Question

practice quiz

1. A legal maximum price at which a good can be sold is a price

a. floor

b. stabilization

c. support

d. ceiling

2. A price floor is not binding if

a. the price floor is higher than the equilibrium market price

b. the price floor is lower than the equilibrium market price

c. people are willing to buy less when the price floor is imposed as they did before

d. the government sets it

3. Rationing by long lines is

a. inefficient, because it wastes buyers’ time

b. efficient, because those who are willing to wait the longest get the goods

c. the only way scarce goods can be rationed

d. only necessary if price ceilings are not binding

4. Over time, housing shortages caused by rent control

a.   increase, because the demand and supply curves for housing are more elastic in the long run

b. increase, because the demand and supply curves for housing are more inelastic in the long run

c. decrease, because the demand and supply curves or housing are more inelastic in the long run

d. change very little since price is not allowed to adjust.

5. A minimum wage will

a. alter both the quantity demanded and quantity supplied of labor

b. affect only the quantity of labor firms will demand at the higher wage, but does not affect the quantity supplied of labor.

c. have no effect on the quantity demand or quantity supplied of labor since the equilibrium wage will not change

d. cause only temporary unemployment since the market will adjust and eliminate he surplus of workers.

6. The equilibrium wages of teenagers tend to be

a. low because teenagers are among the least skilled and least experienced workers

b. high because teenagers are among the strongest and most energetic workers

c low because most teenagers live at home and do not require high wages

d. high because teenagers tend to join unions.

7. Which of the following is NOT a function of prices in a market system?

a. Prices have the crucial job of balancing supply and demand

b. prices send signals to buyers and sellers to help them make rational economic decisions

c. prices coordinate economic activity

d. prices make an equitable distribution of goods and services among consumers possible.

8. The “invisible hand” refers to

a. the marketplace guiding the self-interests of market participants into promoting general economic well-being

b. the marketplace as a place where government looks out for the interests of individual participants in the market

c. the equity that results from market forces allocating the goods produced in the market

d. the automatic maximization of consumer surplus in free markets

9. Which of the following is correct?

a. Efficiency deals with the size of the economic pie ad equity deals with how fairly the pie is sliced.

b. equity can be judged on positive grounds where efficiency requires normative judgments

c. efficiency is more difficulty to evaluate than equity

d. equity and efficiency are both maximized in a society when total surplus is maximized.

Chapter 6: Price Ceilings and Price Floors

9. If the market price is below equilibrium, then

a. there is excess demand

b. there is excess supply

c. consumers will want to raise the price

d. firms will want to lower the price

e. all of the above

10. Laws used to keep market prices from rising are called:

a. wage and/or price ceilings

b. rationing and subsidies

c. allocations and redemptions

d. arbitrage and arbitration

e.   none of the above

11. Long term price ceilings are likely to cause

a. shortages

b. queues

c. black markets and corruption

d. economic inefficiency

e. All of the above

12. Minimum wage laws are examples of

a. government assistance that aids people on welfare

b. direct benefits from union membership

c. price floors, and create surplus labor and unemployment

d. arbitrage exercised by government bureaucrats

e. price ceilings that create labor shortages

13. Ignoring economic factors when designing social policies is:

a. appropriate because morality does not depend on money

b. likely to cause results incompatible with intentions

c. recommended by advocates of laissez-faire policies

d. a major reason why income is equitably distributed

e. mandated by the 27^th amendment to the U.S. Constitution

14. Curing shortages in the market for ice cream requires

a. increases in the price of ice cream

b. decreases in the supply of ice cream

c. increases in the demand for ice cream

d. decreases in the price of ice cream

Answer 1

1. Option d. So that customers are protected from charging high prices

2. Option b. As it is intended to protect suppliers

3. Option a.

4. Option a. More the time more would be elasticity

5. Option a. As it affects both quantity supply and demand

6. Option a. As they lack proper skill set needed for the job

7. Option d.

8. Option c. Automatic controls through forces of market demand and supply

9. Option a. Efficiency is the ability to get most whereas equity is about how fairly the prosperity gets distributed in the society

Chap 6.

9. Option a

10.Option a

11. Option c

12. Option c

13. Option b

14. Option a