Chapter 6

Chapter 6 Questions

1. What will be the effect of a non binding price ceiling?

   1. There will be no effect

2. In the event of a binding price ceiling, what is one function that an illegal market services?

   1. It reduces the shortage caused by the price ceiling.

3. Supply & Demand generally become more elastic in the long run, This means that shortages caused by price ceilings become larger in the long run.

4. What is one unintended consequence of rent control?

   1. Landlords may not maintain rental units.

5. A binding price ceiling will have which of the following consequences?

   1. The quantity demanded will always exceed to quantity supplied

6. Do all buyers benefit from a binding price ceiling?

   1. No. A binding price ceiling benefits only some buyers because not all are able to obtain the good in the legal markets at the government-set price.

7. Setting a price ceiling below the equilibrium price can result in 

   1. A shortage, where the quantity demanded exceeds the quantity supplied

8. Which is correct statement about a rent control law?

   1. A rent control law is a price ceiling law that makes apartments cheaper to rent but discourages property owners from renting our apartments,

9. Which of the following is the most likely cause of the government’s implementing a price floor on the market for soybeans?

   1. Produces of soybeans know a price floor will protect their profits and they lobbied Congress for such legislation.

10. A consequence of a price floor is 

    1. An increase in the amount of resources devoted to the production of this good or service.

11. A binding price ceiling is a government-set price that 

    1. Is set below the equilibrium price.

12. Which of the following is a correct statement about a minimum wage law?

    1. It can cause prices to rise as producers pay more for labor.

13. The maximum legal price that can be charged for a good or service is a(n)

    1. Price ceiling.

14. What is the long-run consequence of a price floor law

    1. A surprlus will continue to exist and wil grow larger over time.

15. The rent control is

    1. A price ceiling that applies to the market for apartment rentals.

16. What will happen in a market where a binding price floor is removed?

    1. There will  be downward pressure on the price.

17. Price gouging law is

    1. Temporary ceilings on the prices that sellers can charge during times of emergency.

18. If a price floor is imposed at $15 per unit when the equilibrium market price is $12, there will be

    1. A surplus

19. What are some of the unintended effects of rent control 

    1. Rent control decreases landlords’ profits and subsequently lowers their incentive to invest properly.

20. The price control

    1. An attempt to set prices through government regulations in the market.

21. Why does a surplus exist under a binding price floor?

    1. A price floor makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.

22. Which of the following is a correct statement?

    1. Rent control is an illustration of a price ceiling and the minimum wage is an illustration of a price floor.