Macro 4

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Exam

A price control is:

a legal restriction on how high or low a price in a market may go.

The government imposes a price ceiling below the equilibrium price. The price ceiling will cause:

a shortage of the good.

A(n) ________ market is a market in which goods or services are bought and sold illegally.

black

(Figure and Table: Market for Apartments) This figure represents a competitive market for apartments. If a government price ceiling at $700 is now imposed on this market (in the name of fairness), then an inefficiency will result in the form of a:

shortage of 0.6 million apartments.

(Figure and Table: Market for Apartments) This figure represents a competitive market for apartments. If a government price ceiling at $900 is now imposed on this market (in the name of fairness), then an inefficiency will result in the form of a:

shortage of 0.2 million apartments.

If the government feels that a price in the market is too high for the ________, it can impose a ________.

consumers; price ceiling

To be binding, a price ceiling must be set at a price:

lower than the equilibrium price or at a price at which quantity demanded exceeds quantity supplied.

A quota is essentially a:

quantity restriction.

An effective price floor will lead to:

a resulting excess supply or a surplus.

If wages are set above the equilibrium wage in the market, then the number of workers hired will depend upon:

employers.

(Figure: Market I) If a price floor of $15 was imposed on this market, government would need to buy ________ units of the good, and spend a total amount of ________ on its purchase.

5; $75

(Figure: Market I) If a price floor of $6 was imposed on this market, this would:

have no effect on this market.

An effective price ceiling will most likely result in which of the following?

an increase in consumer surplus

Price ceilings may be imposed if:

demanders can make strong moral or political arguments for lower prices.

When a price ceiling is imposed, this results in:

inefficiency due to overconsumption of the good.

An upper limit on the quantity of a good that can be bought and sold is a:

quota limit.

Quota limits cause:

the demand price to be greater than the supply price.

(Table: The Market for Acupuncture) A small town has a thriving market for acupuncture treatments. In an effort to regulate this market, the town requires each acupuncture therapist to purchase a license. Initially, the government issues only enough licenses to provide for 20 treatments per month. This quota creates a quota rent equal to:

$200.

(Table: The Market for Acupuncture) The production quota of 20 acupuncture treatments prevents mutually beneficial transactions because there are ________ additional transactions that people would like to make but would not take place given the quota.

40

If a quota is set above the equilibrium quantity, there will be:

no effect from the quota.

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