Deck 6: Supply, Demand, and Government Policies

Question 1

A price ceiling set below the equilibrium price is binding.

Answer 1

True

Question 2

A price ceiling is a legal minimum on the price at which a good or service can be sold.

Answer 2

False

Question 3

Economic policies often have effects that their architects did not intend or anticipate.

Answer 3

True

Question 4

When a free market for a good reaches equilibrium, anyone who is willing and able to pay the market price can buy the good.

Question 5

A price ceiling set below the equilibrium price causes quantity demanded to exceed quantity supplied.

Question 6

If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

Question 7

When free markets ration goods with prices, it is both efficient and impersonal.

Question 8

When a free market for a good reaches equilibrium, anyone who is willing and able to sell at the market price can sell the good.

Question 9

If a price ceiling is not binding, then it will have no effect on the market.

Question 10

Rent-control laws dictate a minimum rent that landlords may charge tenants.

Question 11

At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers want to sell.

Question 12

Minimum-wage laws dictate the lowest wage that firms may pay workers.

Question 13

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Question 14

Prices are inefficient rationing devices.

Question 15

A price ceiling set above the equilibrium price is not binding.

Question 16

Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

Question 17

Price controls can generate inequities.

Question 18

Price is the rationing mechanism in a free, competitive market.

Question 19

To be binding, a price ceiling must be set above the equilibrium price.

Question 20

A price ceiling set below the equilibrium price is nonbinding.

Question 21

Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price.

Question 22

Price ceilings are typically imposed to benefit sellers.

Question 23

A price ceiling set above the equilibrium price causes a surplus in the market.

Question 24

If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50, then the price ceiling is a binding constraint on the market.

Question 25

Long lines and discrimination are examples of rationing methods that may naturally develop in response to a binding price ceiling.

Question 26

The rationing mechanisms that develop under binding price ceilings are usually inefficient.

Question 27

A price ceiling caused the gasoline shortage of 1973 in the United States.

Question 28

One common example of a price ceiling is rent control.

Question 29

When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

Question 30

Price ceilings are typically imposed to benefit buyers.

Question 31

A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied.

Question 32

Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

Question 33

A binding price ceiling causes a shortage in the market.

Question 34

If a price ceiling of $1.50 per gallon is imposed on gasoline, and the market equilibrium price is $2, then the price ceiling is a binding constraint on the market.

Question 35

All buyers benefit from a binding price ceiling.

Question 36

A binding price ceiling may not help all consumers, but it does not hurt any consumers.

Question 37

When the government imposes a binding price ceiling on a competitive market, a surplus of the good arises, and sellers must ration the scarce goods among the large number of potential buyers.

Question 38

A binding price ceiling causes quantity demanded to be less than quantity supplied.

Question 39

A price ceiling set below the equilibrium price causes a shortage in the market.

Question 40

The goal of rent control is to help the poor by making housing more affordable.

Question 41

Renters of rent-controlled apartments will likely benefit from both lower rents and higher quality of apartments.

Question 42

A binding price floor causes a shortage in the market.

Question 43

Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

Question 44

A price floor is a legal minimum on the price at which a good or service can be sold.

Question 45

A price floor set above the equilibrium price is binding.

Question 46

The effects of rent control in the long run include lower rents and lower-quality housing.

Question 47

A price floor set above the equilibrium price is not binding.

Question 48

When a binding price floor is imposed on a market for a good, some people who want to sell the good cannot do so.

Question 49

A binding price floor causes quantity supplied to be less than quantity demanded.

Question 50

To be binding, a price floor must be set above the equilibrium price.

Question 51

A price floor set above the equilibrium price causes quantity supplied to exceed quantity demanded.

Question 52

Rent control may lead to lower rents for those who find housing, but the quality of the housing may also be lower.

Question 53

A price floor set below the equilibrium price causes a surplus in the market.

Question 54

In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

Question 55

A price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded.

Question 56

The primary effect of rent control in the short run is to reduce rents.

Question 57

The housing shortages caused by rent control are larger in the long run than in the short run because both the supply of housing and the demand for housing are more elastic in the long run.

Question 58

A price floor set above the equilibrium price causes a surplus in the market.

Question 59

If a price floor is not binding, then it will have no effect on the market.

Question 60

Because the supply and demand of housing are inelastic in the short run, the initial shortage caused by rent control is large.

Question 61

Price floors are typically imposed to benefit sellers.

Question 62

Figure 6-35
Refer to Figure 6-35. A price ceiling set at $70 would create a shortage of 40 units.

Question 63

The rationing mechanisms that develop under binding price floors are usually efficient.

Question 64

The goal of the minimum wage is to ensure workers a minimally adequate standard of living.

Question 65

The United States is the only country in the world with minimum-wage laws.

Question 66

States in the U.S. may mandate minimum wages above the federal level.

Question 67

Price floors are typically imposed to benefit buyers.

Question 68

A binding price floor may not help all sellers, but it does not hurt any sellers.

Question 69

Figure 6-35
Refer to Figure 6-35. A price ceiling set at $30 would create a shortage of 20 units.

Question 70

One common example of a price floor is the minimum wage.

Question 71

If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

Question 72

Figure 6-35
Refer to Figure 6-35. A price floor set at $60 would create a surplus of 20 units.

Question 73

If the equilibrium price of an airline ticket is $500 and the government imposes a price floor of $400 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

Question 74

In an unregulated labor market, the wage adjusts to balance labor supply and labor demand.

Question 75

The economy contains many labor markets for different types of workers.

Question 76

Figure 6-35
Refer to Figure 6-35. A price floor set at $40 would create a surplus of 20 units.

Question 77

Workers determine the supply of labor, and firms determine the demand for labor.

Question 78

Binding price floors benefit sellers because they allow sellers to sell all the goods they want at a higher price.

Question 79

Not all sellers benefit from a binding price floor.

Question 80

A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.