ECO 120 Lecture Notes - Lecture 16: Price Ceiling, Price Floor
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QUESTION 38
You are the president of the United States. In an attempt to make gasoline prices cheaper, you have imposed a binding price ceiling on gas. What would you expect your critics to say?
a. |
The binding price ceiling will cause firms to minimize their spending on the research and development of alternatives to gasoline. |
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b. |
The binding price ceiling will discourage individuals from using their personal automobile to commute to work or school. |
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c. |
The binding price ceiling will increase the likelihood that customers obtain needed |
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d. |
The binding price ceiling will encourage oil companies to deplete the resource too quickly. |
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e. |
The binding price ceiling will cause firms to produce only gasoline of the highest quality. |
1.05000 points
QUESTION 39
If a firm's long-run average total costs increase as it increases its scale of production, the firm is experiencing:
a. |
increasing returns from specialization. |
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b. |
diseconomies of scale. |
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c. |
economies of scale. |
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d. |
constant returns to scale. |
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e. |
diminishing marginal product. |
1.05000 points
QUESTION 40
A(n) __________ in the elasticity of supply or demand in a market for a good that is taxed would tend to __________ tax revenue from that tax.
a. |
increase; increase |
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b. |
increase; have no effect on |
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c. |
decrease; have no effect on |
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d. |
decrease; decrease |
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e. |
increase; decrease |
1.05000 points
QUESTION 41
The costs of a market activity paid for by an individual engaged in the market activity are:
a. |
external costs. |
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b. |
social costs. |
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c. |
common costs. |
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d. |
free-rider costs. |
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e. |
internal costs. |
1.05000 points
QUESTION 42
Assume that the price of rubber increased at the same time that Michael Jordan, arguably the best NBA basketball player of all time, became famous. What do you expect to happen to the equilibrium price and equilibrium quantity of the basketball shoes that are promoted by Michael Jordan?
a. |
Equilibrium price will go down and equilibrium quantity will be indeterminate. |
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b. |
Equilibrium price will go up and equilibrium quantity will go down. |
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c. |
Equilibrium price will go up and equilibrium quantity will be indeterminate. |
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d. |
Equilibrium price will go down and equilibrium quantity will go up. |
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e. |
Equilibrium price will go up and equilibrium quantity will go up. |
1.05000 points
QUESTION 43
The minimum wage law is an example of a:
a. |
price floor. |
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b. |
law that sets the minimum number of hours that an employee must work for wages during the week. |
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c. |
law that allows individual employers and employees to make free decisions. |
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d. |
law that requires quantity demanded to equal quantity supplied. |
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e. |
price ceiling. |
Question 1
During a crisis such as Hurricane Katrina, governments often make it illegal to raise the price of emergency items like flashlights and bottled water. In practice, this means that these items get sold on a first-come, first-served basis. If a person has a flashlight that she values at $5, but its price on the black market is $40, what gains from trade are lost if the government shuts down the black market?
$30 | ||
$35 | ||
$40 | ||
Indeterminant with the given information. |
2 points
Question 2
Which of the following is an example of a price floor?
A sale price with a limit on the quantity you can purchase. | ||
Rent-controlled apartments | ||
Predatory pricing designed to put a competitor out of business. | ||
The minimum wage |
2 points
Question 3
Airline regulation of the 1970s produced a similar result to which of the following government interventions?
The Affordable Care Act | ||
Minimum wage laws | ||
Rent control laws | ||
Communism |
2 points
Question 4
Which of the following is a possible effect of a price ceiling?
A surplus of the good. | ||
Increases in product quality. | ||
Increased gains from trade. | ||
People will waste time in lines waiting to purchase the good. |
2 points
Question 5
What is a price ceiling?
A minimum price consumers are willing to pay. | ||
A minimum price allowed by law. | ||
A maximum price allowed by law. | ||
A maximum price consumers are willing to pay. |
2 points
Question 6
Why are the long lines generated by a shortage worse than paying a higher price in money?
It is not better or worse. Paying in time and paying in money are essentially the same in a market economy. | ||
Paying with time reduces the value of money, and prevents valuable trades from occurring. | ||
Waiting in line is a waste of a valuable resource: time. Paying a price in money transfers the value of resources from one person to another, and maximizes the value of resources. | ||
Paying with time gives those who do not work an advantage over those who do. |
2 points
Question 7
Which of the following is a possible effect of a price floor?
The quantity supplied exceeds the quantity demanded. | ||
Increased gains from trade. | ||
Decreases in product quality. | ||
A shortage of the good. |