Week 7 Quiz

Created by jacobbogage 

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A consumer's reservation price is:

The highest price that the consumer is willing to pay

When a price floor is imposed below the market price, the result will be that

There will be no effect on the market equilibrium because this is not a binding price
floor.

Consumer surplus:

Is equal to a consumer's reservation price minus the price paid for a product;
Is equal to the amount of economic surplus a consumer has after making a consumption
decision;
The area under the demand curve and above the price paid.

Which of the following statements regarding government intervention in markets is true?

a. Price floors are used to help consumers avoid high market prices.
b. Price ceilings always benefit sellers and harm buyers; society may or may not be harmed.
c. To be effective, a price floor should be set below the market equilibrium price and a price
ceiling should be set above the market equilibrium price.
d. Government intervention in the market is always bad for society because free markets
always allocate society's scarce resources in the most efficient way possible.
e. NONE OF THE ABOVE

Which of the following statements regarding price ceilings is true?

A binding price ceiling may result in an excess demand for a product.

Assuming a market was not initially experiencing a market failure and that buyers and sellers are both responsive to price changes, then the imposition of a binding price ceiling or a binding price floor will always create ______.

A dead weight loss

What do we call the loss of economic surplus that society suffers when the government interferes in a well-functioning free market?

Deadweight loss

A binding price ceiling is usually graphically depicted by a:

Horizontal line below the equilibrium price

According to the article "Economists Fret Over Return to Price Controls,"

Price control on housing (rent control) hurts the young and immigrants;
Price control on housing (rent control) may be the most effective way to destroy a city -
except for bombing;
The South Bronx lost 40% of its housing stock in the 1960s and 1970s as a result of price
controls;
Price control on housing (rent control) is a way politicians can buy votes.

According to the article "Economists Fret Over Return to Price Controls," which of the following individuals is advocating for price controls?

Ted Gullicksen

According to the article "Majority of Americans Support Price Controls on Gas,"

Price controls artificially hold down the price, which reduces the incentive on the part of consumers to use less and the incentive for producers to produce more.

According to the article "Majority of Americans Support Price Controls on Gas,"

Americans' dissatisfaction with high gas prices may result in their emotions superseding their logic.

According to the article "The Futility of Price Controls," Emperor Diocletian tried price
controls in ancient Rome in the early 4th century. Which of the following methods did he employ to try to enforce these price controls?

The death penalty for anyone violating the price controls.

According to the article "The Futility of Price Controls," John F. Kennedy's pressure on the U.S. steel industry to impose informal price controls lead to which result?

An opening for countries such as Japan to gain steel markets and a decline in the U.S. steel industry.

According to the article "With Venezuelan Food Shortages, Some Blame Price Controls," price controls:

Make products hard to find.

According to the article "With Venezuelan Food Shortages, Some Blame Price Controls,"

Price controls mean prices are too low for companies and producers to make a
profit so they produce less, resulting in shortages.

What is a deadweight loss?

Lost economic surplus due to a misallocation of resources

What is the difference between a binding price floor and a non-binding price floor?

Binding price floors are set above the market equilibrium price and non-binding price floors are set below the market equilibrium price.

Which of the following statements is NOT true regarding a price ceiling?

A price ceiling is binding if placed above the market equilibrium price.

Suppose the government decides to impose a binding price floor on the market for apples with the intention of helping apple farmers. If this price floor is binding, then which of the following would we expect to be present in the market?

An excess supply of apples

A seller's reservation price is

The lowest price a seller is willing to accept for a product.

According to the article "Economists Fret Over Return to Price Controls," Vermont
legislators are willing to impose:

A binding price floor on milk.

According to the article "Economists Fret Over Return to Price Controls," which of the following is a justification given by Alaska State Sen. Bill Wielechowski for oil price control?

The oil is produced in Alaska;
The transportation costs are the lowest across the nation;
The gas taxes are the lowest across the nation;
The refineries in Alaska are colluding to keep the oil price high.

According to the article "Majority of Americans Support Price Controls on Gas,"

Gallup polls indicate that a majority of Americans now support drilling in U.S. coastal and wilderness areas;
Right now, gas in the U.S. is being rationed by price;
Gallup polls indicate that some Americans support releasing supplies from the federal government's strategic petroleum reserve.

According to the article "Majority of Americans Support Price Controls on Gas," Gallup
polls indicate that 53% of Americans favor imposing price controls to reduce gas prices. Which of the following price controls is meant in this case?

Binding price ceiling.

According to the article "The Futility of Price Controls," prices of which of the following goods cannot be controlled for any length of time?

The prices of farm commodities due to their dependence on the weather;
Prices of energy and raw materials due to their co-movement with international prices;
Prices of exported goods due to implied stupidity of giving foreigners a gift of lower price
on exported goods.

According to the article "The Futility of Price Controls," what are the reasons that price controls that are still effective in New York City in the form of rent controls are not eliminated?

Because politicians are afraid that elimination of price controls would cause rents to jump;
Because the political power of those benefiting from the price controls outweighs the
political power of those losing from the price controls.

According to the article "With Venezuelan Food Shortages, Some Blame Price Controls," what was the effect of the price controls in Venezuela on the coffee market?

Price controls drastically decreased production of coffee in Venezuela turning the
country from an exporter into an importer of coffee.

According to the article "With Venezuelan Food Shortages, Some Blame Price Controls," what are the problems that Mr. Chavez and his ministers are trying to solve with price controls in V enezuela?

The income gap between poor and rich Venezuelans;
The fact that the poor in Venezuela could not afford a range of foods and other goods.

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