Question 1

A quota is the minimum amount of some good that can be bought and sold in the market.

Accepted Answer

A quota is a limit on the amount of some good that can be bought and sold in a market, not a minimum requirement.

Question 2

Licenses allowing taxis to operate issued by New York City in the 1930s are called medallions.

Accepted Answer

This statement is true. Medallions were first introduced in the 1930s as a way to regulate and limit the number of taxis operating in the city. They are essentially licenses that allow taxis to legally pick up passengers on the street.

Question 3

Suppose the state of Mississippi sets a price floor in the market for cotton.If the floor is set below the market-clearing price of cotton,the floor will cause a surplus of cotton.

Accepted Answer

A price floor is a minimum price imposed by the government on a product or service. If the price floor is set below the market-clearing price, it will not have any effect on the market. However, if the price floor is set above the market-clearing price, it will lead to a surplus of the product. Therefore, if the state of Mississippi sets a price floor for cotton below the market-clearing price, it will not cause a surplus of cotton.

Question 4

A limit on the amount of a foreign currency people are allowed to buy is an example of a quota.

Accepted Answer

This statement is true. A quota is a government-imposed limit on the quantity or value of a certain good or service that can be imported, exported, or traded. In the case of foreign currency, a quota would limit the amount that individuals or businesses can purchase in order to control the amount of currency flowing out of the country.

Question 5

If the demand curve for clams is downward sloping and the supply curve is upward sloping,a quota that is set above the equilibrium quantity will have no immediate effect on the market.

Accepted Answer

A quota set above the equilibrium quantity does not restrict the market because it allows for the production and sale of the good at the equilibrium level and beyond, hence it does not immediately affect price or quantity sold in the market.

Question 6

To dispose of the unwanted surplus resulting from agricultural price floors,the European Union pays exporters to sell products at a loss overseas.

Accepted Answer

This is known as export subsidies and is a common practice by the EU to dispose of surplus agricultural products resulting from price floors. The subsidies help make the products more competitive in overseas markets and help farmers maintain their income despite the surplus.

Question 7

If the supply curve for clams is upward sloping,a quota that is set below the equilibrium quantity will result in a supply price that is lower than the equilibrium price.

Accepted Answer

If the supply curve for clams is upward sloping, a quota that is set below the equilibrium quantity will result in a supply price that is lower than the equilibrium price because the quantity supplied will be less than the quantity demanded at the equilibrium price, leading to a higher price.

Question 8

If the demand curve for clams is downward sloping,a quota that is set below the equilibrium quantity will decrease the price that consumers pay for clams.

Accepted Answer

A quota set below the equilibrium quantity will restrict supply, leading to a higher price for consumers due to the reduced availability of clams.

Question 9

Quotas,price ceilings,and price floors are all types of quantity controls that the government may impose.

Accepted Answer

Quotas are a type of quantity control, but price ceilings and price floors are types of price controls, not quantity controls.

Question 10

The National Football League does not license quarterbacks.This means that the free market determines the standards that an aspiring quarterback must achieve.

Accepted Answer

The NFL does not license quarterbacks, so the standards for becoming a quarterback are determined by the free market. This means that an aspiring quarterback must meet the demands and expectations of NFL teams and scouts in order to be signed to a team.

Question 11

If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price,this would lead to an inefficient number of pumpkins sold in Minnesota.

Accepted Answer

If the state sets a price floor that is double the current market-clearing price, it is likely that the new price would be higher than what consumers are willing to pay, resulting in a surplus of pumpkins. This means that there will be more pumpkins supplied than demanded, leading to an inefficient number of pumpkins being sold.

Question 12

Critics of the pharmaceutical industry often argue that price ceilings should be imposed on drug manufacturers.If this happened,the quality of drugs would improve.

Accepted Answer

Imposing price ceilings on drug manufacturers may lead to a decrease in their profits, which could impact their ability to invest in research and development, ultimately resulting in the quality of drugs being compromised.

Question 13

The demand price of a given quantity of doughnuts is the price at which consumers will demand that quantity.The supply price for a given quantity is the price at which doughnut producers will supply that quantity.

Accepted Answer

This is the correct definition of demand price and supply price.

Question 14

Economic models predict that a binding minimum wage will generally cause increased unemployment for low-skilled workers.

Accepted Answer

Economic theory suggests that a binding minimum wage, meaning a wage floor set above the market equilibrium, will increase the wage cost to firms and lead them to reduce their demand for low-skilled workers, ultimately causing higher unemployment among this group. However, the extent to which this effect occurs in reality is a subject of ongoing debate among economists.

Question 15

When transatlantic airfares were set artificially high by an international treaty,airlines offered customers an inefficiently high quality of service.

Accepted Answer

When airfares were artificially high, airlines had less competition, so they did not need to compete on price. Instead, they competed on the quality of service, offering amenities such as gourmet meals, luxurious seats, and personalized service. This made air travel more expensive for customers while failing to increase efficiency.

Question 16

The American Medical Association licenses doctors.This licensing has probably led to lower earnings for doctors over time.

Accepted Answer

The licensing by the American Medical Association has likely increased the credibility and trust in the profession, which may have led to higher earnings for doctors over time. However, there may be other factors that have contributed to changes in doctors' earnings.

Question 17

In New York City there are more than 100,000 licensed taxicabs.

Accepted Answer

According to the New York City Taxi and Limousine Commission, as of 2021 there are only around 13,587 licensed taxicabs in New York City.

Question 18

If the demand curve for clams is downward sloping,a quota that is set below the equilibrium quantity will result in a demand price that is lower than the equilibrium price.

Accepted Answer

A quota that is set below the equilibrium quantity will result in a shortage of clams, which will increase the demand price above the equilibrium price.

Question 19

Although they cost more than $200,000 when they were issued in the 1930s,the New York taxicab medallions are relatively inexpensive today,selling for around $3,000.

Accepted Answer

The statement is incorrect. As per the latest information, New York City taxicab medallions are selling for around $100,000 to $150,000, which is still a significant decrease from their peak value of over $1 million in 2014.

Question 20

Quantity controls usually take the form of price ceilings or price floors established by the government.

Accepted Answer

Quantity controls, such as quotas, directly limit the amount of a good that can be bought or sold, rather than setting price ceilings or floors which indirectly affect quantity by capping prices or setting minimum prices.

Quiz 5: Price Controls and Quotas: Meddling With Markets