ECO111 - CHAPTER 6

Rent-control laws dictate

• a.

  the exact rent that landlords must charge tenants.

• b.

  a maximum rent that landlords may charge tenants.

• c.

  a minimum rent that landlords may charge tenants.

• d.

  a minimum rent and a maximum rent that landlords may charge tenants.

Minimum-wage laws dictate

• a.

  the exact wage that firms must pay workers.

• b.

  a maximum wage that firms may pay workers.

• c.

  a minimum wage that firms may pay workers.

• d.

  a minimum wage and a maximum wage that firms may pay workers.

A legal maximum on the price at which a good can be sold is called a price

• a.

  floor.

• b.

  subsidy.

• c.

  support.

• d.

  ceiling.

A price ceiling is

• a.

  often imposed on markets in which “cutthroat competition” would prevail without a price ceiling.

• b.

  a legal maximum on the price at which a good can be sold.

• c.

  often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling.

• d.

  All of the above are correct.

If a price ceiling is not binding, then

• a.

  the equilibrium price is above the price ceiling.

• b.

  the equilibrium price is below the price ceiling.

• c.

  it has no legal enforcement mechanism.

• d.

  More than one of the above is correct.

If a price ceiling is not binding, then

• a.

  there will be a surplus in the market.

• b.

  there will be a shortage in the market.

• c.

  the market will be less efficient than it would be without the price ceiling.

• d.

  there will be no effect on the market price or quantity sold.

A price ceiling will be binding only if it is set

• a.

  equal to the equilibrium price.

• b.

  above the equilibrium price.

• c.

  below the equilibrium price.

• d.

  either above or below the equilibrium price.

To say that a price ceiling is binding is to say that the price ceiling

• a.

  results in a surplus.

• b.

  is set above the equilibrium price.

• c.

  causes quantity demanded to exceed quantity supplied.

• d.

  All of the above are correct.

A shortage results when

• a.

  a nonbinding price ceiling is imposed on a market.

• b.

  a nonbinding price ceiling is removed from a market.

• c.

  a binding price ceiling is imposed on a market.

• d.

  a binding price ceiling is removed from a market.

When OPEC raised the price of crude oil in the 1970s, it caused the

• a.

  demand for gasoline to increase.

• b.

  demand for gasoline to decrease.

• c.

  supply of gasoline to increase.

• d.

  supply of gasoline to decrease.