Question 1

The minimum wage law is an example of a

Accepted Answer

The minimum wage law is an example of a price floor, which is a legal minimum price set above the equilibrium price for a good or service. In this case, the minimum wage sets a floor below which employers cannot pay their workers. By setting a price floor, the government aims to increase the wage rate for workers and prevent exploitation, but it can also cause unintended consequences such as unemployment and price distortions.

Question 2

An economic advisory committee is split on a decision on how to react to an export ban by Mexico of avocados.Isaac wants to put a price ceiling on avocados to ensure an adequate demand; Flora wants to put a price floor on avocados to ensure an adequate supply.April claims that doing nothing is the best response.Who understands economics the best?

Accepted Answer

April's stance of doing nothing aligns with the economic principle that markets tend to reach equilibrium on their own. Isaac's and Flora's proposals of price ceilings and floors, respectively, could lead to unintended consequences like shortages or surpluses, rather than resolving the issue effectively.

Question 3

Refer to the accompanying table to answer the following questions.
 
-At what price level does the apartment market experience its largest surplus?

Accepted Answer

A surplus in the apartment market occurs when the price is above the equilibrium price, leading to more apartments being available than there are renters willing to pay that price. Among the given options, $1,800 is the highest price, which would result in the largest surplus, as it would deter the most renters, leaving the most apartments unrented.

Question 4

Which of the following would be true in a city with rent-controlled apartments?

Accepted Answer

Rent-controlled apartments are designed to limit the amount of rent a landlord can charge tenants. As a result, rents for those lucky enough to find such apartments will be lower than in nearby cities that lack rent control. However, because of the decreased incentive to provide housing, apartment quality may not be higher, and it may be more difficult for landlords to find tenants, but it is unlikely to reduce homelessness.

Question 5

Refer to the accompanying table to answer the following questions.
 
-If rent control is established at $1,550,what would be the amount of disequilibrium in the apartment market?

Accepted Answer

Rent control set below the market equilibrium price typically leads to a shortage of apartments because the quantity demanded exceeds the quantity supplied at the controlled price.

Question 6

Imagine you find yourself in a heat wave and your air conditioner has broken.Unable to find a new one at the store because of a price gouging law,you purchase an air conditioner on the black market.What role did the price gouging law have?

Accepted Answer

Price gouging laws, by keeping prices artificially low, can lead to shortages as demand exceeds supply. This creates an incentive for black market activities, where goods like air conditioners can be sold at higher prices.

Question 7

Refer to the accompanying table to answer the following questions.
 
-If rent control is established at $1,750,what would be the amount of disequilibrium in the apartment market?

Accepted Answer

The answer of Refer to the accompanying table to answer...

Question 8

Why are binding price floor laws passed?

Accepted Answer

Binding price floors are passed to benefit producers by setting a minimum price higher than the equilibrium price. This helps ensure that producers can receive a higher price for their products sold in the legal market.

Question 9

Do all sellers benefit from a binding price floor?

Accepted Answer

A binding price floor benefits only some sellers because not all sellers are able to sell as much as they would like in the legal market. Some sellers might be producing more than the market demand, and a price floor would not increase the quantity demanded. As a result, only those sellers who are producing at or below the market demand level will benefit from the price floor by being able to sell more goods at a higher price.

Question 10

Why is it often difficult to remove a binding price floor after it exists?

Accepted Answer

Sellers benefit from a higher price floor and are likely to lobby their elected officials to keep the price control in place in order to protect their profits. This can make it difficult to remove the price floor, even if it is no longer necessary or if it creates inefficiencies in the market.

Question 11

Refer to the accompanying table to answer the following questions.
 
-At what price level does the apartment market reach equilibrium?

Accepted Answer

The answer of Refer to the accompanying table to answer...

Question 12

A consequence of either a price ceiling or a price floor is

Accepted Answer

Price ceilings (set below the equilibrium price) can lead to shortages, and price floors (set above the equilibrium price) can lead to surpluses. Both interfere with the market's ability to allocate resources efficiently, leading to unwanted market allocations, such as inefficiencies and distortions in supply and demand.

Question 13

Of the following cause-and-effect relationships,which is the most likely that induced a price floor on the market for soybeans?

Accepted Answer

Producers of soybeans would lobby for a price floor because it directly benefits them by ensuring that the price of soybeans cannot fall below a certain level, thus protecting their profits.

Question 14

________ is a real-life example of a price floor.

Accepted Answer

A minimum wage law is a real-life example of a price floor. It sets a minimum price that employers must pay their employees for their labor. This means that employers cannot pay their employees below the legal minimum, ensuring that workers are not exploited and have a minimum standard of living.

Question 15

Which of the following is an accurate statement about the consequence of a binding price floor?

Accepted Answer

Binding price floors, set above the equilibrium price, lead to a surplus of the product because the price is too high for consumers to purchase all of the supply. This surplus can encourage the formation of a black market where the product is sold at a lower price.

Question 16

If the local government tells gas stations that they are not allowed to change the price of gas for three weeks during hurricane season,what will be the consequence?

Accepted Answer

When a price ceiling is set below the market equilibrium, it typically results in a shortage because at the artificially low price, the quantity demanded exceeds the quantity supplied. Consumers will find that they cannot purchase as much gas as they want at the controlled price, leading to shortages.

Question 17

Refer to the accompanying table to answer the following questions.
 
-At what price level does the apartment market experience its largest shortage?

Accepted Answer

The largest shortage in the apartment market occurs at the lowest price level, which is $1,500, as demand exceeds supply the most at this price.

Question 18

The town of Fairness has a law stating that wages should be high enough to ensure that all people can afford to buy enough food for their families.The law that sets wages would be an example of a

Accepted Answer

This law is an example of a minimum wage law because it sets the lowest amount that can be paid to workers, ensuring they can afford basic necessities like food.

Question 19

What will happen in a market where a binding price floor is removed?

Accepted Answer

Removing a binding price floor will result in a market where there is no longer a minimum price that can be charged for the product. This is likely to result in downward pressure on prices as sellers compete to attract buyers. As a result, prices are likely to fall in the absence of the price floor.

Question 20

Jamie,an economics student,was just named Miss Florida,based in part on her answer to the question of why price gouging laws should be relaxed in that state.Jamie won because she gave which of the following answers?

Accepted Answer

Price gouging laws prevent sellers from charging higher prices during a time of disaster, which can prevent customers who are willing to pay higher prices for needed products from obtaining them. By relaxing these laws, sellers are free to charge higher prices, increasing the supply of products and reducing the shortage that often occurs in times of disaster.

Quiz 6: Price Controls