Mods 8 and 9 practice Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The government imposes a price ceiling below the equilibrium price. The price ceiling will cause: A. quantity demanded to decrease. B. quantity supplied to increase. C. a shortage of the good. D. an increase in the quality of the good. E. price to return to market equilibrium. Figure 8-1: Rent Controls 2. Use the Rent Controls Figure 8-1. If rent controls are imposed, they will most likely be set at either or. A. Rent 0; Rent 1 B. Rent 1; Rent 3 C. Rent 3; Rent 4 D. Rent 2; Rent 4 E. Rent 2; Rent 3 3. Price ceilings that lead to shortages will impose costs on society because they: A. will eliminate long waiting lines. B. may result in black market prices, which are lower than the market-determined price would be. C. lead to a smaller quantity offered on the market. D. help businesses instead of consumers. E. eliminate dead weight losses. 4. When price controls take the form of maximum prices set below the equilibrium price they are: A. illegal. B. equal to the demand price. C. price floors.
D. price ceilings. E. ineffective. 5. A persistent shortage may occur if: A. the government imposes a price ceiling. B. a price floor is imposed by the government. C. demand shifts leftward. D. supply shifts rightward. E. the government imposes a minimum wage. 6. West African cotton farmers are very upset about the subsidies the U.S. government pays to American cotton farmers. One reason for this could be that subsidized cotton from the United States: A. leads to global cotton surpluses and lower prices for West African farmers. B. raises the world price of cotton. C. has led to a global shortage of cotton. D. has led to an increase in the demand for West African cotton. E. has led to improved efficiency in the global cotton market. 7. If the government feels that the price in the market is too low for the, it can impose a. A. consumers; price ceiling B. consumers; price floor C. producers; price ceiling D. producers; price floor E. consumers; minimum wage 8. 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 E. quota; inefficiency 9. 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 subsidy to employers. B. a price ceiling. C. a quota. D. an equilibrium price. E. a price floor. 10. Inefficient allocations of goods to consumers often result from: A. price ceilings. B. producer surplus. C. equilibrium prices. D. consumer surplus. E. equilibrium quantities.
Fare (per ride) Quantity Demanded (millions of rides per year) Quantity Supplied (millions of rides per year) $7.00 6 14 6.50 7 13 6.00 8 12 5.50 9 11 5.00 10 10 4.50 11 9 4.00 12 8 3.50 13 7 3.00 14 6 Scenario 9-1: Market for Taxi Rides 11. Use Scenario 9-1. The figure represents a competitive market for taxi rides. If a government quota limit at 9 million rides is now imposed on this market (in the name of quality), then the quota rent that will accrue to the owner of a taxi medallion will be, but there will be a missed opportunity (inefficiency) to consumers of. A. $0.50 per ride; 1 million rides B. $2 per ride; 2 million rides C. $3 per ride; 3 million rides D. $4 per ride; 4 million rides E. $1 per ride; 1 million rides 12. If a quota is set above the equilibrium quantity, there will be: A. incentives for illegal activities. B. missed opportunities in the form of mutually beneficial transactions that don't occur. C. a supply price for the quantity transacted that will exceed the demand price of the quantity transacted. D. no effect from the quota. E. a lower price than the market equilibrium price. Figure 9-3: Market for Round-Trip Airline Flights
13. Use the Market for Round-Trip Airline Flights Figure 9-3. The supply and demand graph represents the market for round-trip airline flights between Boston and New York. Suppose the mayor of NYC decides to limit the number of flights to Q 1 to reduce air pollution. After the quota is in place: A. demand will decrease. B. demand will increase. C. the supply price will be higher than the demand price. D. the demand price will be higher than the supply price. E. supply will decrease. Figure 9-4: Market for Hotel Rooms 14. Use the Market for Hotel Rooms Figure 9-4. 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. E. $0. 15. A quota is essentially a: A. quantity restriction. B. price control. C. consumer surplus. D. means to combat black markets. E. tax on each unit produced.
Mods 8 and 9 practice Answer Section MULTIPLE CHOICE 1. ANS: C PTS: 1 DIF: M REF: Module 8 2. ANS: A PTS: 1 DIF: M REF: Module 8 3. ANS: C PTS: 1 DIF: M REF: Module 8 4. ANS: D PTS: 1 DIF: E REF: Module 8 SKL: Definitional 5. ANS: A PTS: 1 DIF: M REF: Module 8 SKL: Concept-Based 6. ANS: A PTS: 1 DIF: M REF: Module 8 7. ANS: D PTS: 1 DIF: M REF: Module 8 8. ANS: B PTS: 1 DIF: M REF: Module 8 9. ANS: E PTS: 1 DIF: E REF: Module 8 10. ANS: A PTS: 1 DIF: M REF: Module 8 SKL: Concept-Based 11. ANS: E PTS: 1 DIF: M REF: Module 9 12. ANS: D PTS: 1 DIF: M REF: Module 9 13. ANS: D PTS: 1 DIF: M REF: Module 9 14. ANS: D PTS: 1 DIF: M REF: Module 9 15. ANS: A PTS: 1 DIF: M REF: Module 9 SKL: Definitional