Question 1

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

Accepted Answer

If the price floor is set below the current market-clearing price, it will not have any effect on the market as buyers and sellers would continue to trade at the market-clearing price. A price floor set above the market-clearing price would cause a surplus of cotton.

Question 2

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

Accepted Answer

When airlines were prohibited from competing on price due to an international treaty, they competed on service quality instead, offering more amenities than necessary to attract customers. This led to inefficiencies and higher costs for the airlines. When fares are artificially high, airlines have less competition and can afford to provide higher levels of service. This can be seen as inefficient because customers may be paying for services they do not value or need, leading to higher prices for everyone.

Question 3

(Table: The Market for Salmon) Look at the table The Market for Salmon.The state government has imposed a quota of 6 million pounds and has licensed commercial fishing boats to harvest the salmon.When the quota is reached, the season is over.What is the quota rent per pound of salmon when 6 million pounds is harvested and sold?

Accepted Answer

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

Question 4

(Table: The Market for Hamburger Flippers) Look at the table The Market for Hamburger Flippers.If the minimum wage in this market is $8, what is the impact on the market? Who are the winners and losers of the minimum wage?

Accepted Answer

The answer of (Table: The Market for Hamburger Flippers) Look...

Question 5

The minimum wage, which sets a lower limit on the wages that workers can earn, is often above the equilibrium price.The minimum wage is an example of:
A.a price floor.
B.a price ceiling.
C.a quota.
D.an equilibrium price.

Accepted Answer

The answer of The minimum wage, which sets a lower...

Question 6

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 pumpkin farmers in Minnesota.

Accepted Answer

A price floor set above the market-clearing price would create a surplus of pumpkins, indicating an oversupply. This would lead to an inefficient number of pumpkin farmers in Minnesota because too many farmers would be incentivized to enter the market, potentially driving down prices and creating a larger surplus.

Question 7

How does an effective price ceiling affect buyers and sellers in a competitive market?

Accepted Answer

The answer of How does an effective price ceiling affect...

Question 8

A binding minimum wage will generally cause increased unemployment for low-skilled workers.

Accepted Answer

When a minimum wage is set above the market equilibrium wage rate, it creates a surplus of labor, resulting in unemployment. Employers can't afford to hire as many workers as they would at a lower wage rate, and some workers may be displaced from their jobs as a result. This effect is particularly pronounced for low-skilled workers who may not have the productivity to justify a higher wage. When a minimum wage is set above the market-clearing wage (the wage that would be paid in the absence of government intervention), employers may not be willing or able to hire as many low-skilled workers as they would without the minimum wage. This is because the cost of labor has increased, making it less attractive for employers to hire workers they perceive as less productive or less valuable to the firm. Therefore, a binding minimum wage can lead to increased unemployment for low-skilled workers.

Question 9

A price floor or a price ceiling is an example of:
A)a quantity control.
B)a price control.
C)market equilibrium
D)price.a quota.

Accepted Answer

A price floor or price ceiling is a type of government intervention in markets which imposes a minimum or maximum price that can be charged for a good or service. This is an example of a price control, as the government is setting a specific price that cannot be exceeded or fallen below.

Question 10

Suppose the market price of wheat is $7 a bushel and a price ceiling is set at $9 a bushel.What is the impact of this price ceiling?

Accepted Answer

The answer of Suppose the market price of wheat is...

Question 11

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, which are paid by the government to exporters to make up for their losses when selling products at a lower price than they would receive on the domestic market due to the price floors. This practice is controversial as it can distort global trade and harm the agricultural industries of developing countries. This practice is known as export subsidies, where the government pays a certain amount to exporters to compensate for the producer surplus lost due to selling the goods at a lower price on the international market.

Question 12

(Table: The Market for Hamburger Flippers) Look at the table The Market for Hamburger Flippers.For hamburger flippers with a minimum wage of $8 per hour, can you imagine a scenario where the deadweight loss from the minimum wage is lessened or even eliminated?

Accepted Answer

The answer of (Table: The Market for Hamburger Flippers) Look...

Question 13

The National Football League does not have a licensing process for quarterbacks.This means that the free market determines the standards that an aspiring quarterback must achieve.

Accepted Answer

The NFL does not have a formal licensing process for quarterbacks, so their success and ability are determined by their performance on the field and the demand for their services in the free market.

Question 14

How does a price ceiling create deadweight loss in the market?

Accepted Answer

The answer of How does a price ceiling create deadweight...

Question 15

The American Medical Association has a licensing process for people who aspire to become doctors.This licensing process has probably led to lower earnings for doctors over time.

Accepted Answer

The licensing process ensures that only qualified individuals become doctors, which helps maintain the value and earning potential of the profession. Therefore, the licensing process has not led to lower earnings for doctors over time.

Question 16

How could a minimum wage create an incentive for illegal hiring practices?

Accepted Answer

The answer of How could a minimum wage create an...

Question 17

Figure: Price Controls
   (Figure: Price Control) Look at the figure Price Controls.A price ceiling has been imposed at point d.Identify the areas that correspond to the consumer surplus, producer surplus, and deadweight loss with this price control.In addition, identify the area that represents lost producer surplus that has been transferred to consumers as a result of this policy.

Accepted Answer

The answer of Figure: Price Controls
   (Figure: Price...

Question 18

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

Accepted Answer

This statement is true as it describes the basic economic concepts of demand and supply prices.

Question 19

How is a quota limit different from or similar to a price control?

Accepted Answer

The answer of How is a quota limit different from...

Question 20

How do price ceilings create so-called black markets?

Accepted Answer

The answer of How do price ceilings create so-called black...

Quiz 5: Price Controls and Quotas: Meddling With Markets