Question 1

Price floors are typically imposed to benefit sellers.

Accepted Answer

Price floors set a minimum price that sellers can receive for their goods or services, which may protect them from short-term market fluctuations or competition.

Question 2

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

Accepted Answer

A price ceiling set at $70 would create a shortage of 60 units, not 40. This can be seen by looking at the quantity demanded at that price point (140) and subtracting it from the quantity supplied (80).

Question 3

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

Accepted Answer

Binding price floors create a situation where the price of a good is higher than its market equilibrium price. This leads to an excess supply of the good, which must be rationed. However, the rationing mechanisms that develop under price floors are often inefficient, such as long waiting lines, discrimination in distribution, and lower quality goods being sold. These inefficiencies can lead to a deadweight loss, where both producers and consumers are worse off than they would be in a free market without the price floor.

Question 4

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

Accepted Answer

The purpose of the minimum wage is to establish a base wage that employers are required to pay to their employees in order to ensure that they earn a minimally adequate standard of living. This is achieved by setting a legal limit on how low wages can go, thereby preventing employers from paying wages that are deemed to be too low to provide sufficient income for workers to live on.

Question 5

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

Accepted Answer

There are many other countries in the world with minimum-wage laws, including Canada, Australia, Germany, France, and the United Kingdom, among others.

Question 6

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

Accepted Answer

Yes, several states in the U.S. have minimum wages above the federal level.

Question 7

Price floors are typically imposed to benefit buyers.

Accepted Answer

Price floors are typically imposed to benefit sellers by setting a minimum price for their goods or services. This can sometimes lead to an oversupply of the product and a higher cost for consumers.

Question 8

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

Accepted Answer

A binding price floor can hurt some sellers if they are unable to sell their products at the higher price dictated by the floor, and therefore lose business to competitors who can sell at the higher price. Additionally, if the price floor is set too high, it can create a surplus of the product, leading to a loss of revenue for all sellers.

Question 9

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

Accepted Answer

It is not possible to determine the exact quantity of shortage without knowing the demand and supply curve for the product.

Question 10

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

Accepted Answer

The minimum wage is a legal price floor that sets a minimum hourly wage that employers must pay their workers.

Question 11

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.

Accepted Answer

The price floor of $500 is above the equilibrium price of $400, which means that airlines would have to charge more than customers are willing to pay. As a result, demand for airline tickets would decrease, leading to fewer tickets being sold.

Question 12

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

Accepted Answer

According to the graph, a price floor set at $60 would result in a quantity supplied of 70 and a quantity demanded of 50, creating a surplus of 20 units.

Question 13

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.

Accepted Answer

A price floor set below the equilibrium price has no effect on the market because the market price is already higher than the floor, so the quantity sold remains determined by the market equilibrium.

Question 14

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

Accepted Answer

In an unregulated labor market, the wage is determined by the intersection of labor supply and labor demand curves. The wage adjusts until the quantity of labor supplied equals the quantity of labor demanded, resulting in a market-clearing equilibrium wage.

Question 15

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

Accepted Answer

This is true. The labor market includes different types of workers specializing in different fields, such as manufacturing, healthcare, technology, and many more.

Question 16

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

Accepted Answer

The answer of Figure 6-35 
-Refer to Figure 6-35. A...

Question 17

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

Accepted Answer

Workers decide how many hours they are willing to work and at what wage rate, which determines the supply of labor. On the other hand, firms determine how many workers they need to hire and at what wage rate, which determines the demand for labor.

Question 18

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

Accepted Answer

Binding price floors can lead to surpluses because the minimum price is set above the equilibrium price, causing the quantity supplied to exceed the quantity demanded, which means sellers may not be able to sell all they want.

Question 19

Not all sellers benefit from a binding price floor.

Accepted Answer

A binding price floor means a minimum price at which a good or service must be sold. This can benefit some sellers, but not all. If the price floor is set above the equilibrium price, it can lead to a surplus of goods or services, and sellers may not be able to sell all their products. This can hurt small sellers who cannot afford to hold excess inventory and can also lower their profits or even drive them out of the market if they cannot compete with larger players. Therefore, not all sellers benefit from a binding price floor.

Question 20

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

Accepted Answer

A binding minimum wage creates a surplus of labor as the quantity of labor supplied exceeds the quantity of labor demanded. This surplus is often referred to as unemployment.

Quiz 6: Supply, Demand, and Government Policies