Question 1

In the short run, rent control causes the quantity supplied
A)and quantity demanded to fall.
B)to fall and quantity demanded to rise.
C)to rise and quantity demanded to fall.
D)and quantity demanded to rise.

Accepted Answer

The answer of In the short run, rent control causes...

Question 2

The minimum wage is an example of a
A)price ceiling.
B)price floor.
C)wage subsidy.
D)tax.

Accepted Answer

The minimum wage sets a floor on how low wages can legally be paid, so it is an example of a price floor.

Question 3

Which of the following statements about the effects of rent control is correct?
A)The short-run effect of rent control is a surplus of apartments, and the long-run effect of rent control is a shortage of apartments.
B)The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments.
C)In the long run, rent control leads to a shortage of apartments and an improvement in the quality of available apartments.
D)The effects of rent control are very noticeable to the public in the short run because the primary effects of rent control occur very quickly.

Accepted Answer

Rent control creates a shortage of apartments because landlords may not be able to cover their costs and may leave the rental market. In the short run, some landlords may continue to rent their apartments at the controlled rents, which results in a relatively small shortage of apartments. However, in the long run, landlords will not find it profitable to provide rental housing, which results in a larger shortage of apartments.

Question 4

Rent control policies tend to cause
A)relatively smaller shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run.
B)relatively larger shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run.
C)relatively larger shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run.
D)relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run.

Accepted Answer

The answer of Rent control policies tend to cause
A)relatively smaller...

Question 5

Which of the following is not a short-run effect of rent control on the housing market?
A)reduced rents
B)a large shortage
C)a small increase in quantity demanded
D)a small decrease in quantity supplied

Accepted Answer

The answer of Which of the following is not a...

Question 6

Which of the following is not a result of rent control?
A)fewer new apartments offered for rent
B)less maintenance provided by landlords
C)bribery
D)higher quality housing

Accepted Answer

Rent control is often associated with lower quality housing as landlords have less incentive to invest in maintenance and improvements when they are limited in their ability to increase rents. However, higher quality housing is not a result of rent control.

Question 7

Rent control
A)is an example of a price ceiling.
B)leads to a larger shortage of apartments in the long run than in the short run.
C)leads to lower rents and, in the long run, to lower-quality housing.
D)All of the above are correct.

Accepted Answer

The answer of Rent control
A)is an example of a price...

Question 8

The long-run effects of rent controls are a good illustration of the principle that
A)society faces a short-run tradeoff between unemployment and inflation.
B)the cost of something is what you give up to get it.
C)people respond to incentives.
D)government can sometimes improve on market outcomes.

Accepted Answer

Rent controls create incentives for landlords to reduce the quantity and quality of rental housing available, which can lead to shortages in the long run. Additionally, rent controls decrease the profitability of renting out properties, which can discourage investment in new rental housing. This illustrates the principle that people respond to incentives.

Question 9

Under rent control, bribery is a mechanism to
A)bring the total price of an apartment (including the bribe) closer to the equilibrium price.
B)allocate housing to the poorest individuals in the market.
C)force the total price of an apartment (including the bribe) to be less than the market price.
D)allocate housing to the most deserving tenants.

Accepted Answer

The answer of Under rent control, bribery is a mechanism...

Question 10

Minimum-wage laws dictate the
A)average price employers must pay for labor.
B)highest price employers may pay for labor.
C)lowest price employers may pay for labor.
D)the highest and lowest prices employers may pay for labor.

Accepted Answer

Minimum-wage laws set a floor, or minimum amount, that employers must pay their workers. This is the lowest price that employers may legally pay for labor.

Question 11

Which of the following is correct?
A)Rent control and the minimum wage are both examples of price ceilings.
B)Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor.
C)Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling.
D)Rent control and the minimum wage are both examples of price floors.

Accepted Answer

Rent control is an example of a price ceiling because it places a legal limit on the maximum rent that landlords can charge. The minimum wage, on the other hand, is an example of a price floor because it sets a legal minimum wage that employers must pay their workers. Thus, only option B correctly identifies both policies as examples of price control measures, but different types of price controls - one as a ceiling and the other as a floor.

Question 12

An alternative to rent-control laws that would not reduce the quantity of housing supplied is
A)the payment by government of a fraction of a poor family's rent.
B)higher taxes on rental income earned by landlords.
C)a policy that prevents landlords from evicting tenants.
D)a policy that allows government to confiscate residential property for the purpose of commercial development.

Accepted Answer

The payment by government of a fraction of a poor family's rent would directly assist those in need and enable them to afford rental housing without reducing the quantity of housing supplied. This approach is known as a housing subsidy and has been implemented successfully in many countries as a means of reducing poverty and improving access to affordable housing. Higher taxes on rental income earned by landlords could potentially discourage investment in housing and reduce the quantity of housing supplied. A policy that prevents landlords from evicting tenants may reduce the quantity of housing supplied by reducing the incentives for landlords to invest in rental property. A policy that allows government to confiscate residential property for the purpose of commercial development would be a violation of property rights and may not be politically feasible.

Question 13

Under rent control, tenants can expect
A)lower rent and higher quality housing.
B)lower rent and lower quality housing.
C)higher rent and a shortage of rental housing.
D)higher rent and a surplus of rental housing.

Accepted Answer

Under rent control, landlords are not able to increase the rent beyond a certain point. However, this also means that landlords are not incentivized to invest in improving or maintaining the quality of the housing since they cannot increase the rent to cover these costs. Therefore, while tenants may pay lower rent, they may also have to settle for lower quality housing.

Question 14

An example of a price floor is
A)the regulation of gasoline prices in the U.S. in the 1970s.
B)rent control.
C)the minimum wage.
D)any restriction on price that leads to a shortage.

Accepted Answer

The minimum wage is an example of a price floor as it sets a minimum amount that employers must pay their employees. This prevents wages from falling below a certain level, but can also lead to unemployment if employers cannot afford to pay the minimum wage. Choices A and D describe restrictions on price that can lead to shortages, but do not specifically refer to price floors. Rent control is an example of a price ceiling, which is the opposite of a price floor and sets a maximum price that can be charged for a good or service.

Question 15

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because
A)with rent control, the government guarantees landlords a minimum level of profit.
B)they become resigned to the fact that many of their apartments are going to be vacant at any given time.
C)with shortages and waiting lists, they have no incentive to maintain and improve their property.
D)with rent control, it becomes the government's responsibility to maintain rental housing.

Accepted Answer

Under rent control, there is a limited supply of rental housing, leading to shortages and waiting lists. Landlords no longer have to compete for tenants and are guaranteed a steady stream of income regardless of the quality of their property. As a result, they have little incentive to maintain or improve their rental housing because there is a lack of competition and demand for their units.

Question 16

Over time, housing shortages caused by rent control
A)increase, because the demand for and supply of housing are less elastic in the long run.
B)increase, because the demand for and supply of housing are more elastic in the long run.
C)decrease, because the demand for and supply of housing are less elastic in the long run.
D)decrease, because the demand for and supply of housing are more elastic in the long run.

Accepted Answer

The answer of Over time, housing shortages caused by rent...

Question 17

The U.S. Congress first instituted a minimum wage in
A)1776.
B)1812.
C)1938.
D)1975.

Accepted Answer

The U.S. Congress first instituted a federal minimum wage with the Fair Labor Standards Act of 1938. This established a minimum wage of 25 cents per hour and a maximum workweek of 44 hours.

Question 18

Which of the following is not a rationing mechanism used by landlords in cities with rent control?
A)waiting lists
B)race
C)price
D)bribes

Accepted Answer

Price is not used as a rationing mechanism by landlords in cities with rent control because rent control sets a cap on the maximum rent that can be charged, so landlords cannot use price as a way to limit access to housing. Waiting lists, race, and bribes are all examples of rationing mechanisms that landlords may use in these situations.

Question 19

In the housing market, supply and demand are
A)more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run.
B)more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.
C)more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run.
D)more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.

Accepted Answer

In the long run, the supply of housing can become more elastic as developers build more units to meet the demand. However, in the short run, the supply is relatively fixed, meaning that rent control can lead to a larger shortage of apartments as landlords are reluctant to build additional units or maintain existing ones. Therefore, rent control leads to a larger shortage of apartments in the long run than in the short run.

Question 20

Which of the following is not correct? In a 2006 survey of Ph.D. economists,
A)47 percent favored eliminating the minimum wage.
B)14 percent would maintain the minimum wage at its current level.
C)38 percent would increase the minimum wage.
D)10 percent would decrease the minimum wage.

Accepted Answer

The answer of Which of the following is not correct?...

Quiz 6: Supply, Demand, and Government Policies

In the short run, rent control causes the quantity supplied

The minimum wage is an example of a

Which of the following statements about the effects of rent control is correct?

Rent control policies tend to cause

Which of the following is not a short-run effect of rent control on the housing market?

Which of the following is not a result of rent control?

Rent control

The long-run effects of rent controls are a good illustration of the principle that

Under rent control, bribery is a mechanism to

Minimum-wage laws dictate the

Which of the following is correct?

An alternative to rent-control laws that would not reduce the quantity of housing supplied is

Under rent control, tenants can expect

An example of a price floor is

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

Over time, housing shortages caused by rent control

The U.S. Congress first instituted a minimum wage in

Which of the following is not a rationing mechanism used by landlords in cities with rent control?

In the housing market, supply and demand are

Which of the following is not correct? In a 2006 survey of Ph.D. economists,