ECON1101 Study Guide - Final Guide: Price Ceiling, Price Elasticity Of Demand, Economic Equilibrium

1.) An excise tax on a good typically reduces the net price received by the seller. (TRUE/FALSE)

2.) The burden of an excise tax on gasoline falls entirely on consumers of gasoline. (TRUE/FALSE)

3.) Rent controls are one of the few examples of a price floor in market economies. (TRUE/FALSE)

4.) Imposing a price ceiling below the equilibrium price of a good often leads to_____.

A) A greater supply of the good

B) A black market for the good

C) A rightward shift of the supply curve for the good.

D) A leftward shift of the demand curve for the good.

E) All of these

5.) Which of the following is true of price floors and ceilings?

A) Lead to the same price and quantity as in competitive market.

B) Lead to technical efficiency

C) Cause the demand curve to shift left

D) Usually result from government intervention

E) Cause the supply curve to shift right.

6.) Price ceilings often lead to black markets. (TRUE/FALSE)

7.) When minimum wage is above the equilibrium wage what occurs?

A) There will be a shortage of labor

B) There will be no effect on the number of people employed

C) There will be an increase in unemployment rate

D) There will be a decrease in unemployment rate

8.) An excise tax on a good typically reduces the price paid by the consumer (TRUE/FALSE)

9.) If a price ceiling is below the equilibrium price is imposed on a market, it will cause the quantity demanded to rise and the quantity supplied to fall. (TRUE/FALSE)

10.) Price floors often lead to black markets. (TRUE/FALSE)

11.) If an excise tax is imposed on restaurant meals what occurs?

A) Fewer meals will be produced and sold

B) More meals will be produced and sold

C) Market price of the meals will fall

D) Government tax revenue will fall.

1.Under rent controls, Select one:

a. the quantity supplied of rental units is greater than it would be under freely competitive markets.

b. there is a shortage of rental units.

c. there is less government involvement in rental markets overall because there is a better supply of low-income housing.

d. all renters are better off than under freely competitive markets.

2.Which of the following is NOT a function of rental prices?

Select one:

a. To stimulate the construction of new housing

b. To allocate existing scarce housing among different people

c. To provide housing to individuals below market value

d. To ration the existing housing stock

3. price floors are designed to

a. establish a minimum allowable price

b. create shortages when none existed before

c. none of these

d. allow free market prices to be achieved

4.what are the effects of an increase in the minimum wage? who would be most affected?

5. the minimum wage laws seek to

a. help teenagers find work

b. assure that all workers are paid the same wage rate

c. assure a minimum standard of payment for work

d. penalize employers that are not complying with labor laws

6. A black market s a market in which

a. goods are sold at outlet prices

b. sales taxes are effectively doubled

c. sales take place exclusively at outlet prices.

d. goods are traded at price above their legal maximum prices

"Shortages, price controls, and queuesDuring the late 1980s and early 1990s, economic reforms initiated  by  Soviet  president  Mikhail  Gorbachev  began  to  raise  consumer  incomes;  however,  the  Soviet  government continued to impose price ceilings on basic goods like food, clothing, and household goods. As higher income led to increased demand, severe shortages of many goods and long lines at all kinds of stores became common. Finally, in January 1992, a new Russian government under president Boris Yeltsin removed retail price controls on most goods. Within a month, prices more than doubled on average, and lines  disappeared.  Analyze  these  events  using  the  supply  and  demand  model.  First  draw  a  supply  and  demand diagram for some normal good such as butter. Show the market in equilibrium at a price of 1 ruble per kilo before the beginning of the Gorbachev reforms. Draw a horizontal line at that level to represent the  price  ceiling;  no  butter  can  be  sold  for  more  than  1  ruble  per  kilo.  Next  show  the  effect  of  rising  income. Does it shift the supply curve? Does it shift the demand curve? What is the shortage or surplus at the controlled price? After the price control ends, assuming no further shift in the supply and demand curve, what happens to the price? What happens to the shortage or surplus?"