Question 1

Table 6-5 
-Refer to Table 6-5. Which of the following price floors would be binding in this market?
A)$3
B)$6
C)$9
D)None of the above price floors would be binding.

Accepted Answer

A price floor is binding if it is set above the equilibrium price. In this market, the equilibrium price is $6, as determined by the intersection of the demand and supply curves. Therefore, a price floor of $3 would not be binding because it is below the equilibrium price, and a price floor of $6 would not be binding because it is equal to the equilibrium price. However, a price floor of $9 would be binding because it is set above the equilibrium price and would result in a surplus of 40 units (quantity supplied exceeds quantity demanded).

Question 2

Table 6-3
The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $2 above the equilibrium price in this market. 
-Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting shortage is
A)0 units.
B)2 units.
C)5 units.
D)7 units.

Accepted Answer

The answer of Table 6-3
The following table contains the demand...

Question 3

When OPEC raised the price of crude oil in the 1970s, it caused the
A)supply of gasoline to decrease.
B)quantity of gasoline demanded to decrease.
C)equilibrium price of gasoline to increase.
D)All of the above are correct.

Accepted Answer

The answer of When OPEC raised the price of crude...

Question 4

When OPEC raised the price of crude oil in the 1970s, it caused the
A)demand for gasoline to increase.
B)demand for gasoline to decrease.
C)supply of gasoline to increase.
D)supply of gasoline to decrease.

Accepted Answer

The answer of When OPEC raised the price of crude...

Question 5

When OPEC raised the price of crude oil in the 1970s, it caused the United States'
A)nonbinding price floor on gasoline to become binding.
B)binding price floor on gasoline to become nonbinding.
C)nonbinding price ceiling on gasoline to become binding.
D)binding price ceiling on gasoline to become nonbinding.

Accepted Answer

When OPEC raised the price of crude oil in the 1970s, it caused the cost of producing gasoline to increase, leading to a decrease in supply and an increase in demand. This shift caused the equilibrium price of gasoline to rise, leading to a nonbinding price ceiling becoming binding, as the government attempted to keep prices low through regulation.

Question 6

Table 6-5 
-Refer to Table 6-5. Suppose the government imposes a price floor of $3 on this market. What will be the size of the surplus (or shortage) in this market?
A)0 units
B)30 units
C)45 units
D)75 units

Accepted Answer

The answer of Table 6-5 
-Refer to Table 6-5. Suppose...

Question 7

In the United States, before OPEC increased the price of crude oil in 1973, there was
A)no price ceiling on gasoline.
B)a nonbinding price ceiling on gasoline.
C)a binding price ceiling on gasoline.
D)a nonbinding price floor on gasoline.

Accepted Answer

The answer of In the United States, before OPEC increased...

Question 8

Rent control
A)serves as an example of how a social problem can be alleviated or even solved by government policies.
B)serves as an example of a price ceiling.
C)is regarded by most economists as an efficient way of helping the poor.
D)is the most efficient way to allocate scarce housing resources.

Accepted Answer

Rent control is a classic example of a price ceiling, where the government sets a cap on the maximum rent that can be charged for a particular property. However, it is often criticized by economists as it can lead to reduced quality and quantity of housing, decreased investment in new housing, and can ultimately exacerbate the housing shortage problem it was meant to solve.

Question 9

Economists blame the long lines at gasoline stations in the U.S. in the 1970s on
A)U.S. government regulations pertaining to the price of gasoline.
B)the Organization of Petroleum Exporting Countries (OPEC).
C)major oil companies operating in the U.S.
D)consumers who bought gasoline frequently, even when their cars' gasoline tanks were nearly full.

Accepted Answer

The answer of Economists blame the long lines at gasoline...

Question 10

Economists generally believe that rent control is
A)an efficient and fair way to help the poor.
B)inefficient but the best available means of solving a serious social problem.
C)a highly inefficient way to help the poor raise their standard of living.
D)an efficient way to allocate housing, but not a good way to help the poor.

Accepted Answer

Economists generally believe that rent control is a highly inefficient way to help the poor raise their standard of living. Rent control creates shortages, reduces quality, and fails to target those in need. It also reduces the incentive for landlords to maintain and upgrade their properties, resulting in a decrease in the overall housing stock. This can lead to a situation where only those who are lucky enough to have a rent-controlled apartment can afford to live in desirable locations.

Question 11

One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?
A)He fears that low rents will cause low-income people to move into the city, reducing the quality of life for other people.
B)He fears that rent control will benefit landlords at the expense of tenants, increasing inequality in the city.
C)He fears that rent controls will cause a construction boom, which will make the city crowded and more polluted.
D)He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.

Accepted Answer

The economist is likely arguing that rent control eliminates the incentive for landlords to maintain their buildings, as they cannot raise rents to cover maintenance costs. This can lead to a deterioration of the city's housing stock, making it less desirable to live in and ultimately harming the city's overall economic health.

Question 12

The goal of rent control is to
A)facilitate controlled economic experiments in urban areas.
B)help landlords by assuring them a low vacancy rate for their apartments.
C)help the poor by assuring them an adequate supply of apartments.
D)help the poor by making housing more affordable.

Accepted Answer

The goal of rent control is to make housing more affordable for low-income individuals by capping the amount that landlords can charge for rent. This helps ensure that rental prices do not become so high that they are unaffordable for those in need, which in turn can help reduce homelessness and improve overall access to affordable housing. While rent control may have other unintended consequences and drawbacks, such as reducing the incentive for landlords to maintain or improve their properties, its primary goal is to improve housing affordability for those who need it most.

Question 13

Other than OPEC, the shortage of gasoline in the U.S. in the 1970s could also be blamed on
A)a sharp increase in the demand for gasoline that was brought on by the Vietnam War.
B)the government's policy of maintaining a price ceiling on gasoline.
C)an indifference among U.S. consumers toward conservation.
D)the lack of substitutes for crude oil.

Accepted Answer

The government policy of maintaining a price ceiling on gasoline created a situation where the demand for gasoline exceeded the supply leading to shortages. This policy prevented market forces from balancing the supply and demand of gasoline, leading to the shortage. Other factors such as the lack of substitutes for crude oil and the indifference among U.S. consumers toward conservation also played a role, but the government's policy was the primary cause for the shortage. The Vietnam War may have contributed to the increase in demand for gasoline, but it was not the main cause for the shortage.

Question 14

Table 6-4
The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $3 above the equilibrium price in this market. 
-Refer to Table 6-4. How many units of the good are sold after the imposition of the price floor?
A)3
B)9
C)15
D)18

Accepted Answer

The answer of Table 6-4
The following table contains the demand...

Question 15

In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that
A)OPEC raised the price of crude oil in world markets.
B)U.S. gasoline producers raised the price of gasoline.
C)the U.S. government maintained a price ceiling on gasoline.
D)Americans typically commuted long distances.

Accepted Answer

The answer of In the 1970s, long lines at gas...

Question 16

Table 6-5 
-Refer to Table 6-5. Which of the following price ceilings would be binding in this market?
A)$3
B)$6
C)$9
D)None of the above price ceilings would be binding.

Accepted Answer

A price ceiling is binding if it is below the equilibrium price. In this case, the equilibrium price is $5, so only a price ceiling of $3 would be binding as it is below the equilibrium price. Price ceilings of $6 and $9 would not be binding as they are above the equilibrium price.

Question 17

Table 6-5 
-Refer to Table 6-5. Suppose the government imposes a price ceiling of $3 on this market. What will be the size of the shortage in this market?
A)0 units
B)30 units
C)45 units
D)75 units

Accepted Answer

The answer of Table 6-5 
-Refer to Table 6-5. Suppose...

Question 18

Table 6-3
The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $2 above the equilibrium price in this market. 
-Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is
A)$2.
B)$3.
C)$4.
D)$5.

Accepted Answer

The answer of Table 6-3
The following table contains the demand...

Question 19

Table 6-4
The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $3 above the equilibrium price in this market. 
-Refer to Table 6-4. Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is
A)$2.
B)$3.
C)$4.
D)$5.

Accepted Answer

The answer of Table 6-4
The following table contains the demand...

Question 20

Table 6-4
The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $3 above the equilibrium price in this market. 
-Refer to Table 6-4. Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting shortage is
A)0 units.
B)4 units.
C)5 units.
D)10 units.

Accepted Answer

The answer of Table 6-4
The following table contains the demand...

Quiz 6: Supply, Demand, and Government Policies

Table 6-5 -Refer to Table 6-5. Which of the following price floors would be binding in this market?

When OPEC raised the price of crude oil in the 1970s, it caused the

When OPEC raised the price of crude oil in the 1970s, it caused the

When OPEC raised the price of crude oil in the 1970s, it caused the United States'

Table 6-5 -Refer to Table 6-5. Suppose the government imposes a price floor of $3 on this market. What will be the size of the surplus (or shortage) in this market?

In the United States, before OPEC increased the price of crude oil in 1973, there was

Rent control

Economists blame the long lines at gasoline stations in the U.S. in the 1970s on

Economists generally believe that rent control is

One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

The goal of rent control is to

Other than OPEC, the shortage of gasoline in the U.S. in the 1970s could also be blamed on

In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that

Table 6-5 -Refer to Table 6-5. Which of the following price ceilings would be binding in this market?

Table 6-5 -Refer to Table 6-5. Suppose the government imposes a price ceiling of $3 on this market. What will be the size of the shortage in this market?