QUESTION 1
1. What would you expect the consequences to size and quality would be for a
product sold under a binding price ceiling?
Both the quality and the size of the product will decrease.
The quality of the product will increase but the size of the product will
decrease.
Both the quality and the size of the product will increase.
The quality of the product will decrease but the size of the product will
increase.
Neither the quality nor the size of the product will be affected.
2 points
QUESTION 2
1. Refer to the accompanying figure to answer the questions that follow.
If there is a $180 price ceiling imposed on a textbook, what will be the
disequilibrium amount?
There will be a shortage of 1,500,000 units.
There will be a shortage of 800,000 units.
There will not be a shortage.
There will be a shortage of 3,000,000 units.
There will be a shortage of 450,000 units.
2 points
QUESTION 3
1. Who potentially benefits from a price floor?
workers
employers
no one
renters
consumers
2 points
QUESTION 4
1. Use the following figure to answer the questions that follow.
The accompanying figure describes the market for gasoline in a local community.
If the government were to place a price floor at P1, predict the resulting surplus
or shortage.
There would be a shortage of 75,000 units.
There would be a surplus of 75,000 units.
There would be neither a shortage nor a surplus.
There would be a shortage of 150,000 units.
There would be a surplus of 150,000 units.
2 points
QUESTION 5
1. What will happen in a market where a nonbinding price floor is removed?
The products sold will become more plentiful.
The price or quantity of the product sold on the legal market will not
change.
There will be upward pressure on the prices.
There will be downward pressure on the prices.
There will be increased pressure to buy and sell the good on the black market.
2 points
QUESTION 6
1. Which of the following is an accurate statement about the consequence of a
binding price ceiling?
Binding price ceilings do not allow consumers to pay a lower price for the
product in the legal market.
Binding price ceilings encourage the formation of a black market.
Binding price ceilings discourage the formation of a black market.
Binding price ceilings create a surplus of the product.
Binding price ceilings cause consumers to purchase more of the product in the
legal market.
2 points
QUESTION 7
1. Use the following table to answer the questions that follow.
If a minimum wage is set at $5.50, predict the amount of disequilibrium in the
labor market.
There would be a labor shortage of 25,515,000.
There would be a labor surplus of 25,515,000.
There would be neither a shortage nor a surplus.
A labor surplus of 25,515,000 would be eliminated because individuals would
decide to work in the illegal black market.
A labor surplus of 25,515,000 would increase as individuals find work in the
illegal black market.
2 points
QUESTION 8
1. Suppose you live in a community with no price controls. What do you expect to
happen if your town borders a community where there is a nonbinding price floor
on most products?
The products sold will become more plentiful.
The products sold will become less plentiful.
There will be upward pressure on the prices.
There will be downward pressure on the prices.
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.
2 points
QUESTION 9
1. Which of the following is an accurate statement about the consequence of a
binding price floor?
Binding price floors do not allow sellers to receive a higher price if they sell
the product in the legal market.
Binding price floors encourage the formation of a black market.
Binding price floors discourage the formation of a black market.
Binding price floors create a shortage of the product.
Binding price floors cause consumers to want to purchase more of the product
in the legal market.
2 points
QUESTION 10
1. How do consumers who are subject to a binding price ceiling respond as the time
frame shifts from the short run to the long run?
Consumers are increasingly willing to substitute away from the good, and their
elasticity of demand becomes less elastic.
There are no changes, and elasticity remains unchanged.
Consumers are increasingly willing to substitute away from the good, and
their elasticity of demand becomes more elastic.
Consumers are less willing to substitute away from the good, and their
elasticity of demand becomes less elastic.
Consumers are less willing to substitute away from the good, and their
elasticity of demand becomes more elastic.
2 points
QUESTION 11
1. Setting a price ceiling below the equilibrium price can result in:
a surplus, where the quantity demanded exceeds the quantity supplied.
a shortage, where the quantity demanded exceeds the quantity
supplied.
a surplus, where the quantity supplied exceeds the quantity demanded.
a shortage, where the quantity supplied exceeds the quantity demanded.
no impact on the quantity demanded or on the quantity supplied.
2 points
QUESTION 12
1. Why are binding price ceiling laws passed?
They make goods more expensive (and profitable) for firms.
They encourage sellers to produce more of a good.
They encourage producers to sell higher-quality products.
They permit customers to obtain higher-quality products.
They make a good less expensive for those customers who are able to
purchase the good in the legal market.
2 points
QUESTION 13
1. You would expect there to be many customers for a black market good when the
opportunity cost of finding the good under a:
binding price floor is high.
binding price floor is low.
nonbinding price ceiling is high.
binding price ceiling is low.
binding price ceiling is high.
2 points
QUESTION 14
1. Why does a shortage that occurs under a binding price ceiling decrease over
time?
Demand becomes more elastic.
Demand becomes more inelastic.
Demand and supply both become more elastic.
Demand and supply both become more inelastic.
Demand becomes more elastic, but supply becomes more inelastic.
2 points
QUESTION 15
1. Use the following table to answer the questions that follow.
If a minimum wage is established at $7.50, determine the amount of
disequilibrium in the labor market.
There would be a shortage of labor of 20,170,000.
There would be a surplus of labor of 20,170,000.
There would be neither a shortage nor a surplus.
A labor shortage of 20,170,000 would be eliminated because individuals would
decide to work in the illegal black market.
A labor shortage of 20,170,000 would increase as individuals find work in the
illegal black market.
2 points
