Question 1

Figure: The Shrimp Market
   (Figure: The Shrimp Market) Look at the figure The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 500 pounds, the quota rent per pound is: 
A.$15.
B.$10.
C.$5.
D.The quota rent cannot be determined from the information provided.

Accepted Answer

The answer of Figure: The Shrimp Market
   (Figure:...

Question 2

Figure: The Shrimp Market
   (Figure: The Shrimp Market) Look at the figure The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 pounds, the quota rent per pound is: 
A.$17.50.
B.$10.
C.$7.50.
D.$0.

Accepted Answer

The answer of Figure: The Shrimp Market
   (Figure:...

Question 3

Which of the following is a likely outcome of price controls and quota limits?
A)prices higher than the market equilibrium price
B)illegal activity as people invent ways to get around the market constraint
C)shortages and units of output that must be disposed of
D)shortages and inefficiency created by buyers searching for units of the good

Accepted Answer

Price controls and quota limits often lead to illegal activities as people try to circumvent the constraints imposed by these controls.

Question 4

Figure: The Market for Sandwiches
  (Figure: The Market for Sandwiches) Look at the figure The Market for Sandwiches.Referring again to the market for sandwiches during the lunch hour at a local deli, suppose a price floor is set at $7.At this price, consumer surplus is equal to and producer surplus is
equal to _. 
A.$64; $40
B.$64; $24
C.$32; $24
D.$32; $40

Accepted Answer

The answer of Figure: The Market for Sandwiches
  (Figure:...

Question 5

(Table: The Market for Acupuncture) Look at the table The Market for Acupuncture.In an effort to regulate this market, the town requires each acupuncture therapist to purchase a license.Initially the government issues only enough licenses to provide for 20 treatments per month.Suppose this quota is in place for many years and, over time, the population of the town has substantially grown.This change could result in:
A.larger quota rents and more deadweight loss as the demand curve shifted to the left.
B.larger quota rents and less deadweight loss as the supply curve shifted to the right.
C.larger quota rents and more deadweight loss as the demand curve shifted to the right.
D.smaller quota rents and more deadweight loss as the demand curve shifted to the right.

Accepted Answer

The answer of (Table: The Market for Acupuncture) Look at...

Question 6

A rent ceiling must be set above the equilibrium rent to be binding.

Accepted Answer

A rent ceiling is a government-imposed price control that limits how much a landlord can charge for rent. If the ceiling is set above the equilibrium rent, it will not have any effect on the market as the existing rent prices will remain legal. A rent ceiling only becomes binding when it is set below the equilibrium rent, which results in a shortage of rental units as the quantity demanded exceeds the quantity supplied. A rent ceiling is a government-imposed limit on how high rent can be charged in a given area. If the rent ceiling is set above the equilibrium rent, it is not binding, as landlords are already charging lower rent than the ceiling. A binding rent ceiling must be set below the equilibrium rent, leading to a shortage of rental units and potential market inefficiencies.

Question 7

Figure: The Market for Hotel Rooms
(Figure: The Market for Hotel Rooms) Look at the figure The Market for Hotel Rooms.If the quota rent per room is equal to $140, we know the quota limit is equal to:
A)100.
B)150.
C)200.
D)250.

Accepted Answer

The quota limit is the quantity of rooms that can be sold at the quota rent. In this case, the quota rent is $140, and the quota limit is 100 rooms.

Question 8

Suppose Congress imposes a price ceiling of $5 per ATM transaction.If the average market- clearing price for an ATM transaction is $2, the price ceiling will not be binding in this instance.

Accepted Answer

A price ceiling is not binding if it is set above the equilibrium market price, which in this case is $2, making the $5 ceiling non-effective.

Question 9

Figure: The Market for Sandwiches
(Figure: The Market for Sandwiches) Look again at the figure The Market for Sandwiches.How much total surplus would be lost if there were a quota of only eight sandwiches that could be legally exchanged at a price of $5?
A.$3
B.$72
C.$27
D.$32

Accepted Answer

The answer of Figure: The Market for Sandwiches
(Figure: The Market...

Question 10

The market for salmon is in equilibrium.A price ceiling, a price floor, and a quota limit in this market would all have which outcome in common?
A.deadweight loss created by a quantity exchanged that is less than the equilibrium quantity
B.a supply price that exceeds a demand price
C.revenue collected by the government on each unit of salmon harvested
D.deadweight loss created by a transfer of surplus from consumers to producers

Accepted Answer

The answer of The market for salmon is in equilibrium.A...

Question 11

A price ceiling will create a persistent and a price floor will create a persistent
________.
A.surplus; surplus
B.shortage; surplus
C.shortage; shortage
D.surplus; shortage

Accepted Answer

The answer of A price ceiling will create a persistent...

Question 12

Figure: The Market for Hotel Rooms
   (Figure: The Market for Hotel Rooms) Look at the figure The Market for Hotel Rooms.The local government limits the number of hotel rooms rented each night to 200.The resulting deadweight loss is equal to: 
A.$750.
B.$375.
C.$250.
D.$0.

Accepted Answer

The answer of Figure: The Market for Hotel Rooms
 ...

Question 13

A price ceiling benefits all consumers.

Accepted Answer

While price ceilings may benefit some consumers by lowering prices, they can also lead to shortages and lower quality goods as producers may not be incentivized to produce at the lower price. Additionally, those who are unable to purchase the product due to shortages may not benefit at all. A price ceiling is a maximum price imposed on a good or service by the government, below the market equilibrium price. While it may benefit some consumers who can purchase the product at a lower price, it also creates market distortions such as decreased supply, increased demand, and potentially long wait times for the product. Price ceilings can lead to shortages as suppliers are no longer willing or able to provide the product at the lower price, harming both producers and consumers in the long run.

Question 14

(Table: The Market for Acupuncture) Look at the table The Market for Acupuncture.The
production quota of 20 acupuncture treatments creates a deadweight loss because there are
________ additional transactions that would be welfare improving but would not take place under the quota.
A.80
B.60
C.40
D.20

Accepted Answer

The answer of (Table: The Market for Acupuncture) Look at...

Question 15

Figure: The Shrimp Market
(Figure: The Shrimp Market) Look at the figure The Shrimp Market.If the government imposes
a quota limiting sales of shrimp to 1,000 pounds, the quota rent per pound is:
A.$15.
B.$10.
C.$5.
D.$0.

Accepted Answer

The answer of Figure: The Shrimp Market
(Figure: The Shrimp Market)...

Question 16

Price controls are always set below the market equilibrium price.

Accepted Answer

Price controls can be set above or below the market equilibrium price. A price ceiling is set below the market equilibrium to keep prices lower for consumers, while a price floor is set above the market equilibrium to ensure producers receive a minimum price.

Question 17

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

Accepted Answer

Imposing price ceilings would likely lead to a decrease in profits for drug manufacturers, potentially discouraging investments in research and development of new drugs and ultimately reducing the quality and availability of drugs.

Question 18

(Table: The Market for Acupuncture) Look at the table The Market for Acupuncture.In an effort to regulate this market, the town requires each acupuncture therapist to purchase a license.Initially, the government issues only enough licenses to provide for 20 treatments per month.This quota creates a quota rent equal to:
A.$50.
B.$100.
C.$150.
D.$200.

Accepted Answer

The answer of (Table: The Market for Acupuncture) Look at...

Question 19

Figure: The Market for Hotel Rooms
(Figure: The Market for Hotel Rooms) Look at the figure The Market for Hotel Rooms The local government limits the number of hotel rooms rented each night to 150.The resulting quota rent per room is equal to:
A.$130.
B.$100.
C.$110.
D.$30.

Accepted Answer

The answer of Figure: The Market for Hotel Rooms
(Figure: The...

Question 20

Figure: The Shrimp Market
   (Figure: The Shrimp Market) Look at the figure The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 pounds, it would have the same effect as a price
________ of _. 
A.floor; $17.50
B.floor; $10 floor;
C.$7.50
D.The answer cannot be determined from the information provided.

Accepted Answer

The answer of Figure: The Shrimp Market
   (Figure:...

Quiz 5: Price Controls and Quotas: Meddling With Markets

Figure: The Shrimp Market (Figure: The Shrimp Market) Look at the figure The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 500 pounds, the quota rent per pound is: A.$15. B.$10. C.$5. D.The quota rent cannot be determined from the information provided.

Figure: The Shrimp Market (Figure: The Shrimp Market) Look at the figure The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 pounds, the quota rent per pound is: A.$17.50. B.$10. C.$7.50. D.$0.

Which of the following is a likely outcome of price controls and quota limits?

A rent ceiling must be set above the equilibrium rent to be binding.

Figure: The Market for Hotel Rooms (Figure: The Market for Hotel Rooms) Look at the figure The Market for Hotel Rooms.If the quota rent per room is equal to $140, we know the quota limit is equal to:

Suppose Congress imposes a price ceiling of $5 per ATM transaction.If the average market- clearing price for an ATM transaction is $2, the price ceiling will not be binding in this instance.

Figure: The Market for Sandwiches (Figure: The Market for Sandwiches) Look again at the figure The Market for Sandwiches.How much total surplus would be lost if there were a quota of only eight sandwiches that could be legally exchanged at a price of $5? A.$3 B.$72 C.$27 D.$32

A price ceiling will create a persistent and a price floor will create a persistent ________. A.surplus; surplus B.shortage; surplus C.shortage; shortage D.surplus; shortage

Figure: The Market for Hotel Rooms (Figure: The Market for Hotel Rooms) Look at the figure The Market for Hotel Rooms.The local government limits the number of hotel rooms rented each night to 200.The resulting deadweight loss is equal to: A.$750. B.$375. C.$250. D.$0.

A price ceiling benefits all consumers.

Figure: The Shrimp Market (Figure: The Shrimp Market) Look at the figure The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 1,000 pounds, the quota rent per pound is: A.$15. B.$10. C.$5. D.$0.

Price controls are always set below the market equilibrium price.

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

Figure: The Market for Hotel Rooms (Figure: The Market for Hotel Rooms) Look at the figure The Market for Hotel Rooms The local government limits the number of hotel rooms rented each night to 150.The resulting quota rent per room is equal to: A.$130. B.$100. C.$110. D.$30.