Econ 2 Flashcards
(15 cards)
- A binding price floor in a market sets price
a) above the equilibrium price and causes a shortage.
b) above the equilibrium price and causes a surplus.
c) below the equilibrium price and causes a shortage.
d) below the equilibrium price and causes a surplus.
e) below the equilibrium price and causes no adverse effects on quantity
b) above the equilibrium price and causes a surplus
- A binding price floor in the market for apples will cause
a) a shortage of apples.
b) a surplus of apples.
c) the quantity demanded of apples to be greater than the quantity supplied.
d) the price to be higher than the free-market (equilibrium) price
e) Both b and d are correct
e) Both b and d are correct
- Suppose that in Fayetteville the market for coffee, the equilibrium price for a cup is $1.00. Which of
the following is the best example of a binding price floor?
a) The Fayetteville City Council makes it illegal to sell coffee at any price higher than $1.50
b) The Fayetteville City Council makes it illegal to sell coffee at any price lower than $1.50
c) The Fayetteville City Council makes it illegal to sell coffee at any price higher than $0.75
d) The Fayetteville City Council makes it illegal to sell coffee at any price lower than $0.75
e) The Fayetteville consumer group “Fayettevilleans for Cheaper Java” agree to boycott any coffee
shop that sells coffee for more than $1.00
b) The Fayetteville City Council makes it illegal to sell coffee at any price lower than $1.50
- Suppose that in Fayetteville the market for coffee, the equilibrium price for a cup is $1.00. Which of
the following is the best example of a binding price ceiling?
a) The Fayetteville City Council makes it illegal to sell coffee at any price higher than $1.50
b) The Fayetteville City Council makes it illegal to sell coffee at any price lower than $1.50
c) The Fayetteville City Council makes it illegal to sell coffee at any price higher than $0.75
d) The Fayetteville City Council makes it illegal to sell coffee at any price lower than $0.75
e) The Fayetteville consumer group “Fayettevilleans for Cheaper Java” agree to boycott any coffee
shop that sells coffee for more than $1.00
c) The Fayetteville City Council makes it illegal to sell coffee at any price higher than $0.75
Consider the market for gasoline. Buyers
a. and sellers would lobby for a price ceiling.
b. and sellers would lobby for a price floor.
c. would lobby for a price ceiling, whereas sellers would lobby for a price floor.
d. would lobby for a price floor, whereas sellers would lobby for a price ceiling
c. would lobby for a price ceiling, whereas sellers would lobby for a price floor.
Which of the following is correct?
a. Rent control and the minimum wage are both examples of price ceilings.
b. Rent control is an example of a price ceiling, and the minimum wage is an example of a
price floor.
c. Rent control is an example of a price floor, and the minimum wage is an example of a price
ceiling.
d. Rent control and the minimum wage are both examples of price floors.
b. Rent control is an example of a price ceiling, and the minimum wage is an example of a
price floor
The presence of a price control in a market for a good or service usually is an indication that
a. an insufficient quantity of the good or service was being produced in that market to meet the
public’s need.
b. the usual forces of supply and demand were not able to establish an equilibrium price in that
market.
c. policymakers believed that the price that prevailed in that market in the absence of price
controls was unfair to buyers or sellers.
d. policymakers correctly believed that price controls would generate no inequities of their own
once imposed
c. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.
Rent-control laws dictate
a. the exact rent that landlords must charge tenants.
b. only a maximum rent that landlords may charge tenants.
c. only a minimum rent that landlords may charge tenants.
d. both a minimum rent and a maximum rent that landlords may charge tenants.
b. only a maximum rent that landlords may charge tenants.
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
d. supply of gasoline to decrease
When OPEC raised the price of crude oil in the 1970s, it caused the United States’
a. nonbinding price floor on gasoline to become binding.
b. binding price floor on gasoline to become nonbinding.
c. nonbinding price ceiling on gasoline to become binding.
d. binding price ceiling on gasoline to become nonbinding
c. nonbinding price ceiling on gasoline to become binding
Consider the U.S. market for tea, a market in which the government has imposed a nonbinding price
ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling?
a. A government study that shows that consuming tea increases the incidence of cancer.
b. A large increase in the size of the tea plant crop; tea leaves are used to produce tea.
c. Chinese tea plant producers refuse to ship to tea producers in the United States.
d. A sharp drop in consumer income; tea is a normal good
c. Chinese tea plant producers refuse to ship to tea producers in the United States.
Which of the following is true about market failure?
a) For various reasons, sometimes markets, on their own, cannot find the socially efficient level of
quantity (Q*)
b) It is extremely difficult to provide some goods that people value because of their nature, it is hard
to collect from everyone who uses it
c) Sometimes, the behavior of market participants affect parties not involved in the market
d) Market failure and government attempts to help are generally controversial topics
e) All of the above are true of market failure
e) All of the above are true of market failure
Suppose that buyers and sellers make up a market, and through their actions and supply and demand,
they determine the price and quantity of a good/product. However, also suppose that others not
involved (third parties) are affected by the buyers and sellers actions. What type of market failure do
we call this?
a) Lack of competition among sellers or buyers
b) Lack of rational behavior and decision-making
c) Public Goods
d) Unequal distribution of resources or output goods
e) Externalities
e) Externalities
Which of the following is the best example of a negative externality?
a) When you neighbor plays good music out his window while you wash your car
b) When your co-worker received flowers that brighten up the whole office
c) When a person next you is smoking, which makes you cough
d) When someone in your group didn’t help with the group project, but still got the ‘A’ the everyone
got
c) When a person next you is smoking, which makes you cough
Suppose that the production of a good generates a negative impact upon third parties. If the market
does NOT take these negative consequences into account, then what is the expected market price and
quantity?
a) Price and quantity will both be higher than the efficient price and quantity
b) Price will be higher and quantity lower than the efficient price and quantity
c) Price will be lower and quantity higher than the efficient price and quantity
d) Price and quantity will both be lower than the efficient price and quantity
e) Price will be higher than the efficient price, but quantity will be equal to its efficient level
c) Price will be lower and quantity higher than the efficient price and quantity
