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One strategy I might use to be elected mayor of a university town is to place a binding price ceiling on rent for student apartments.What will happen if I get elected and am able to pass such a law?


A) The price ceiling will increase the number of apartments available for rent.
B) The price ceiling will cause the demand curve to shift.
C) The price ceiling will cause the supply curve to shift.
D) The price ceiling will decrease the number of students who want to rent an apartment.
E) The price ceiling will cause students to sleep in their cars or to move in with their friends because they won't be able to find a place to live.

F) None of the above
G) A) and D)

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Use the following information to answer the questions that follow.Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P -What would be the quantity demanded if a price ceiling is set at $2,000?


A) 100
B) 154,100
C) 1,541
D) 21,474
E) 18,000

F) A) and D)
G) None of the above

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As a seller of a product subject to a binding price floor,you would be better off in which of the following situations?


A) You would be better off under a binding price floor because you would be able to sell all that you produce at a higher price.
B) You would be better off under a binding price floor because you would be able to sell goods that are smaller and cost less to produce.
C) You would be better off under a binding price floor because you would be able to sell goods of lower quality,which cost less to produce.
D) You would be better off under a binding price floor because you could sell any of the resulting surplus to the government.
E) There is no scenario where a seller is better off when selling a good that is subject to a binding price floor.

F) A) and B)
G) A) and E)

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Let's say that you have a friend who was caught illegally selling a good on the black market.When the judge asks you to describe your friend's motivation as a seller,which of the following would most likely be your reply?


A) My friend sold the good on the black market because a binding price floor had created a shortage in the legal market and my friend was performing a public service by making the good available.
B) My friend sold the good on the black market because a nonbinding price ceiling caused the price to be lower on the black market.
C) My friend sold the good on the black market because a nonbinding price floor had created a shortage in the legal market and my friend was performing a public service by making the good available.
D) My friend sold the good on the black market because a nonbinding price floor made the good too expensive to purchase in the legal market and it was cheaper on the black market.
E) My friend sold the good on the black market because a binding price floor resulted in a surplus of the product in the legal market and he needed to get rid of the surplus.

F) A) and C)
G) A) and B)

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What is a black market? Under what conditions does such a market emerge? How do the prices charged on the black market compare to the conditions that exist in the legal market?

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A black market is an illegal market that...

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Why do government leaders impose price controls?


A) They are trying to promote the formation of black markets.
B) They are trying to ensure that the market reaches equilibrium.
C) They are trying to ensure that all consumers are able to purchase a specific product.
D) They are trying to ensure that a social goal is satisfied.
E) They are trying to increase the demand curve.

F) C) and D)
G) A) and C)

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What is the long-run consequence of a price ceiling law?


A) A surplus will continue to exist and will grow larger over time.
B) A surplus will continue to exist and will grow smaller over time.
C) A shortage will continue to exist and will grow larger over time.
D) A shortage will continue to exist and will grow smaller over time.
E) The amount of the surplus will not change.

F) D) and E)
G) A) and B)

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Some states and localities have laws that make it illegal to resell event tickets at prices higher than the original,legal market price.What would be the positive and negative consequences to such a law?

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The positive consequence would be for th...

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Why does a surplus exist under a binding price floor?


A) It encourages sellers to produce less of the product.
B) It encourages buyers to purchase more of the product.
C) It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.
D) It makes the price so low that the quantity demanded exceeds the quantity supplied on the legal market.
E) It discourages sellers from increasing the quality of the product they sell,which,in turn,increases the quantity demanded.

F) A) and B)
G) A) and C)

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Use the following figure to answer the questions that follow. Use the following figure to answer the questions that follow. -The accompanying figure describes the market for gasoline in a local community.If the government were to place a price floor at P<sub>3</sub>,predict the resulting surplus or shortage. A) There would be a shortage of 75,000 units. B) There would be a surplus of 75,000 units. C) There would be neither a shortage nor a surplus. D) There would be a shortage of 150,000 units. E) There would be a surplus of 150,000 units. -The accompanying figure describes the market for gasoline in a local community.If the government were to place a price floor at P3,predict the resulting surplus or shortage.


A) There would be a shortage of 75,000 units.
B) There would be a surplus of 75,000 units.
C) There would be neither a shortage nor a surplus.
D) There would be a shortage of 150,000 units.
E) There would be a surplus of 150,000 units.

F) A) and C)
G) B) and E)

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If a good is subject to a binding price ceiling and you purchase it on the black market,what do you expect to happen to the availability of the good over time?


A) The availability of the good will rise over time as the supply curve becomes more elastic and the demand curve becomes more inelastic.(The shortage of the good will fall.)
B) The availability of the good will fall over time as both the supply and demand curves become more elastic.(The shortage of the good will fall.)
C) The availability of the good will fall over time as both the supply and demand curves become more elastic.(The shortage of the good will rise.)
D) The availability of the good will rise over time as the demand curve becomes more elastic and the supply curve becomes more inelastic.(The shortage of the good will fall.)
E) The availability of the good will not change over time.

F) A) and C)
G) A) and B)

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Tina,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.Tina won because she gave which of the following answers?


A) They prevent customers who are willing to pay higher prices for needed products from doing so during a time of disaster.
B) They cause consumers to consume more of certain products during a time of disaster.
C) They cause producers to overproduce products during a time of disaster.
D) They act as a binding price floor in a time of disaster.
E) They cause a surplus in the product during a time a time of disaster.

F) A) and B)
G) All of the above

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Refer to the accompanying figure to answer the questions that follow. Refer to the accompanying figure to answer the questions that follow. -If there is a $180 price ceiling imposed on a textbook,what will be the disequilibrium amount? A) There will be a shortage of 1,500,000 units. B) There will be a shortage of 800,000 units. C) There will not be a shortage. D) There will be a shortage of 3,000,000 units. E) There will be a shortage of 450,000 units. -If there is a $180 price ceiling imposed on a textbook,what will be the disequilibrium amount?


A) There will be a shortage of 1,500,000 units.
B) There will be a shortage of 800,000 units.
C) There will not be a shortage.
D) There will be a shortage of 3,000,000 units.
E) There will be a shortage of 450,000 units.

F) None of the above
G) A) and B)

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Let's say that you are a politician who promises cheaper gasoline for everyone in the country if you are elected.Once you are elected,you make gas cheaper by imposing a price ceiling that is one full dollar less than the market's equilibrium price.What would be the reaction of the sellers of gasoline and of the public to your price ceiling law? Would you expect to be reelected in the long run?

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The public would initially be quite happ...

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Use the following table to answer the questions that follow. Use the following table to answer the questions that follow. -At what price level does the labor market experience its largest surplus? A) $5.00 B) $5.50 C) $6.00 D) $7.50 E) $8.00 -At what price level does the labor market experience its largest surplus?


A) $5.00
B) $5.50
C) $6.00
D) $7.50
E) $8.00

F) B) and D)
G) A) and D)

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Apartment rent control in New York City is an example of:


A) government intervention to ensure a market equilibrium is reached.
B) a subsidy for landlords.
C) a nonbinding price floor.
D) a binding price ceiling.
E) a black market.

F) A) and E)
G) C) and D)

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Use the following figure to answer the questions that follow. Use the following figure to answer the questions that follow. -The accompanying figure describes the market for gasoline in a local community.If the government were to place a price floor at P<sub>1</sub>,predict the resulting surplus or shortage. A) There would be a shortage of 75,000 units. B) There would be a surplus of 75,000 units. C) There would be neither a shortage nor a surplus. D) There would be a shortage of 150,000 units. E) There would be a surplus of 150,000 units. -The accompanying figure describes the market for gasoline in a local community.If the government were to place a price floor at P1,predict the resulting surplus or shortage.


A) There would be a shortage of 75,000 units.
B) There would be a surplus of 75,000 units.
C) There would be neither a shortage nor a surplus.
D) There would be a shortage of 150,000 units.
E) There would be a surplus of 150,000 units.

F) C) and E)
G) A) and E)

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As a voter,why would or wouldn't you vote for a referendum calling for an increase in the minimum wage? What consequences would result from raising the minimum wage?

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Students' answers will vary.If the stude...

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If a store sells a good at the market price,even though the government authorities have set the maximum price that can be charged for it,the store is selling the good in a(n) :


A) black market for a market price that is higher.
B) black market for a market price that is lower.
C) effort to eliminate a surplus of the good.
D) legal market for a market price that is higher.
E) legal market for a market price that is lower.

F) C) and D)
G) B) and E)

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Use the following table to answer the questions that follow. Use the following table to answer the questions that follow. -Which of the following is true,holding all other things constant,when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage? A) In regions with the highest minimum wage,most of the jobs require low skills and workers are not productive enough to get paid the higher wage. B) In regions with the lowest minimum wage,most of the jobs require technical skills and no one works minimum wage jobs. C) In regions with the lowest minimum wage,the price control is nonbinding; in the regions with the highest minimum wage,the price control is binding. D) In regions with the lowest minimum wage,the price control is binding; in the regions with the highest minimum wage,the price control is nonbinding. E) In regions with the highest minimum wage,the minimum wage law is legally enforced; in regions with the lowest minimum wage,the law is not strongly enforced. -Which of the following is true,holding all other things constant,when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?


A) In regions with the highest minimum wage,most of the jobs require low skills and workers are not productive enough to get paid the higher wage.
B) In regions with the lowest minimum wage,most of the jobs require technical skills and no one works minimum wage jobs.
C) In regions with the lowest minimum wage,the price control is nonbinding; in the regions with the highest minimum wage,the price control is binding.
D) In regions with the lowest minimum wage,the price control is binding; in the regions with the highest minimum wage,the price control is nonbinding.
E) In regions with the highest minimum wage,the minimum wage law is legally enforced; in regions with the lowest minimum wage,the law is not strongly enforced.

F) A) and B)
G) B) and D)

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