Ch06 Policy Multiple Choice Questions PDF

Ch06 Policy Multiple Choice Questions 1. Rent-control laws dictate a. the exact rent that landlords must charge tenants. b. only a maximum rent that landlords may charge tenants. c. only a minimum rent that landlords may charge tenants. d. both a minimum rent and a maximum rent tha...

Ch06 Policy Multiple Choice Questions 1. Rent-control laws dictate a. the exact rent that landlords must charge tenants. b. only a maximum rent that landlords may charge tenants. c. only a minimum rent that landlords may charge tenants. d. both a minimum rent and a maximum rent that landlords may charge tenants. ANSWER: b 2. Minimum-wage laws dictate a. the exact wage that firms must pay workers. b. only a maximum wage that firms may pay workers. c. only a minimum wage that firms may pay workers. d. both a minimum wage and a maximum wage that firms may pay workers. ANSWER: c 3. A price ceiling is a. often imposed on markets in which “cutthroat competition” would prevail without a price ceiling. b. a legal maximum on the price at which a good can be sold. c. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. d. imposed to make sure everyone can earn a fair wage. ANSWER: b 4. If a price ceiling is binding, then a. there will be no effect on the market price or quantity sold. b. there will be a surplus in the market. c. the market will be more efficient than it would be without the price ceiling. d. there will be a shortage in the market. ANSWER: d 1 5. If the government imposes a binding price ceiling on a market, then the price paid by buyers will a. decrease, and the quantity sold in the market will decrease. b. increase, and the quantity sold in the market will increase. c. increase, and the quantity sold in the market will decrease. d. decrease, and the quantity sold in the market will increase. ANSWER: a 6. To say that a price ceiling is binding is to say that the price ceiling a. results in a surplus. b. is set below the equilibrium price. c. causes quantity supplied to exceed quantity demanded. d. is set above the equilibrium price. ANSWER: b 7. The imposition of a binding price ceiling on a market causes a. quantity demanded to be greater than quantity supplied. b. quantity demanded to be less than quantity supplied. c. quantity demanded to be equal to quantity supplied. d. the price of the good to be greater than its equilibrium price. ANSWER: a 8. Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the a. demand curve for physicals shifts to the right. b. supply curve for physicals shifts to the left. c. quantity demanded of physicals increases, and the quantity supplied of physicals decreases. d. number of physicals performed stays the same. ANSWER: c 2 Figure 6-1 Graph (a) Graph (b) 9. Refer to Figure 6-1. A binding price ceiling is shown in a. graph (a) only. b. graph (b) only. c. both graph (a) and graph (b). d. neither graph (a) nor graph (b). ANSWER: b 10. A price floor is a. a legal maximum on the price at which a good can be sold. b. often imposed when buyers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. c. a source of efficiency in a market. d. a legal minimum on the price at which a good can be sold. ANSWER: d 3 11. If a price floor is not binding, then a. the equilibrium price is above the price floor. b. the equilibrium price is below the price floor. c. there will be a surplus in the market. d. there will be a shortage in the market. ANSWER: a 12. If a nonbinding price floor is imposed on a market, then the a. quantity sold in the market will decrease. b. quantity sold in the market will stay the same. c. price in the market will increase. d. price in the market will decrease. ANSWER: b 13. If a binding price floor is imposed on the pizza market, then a. the demand for pizza will decrease. b. the supply of pizza will increase. c. a surplus of pizza will develop. d. a shortage of pizza will develop. ANSWER: c 4 Figure 6-3 14. Refer to Figure 6-3. A government-imposed price of $6 in this market is an example of a a. binding price ceiling that creates a shortage. b. nonbinding price ceiling that creates a shortage c. binding price floor that creates a surplus. d. nonbinding price floor that creates a surplus. ANSWER: c Figure 6-5 15. Refer to Figure 6-5. Which of the following statements is not correct? a. When the price is $10, quantity supplied equals quantity demanded. b. When the price is $6, there is a surplus of 8 units. c. When the price is $12, there is a surplus of 4 units. d. When the price is $16, quantity supplied exceeds quantity demanded by 12 units. ANSWER: b 5 16. Refer to Figure 6-5. A government-imposed price of $12 in this market is an example of a a. binding price ceiling that creates a shortage. b. nonbinding price ceiling that creates a shortage. c. binding price floor that creates a surplus. d. nonbinding price floor that creates a surplus. ANSWER: c Figure 6-8 17. Refer to Figure 6-8. When the price ceiling is enforced in this market and the supply curve for gasoline shifts from S1 to S2, a. the market price will increase to P3. b. a surplus will occur at the new market price of P2. c. the market price will stay at P1. d. a shortage will occur at the new market price of P2. ANSWER: d 18. Refer to Figure 6-8. When the price ceiling is enforced in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is a. less than Q3. b. Q3. c. between Q1 and Q3 d. at least Q1. ANSWER: a 6