. A labor shortage of 20,170,000 would increase as individuals find work in the illegal black market.

Q: Who potentially benefits from a price floor?a. workers b. employers c. no oned. renterse. consumers

Q: Which of the following is a correct statement about a minimum wage law? a. It reduces costs for employers. b. It ensures that anyone who wants a job can get a job with a high enough wage. c. It causes prices to rise as producers pay more for labor. d. It is a price ceiling law that makes wages higher than the market equilibrium price. e. It is a price floor law that forces wages to be lower than the market equilibrium price.

Q: A binding minimum wage will decrease the income of a. all workers. b. potential workers seeking employment. c. only those workers in jobs that would normally pay less than minimum wage. d. only those workers in jobs that would normally pay more than minimum wage. e. no workers.

Q: A binding minimum wage will increase the income of a. all workers. b. potential workers seeking employment. c. only those workers in jobs that would normally pay less than minimum wage. d. only those workers in jobs that would normally pay more than minimum wage. e. no workers.

Q: Which of the following is a correct statement? a. Rent control and the minimum wage are both illustrations of price floors. b. Rent control is an illustration of a price floor and the minimum wage is an illustration of a price ceiling. c. Rent control and the minimum wage are neither illustrations of price floors nor price ceilings. d. Rent control is an illustration of a price ceiling and the minimum wage is an illustration of a price floor. e. Rent control and the minimum wage are both illustrations of price ceilings.

Q: Refer to the accompanying figure, which shows both short-run and long-run demand and supply curves. If there is a $x binding price floor imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run?a. There will be a surplus of 1,500,000 units.b. There will be a surplus of 800,000 units.c. There will not be a surplus; there will be a shortage.d. There will be a surplus of 2,000,000 units.e. There will be a surplus of 500,000 units.

Q: What is the long-run consequence of a price floor 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. e. The amount of the surplus will not change.

Q: Suppose Lewis lives in a community with no price controls. What would he expect will happen if his town borders a community where there is a binding price floor on most products? a. Prices in the legal market in the community with a binding price floor will rise. b. Prices in the legal market in the community with a binding price floor will fall. c. There will be surpluses in the community with a binding price floor. d. More consumers will purchase the product in the community with the price floor. e. The black market in his community will be larger than the black market in the community with the binding price floor.

Q: If a good is subject to a binding price floor and someone purchases it on the black market, what would he or she expect to happen to the availability of the good over time? a. The availability of the good will fall over time as the supply curve becomes more elastic and the demand curve becomes more inelastic. (The surplus of the good will fall.) b. The availability of the good will fall over time as both the supply and demand curves become more elastic. (The surplus of the good will fall.) c. The availability of the good will rise over time as both the supply and demand curves become more elastic. (The surplus of the good will rise.) d. The availability of the good will fall over time as the demand curve becomes more elastic and the supply curve becomes more inelastic. (The surplus of the good will fall.) e. The availability of the good will not change over time.

Q: Why does a surplus that occurs under a binding price floor increase over time? a. Demand becomes more elastic. b. Demand becomes more inelastic. c. Demand and supply both become more elastic. d. Demand and supply both become more inelastic. e. Demand becomes more elastic, but supply becomes more inelastic.

Q: As the time frame shifts from the short run to the long run, what happens to consumers who are subject to a binding price floor? a. They are increasingly willing to substitute away from the good, and the demand curve becomes less elastic. b. There are no changes, and elasticity remains unchanged. c. They are less willing to substitute away from the good, and the demand curve becomes less elastic. d. They are increasingly willing to substitute away from the good, and the demand curve becomes more elastic. e. They are less willing to substitute away from the good, and the demand curve becomes more elastic.

Q: Victor is a senator from Kansas who wants to help farmers. He has worked to encourage the passage of a law that would impose a binding price floor on wheat. What would he expect his critics to say? a. The binding price floor will discourage farmers from planting wheat and they will plant other crops instead. b. The binding price floor will encourage consumers to eat too much wheat. c. The binding price floor will discourage farmers from using the most productive farming methods available. d. The binding price floor will cause a shortage of wheat. e. The binding price floor will cause a surplus of wheat that farmers will be unable to sell.

Q: The consequence of a price floor set below the equilibrium price is a. a surplus, where the quantity demanded exceeds the quantity supplied. b. a shortage, where the quantity demanded exceeds the quantity supplied. c. a surplus, where the quantity supplied exceeds the quantity demanded. d. a shortage, where the quantity supplied exceeds the quantity demanded. e. nothing; the price floor will have no impact on the quantity demanded or the quantity supplied.

Q: Refer to the accompanying figure. If the government has a budget of $300,000 to purchase surplus shampoo, what is the maximum possible floor price that could be imposed?a. $1 b. $2 c. $3d. $4e. $5

Q: Use the following figure to answer the following questions. If the government imposes a price floor on wheat at $5 and agrees to purchase any surpluses, how much will the government be forced to spend?a. $15,000,000b. $3,000,000c. $10,000,000d. $25,000,000e. nothing because there would be no surplus

Q: Refer to the accompanying figure for the following questions. The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P3, what would be the resulting surplus or shortage?a. There would be a shortage of 75,000 units.b. There would be a surplus of 75,000 units.c. There would be neither a shortage nor a surplus.d. There would be a shortage of 150,000 units.e. There would be a surplus of 150,000 units.

Q: Suppose Dawn lives in a community with no price controls. What would she expect to happen if her town borders a community where there is a nonbinding price floor on most products? a. The products sold will become more plentiful. b. The products sold will become less plentiful. c. There will be upward pressure on the prices. d. There will be downward pressure on the prices. e. The price and the quantity sold in the community without a nonbinding price floor will be the same as the price and quantity in the community with a nonbinding price floor.

Q: Use the following table to answer the following questions.What is the surplus when the price floor is $1.75 in the market for public transportation?a. 100,000 b. 86,000 c. 75,000d. 40,000e. 0 (zero)

Q: Use the following table to answer the following questions.What is the quantity demanded when the price floor is $0.75 in the market for public transportation?a. 100,000 b. 86,000 c. 75,000d. 116,000e. 0 (zero)

Q: Use the following table to answer the following questions.What is the equilibrium quantity in the market for public transportation?a. 100,000 b. 86,000c. 75,000d. 116,000 e. 0 (zero)

Q: What will happen in a market where a nonbinding price floor is removed? a. The products sold will become more plentiful. b. The price or quantity of the product sold on the legal market will not change. c. There will be upward pressure on the prices. d. There will be downward pressure on the prices. e. There will be increased pressure to buy and sell the good on the black market.

Q: A nonbinding price floor has which of the following consequences? a. There will be downward pressure on prices until quantity demanded equals quantity supplied. b. There will be upward pressure on prices until quantity demanded equals quantity supplied. c. There are no consequences to a nonbinding price floor. d. The quantity demanded will always exceed the quantity supplied. e. The quantity demanded will always be smaller than the quantity supplied.

Q: The government has imposed a price control for many agricultural products in an effort to support farmers. In the case of price floor P2 in the accompanying figure, how much of a disequilibrium in quantity exists?a. a shortage of 30,000 units b. a surplus of 120,000 units c. 30,000 unitsd. a surplus of 30,000 unitse. an excess of $3

Q: Use the following table to answer the following questions. Market for CornYearPriceQuantity DemandedQuantity Supplied1$2.00200,000100,0002$2.50186,000125,0003$3.00184,000141,0004$3.50169,000169,0005$4.00161,000181,0006$4.50155,000200,0007$5.00120,000223,000If a price floor is imposed at $15 per unit when the equilibrium market price is $12, there will bea. no surplus or shortage. b. a surplus. c. a shortage.d. a downward pressure on prices.e. an upward pressure on prices.

Q: Suppose Anthony lives in a community with no price controls. What would he expect to happen if his town borders a community where there is a binding price floor on most products? a. Prices in the legal market in the community with a binding price floor would fall. b. There would be smaller surpluses in the community with a binding price floor. c. More consumers would purchase the product in the community without a price floor. d. The black market in the community with a binding price floor would be larger. e. Sales of the product in the community with a binding price floor would increase.

Q: As a seller of a product subject to a binding price floor, Makayla would be better off in which of the following situations? a. Makayla would be better off under a binding price floor because she would be able to sell all that she produces at a higher price. b. Makayla would be better off under a binding price floor because she would be able to sell goods that are smaller and cost less to produce. c. Makayla would be better off under a binding price floor because she would be able to sell goods of lower quality, which cost less to produce. d. Makayla would be better off under a binding price floor because she could sell any of the resulting surplus to the government. e. There is no scenario where a seller is better off when selling a good that is subject to a binding price floor.

Q: If Lucy were a politician, why would she find it difficult to remove a binding price floor? a. because it greatly benefits firms, and they would spend a lot of money to lobby against the laws repeal b. because it greatly benefits all consumers, who are also voters c. because it greatly benefits society as a whole, with all consumers able to buy as much as firms produce d. because it is not difficult to remove; the legal market price or quantity are not affected e. because it greatly benefits the government, which receives additional tax revenue as a result

Q: Do all sellers benefit from a binding price floor? a. No. A binding price floor benefits only some sellers because not all are able to sell as much as they would like in the legal market. b. Yes. A binding price floor benefits all sellers because it allows all sellers to sell as much as they produce on the legal market. c. No. A binding price floor doesnt benefit any sellers because sellers will be unwilling to sell any of their products. d. No. A binding price floor benefits only some sellers because the price is initially higher but then eventually decreases to the equilibrium price. e. No. A binding price floor doesnt benefit any buyers because buyers are unwilling to purchase any of the products at a price lower than the equilibrium.

Q: Which of the following is an accurate statement about the consequence of a binding price floor? a. Binding price floors do not allow sellers to receive a higher price if they sell the product in the legal market. b. Binding price floors encourage the formation of a black market. c. Binding price floors discourage the formation of a black market. d. Binding price floors create a shortage of the product. e. Binding price floors cause consumers to want to purchase more of the product in the legal market.

Q: Why are binding price floor laws passed? a. They make goods less expensive. b. They make goods available to the largest number of customers. c. They encourage producers to produce goods in the most cost-efficient fashion. d. They help producers receive higher prices for products sold in the legal market. e. They discourage the formation of illegal black markets.

Q: Why is it often difficult to remove a binding price floor after it exists? a. in general, because consumers benefit from the lower prices and would lobby their elected officials to keep the price control b. in general, because consumers benefit from higher quality products and would lobby their elected officials to keep the price control c. in general, because consumers benefit from larger products and would lobby their elected officials to keep the price control d. in general, because sellers benefit from higher prices and would lobby their elected officials to keep the price control e. in general, because it has little effect on the market price and people forget about it

Q: What will happen in a market where a binding price floor is removed? a. The products sold will become scarcer. b. There will be upward pressure on the prices. c. There will be downward pressure on the prices. d. The price or quantity of the product sold in the legal market will not change. e. There will be increased pressure to buy and sell the good on the black market.

Q: Of the following cause-and-effect relationships, which is the most likely that induced a price floor on the market for soybeans? a. Government-funded economists have determined that a price floor is good for society, and Congress enacted legislation for it. b. Major consumers and producers in the soybean market have formed an association that has determined that a price floor would increase profits and lobbied Congress for legislation to enact it. c. Producers of soybeans know a price floor will protect their profits and they lobbied Congress for legislation to enact it. d. Consumers of soybeans know a price floor will protect their profits and they lobbied Congress for legislation to enact it. e. Agricultural workers know a price floor will protect their jobs and they lobbied Congress for legislation to enact it.

Q: The minimum wage law is an example of a a. price floor. b. price ceiling. c. law that requires quantity demanded to equal quantity supplied. d. law that allows individual employers and employees to make free decisions. e. law that sets the minimum number of hours that an employee must work for wages during the week.

Q: An economic advisory committee is split on a decision on how to react to an export ban by Mexico of avocados. Isaac wants to put a price ceiling on avocados to ensure an adequate demand; Flora wants to put a price floor on avocados to ensure an adequate supply. April claims that doing nothing is the best response. Who understands economics the best? a. Isaac b. Flora c. April d. none of them, since none of these policies will organize this disrupted market e. Any of the responses will work under the proper circumstances.

Q: ________ is a real-life example of a price floor.a. A minimum wage law b. Rent control c. A price gouging lawd. A black market pricee. A price

Q: The town of Fairness has a law stating that wages should be high enough to ensure that all people can afford to buy enough food for their families. The law that sets wages would be an example of aa. minimum wage law. b. fair wage law. c. price ceiling.d. black market price.e. ration price.

Q: If the local government tells gas stations that they are not allowed to change the price of gas for three weeks during hurricane season, what will be the consequence? a. Gas stations will be unable to sell all the gas they want at the temporary price ceiling price. b. Consumers will be unable to buy all the gas they want at the temporary price ceiling price. c. The supply curve for gas will increase and shift to the right. d. The demand curve for gas will increase and shift to the right. e. Equilibrium in the gas market will be achieved.

Q: Jamie, an economics student, was just named Miss Florida, based in part on her answer to the question of why price gouging laws should be relaxed in that state. Jamie won because she gave which of the following answers? a. They prevent customers who are willing to pay higher prices for needed products from doing so during a time of disaster. b. They cause consumers to consume more of certain products during a time of disaster. c. They cause producers to overproduce products during a time of disaster. d. They act as a binding price floor in a time of disaster. e. They cause a surplus in the product during a time of disaster.

Q: Imagine you find yourself in a heat wave and your air conditioner has broken. Unable to find a new one at the store because of a price gouging law, you purchase an air conditioner on the black market. What role did the price gouging law have? a. It increased the willingness of firms to supply air conditioners when they were out of stock at the stores. b. It increased consumer demand for air conditioners. c. It decreased the incentive of individuals to supply the good on the black market. d. It had no effect on consumers or firms in this situation. e. It increased the incentive of individuals to supply the good on the black market.

Q: Refer to the accompanying table to answer the following questions.Monthly RentQuantity of Apartments DemandedQuantity of ApartmentsSupplied$1,500136,500 78,100$1,550112,750 83,760$1,600107,000 87,900$1,650100,100 94,250$1,700 98,450 98,450$1,750 95,000 118,500$1,800 92,800 125,600If rent control is established at $1,750, what would be the amount of disequilibrium in the apartment market?a. There would be a shortage of 23,500 apartments.b. There would be a surplus of 23,500 apartments that is reduced, over time, as individuals rent apartments in the illegal black market.c. There would be neither a shortage nor a surplus.d. There would be a surplus of 23,500 apartments that is eliminated through individuals renting apartments in the illegal black market.e. There would be a surplus of 23,500 apartments that increases as houses and condominiums are converted into apartments.

Q: Which of the following would be true in a city with rent-controlled apartments? a. Homelessness is reduced. b. Landlords face a greater incentive to provide housing. c. Apartments are of higher quality. d. Rents for those fortunate enough to find an apartment are lower than rents in nearby cities that lack rent controls. e. It is more difficult for the landlord to find a tenant willing to rent the apartment.

Q: Apartment rent control in New York City is an example of a. government intervention to ensure a market equilibrium is reached. b. a subsidy for landlords. c. a nonbinding price floor. d. a binding price ceiling. e. a black market.