203 A price control is when a firm controls the price of the good it produces Incorrect a legal restriction on how high or low a price in a market may go True Answer Correct an upper limit on the quantity of some good that can be bought or sold Incorrect a tax placed on the sale of a good which controls the market price Incorrect A binding price ceiling is designed to keep prices low True Answer Correct increase the quality of the good Incorrect prevent shortages Incorrect increase efficiency Incorrect Rapidly increasing health costs have been a major political concern since at least 1992 Suppose the government sets the maximum price for a normal doctor s visit at 20 to control rising health costs but the current market price is 40 What will happen More people will try to visit the doctor but there will be fewer doctors willing to see patients at that price True Answer Correct The same number of people will try to visit the doctor and the same number of doctors are willing to see patients at that price Incorrect More people will be able to see the doctor since the price is lower Incorrect Fewer people will try to see the doctor and fewer doctors are willing to see patients at that price Incorrect The government decides to impose a price ceiling on a good because it thinks the market determined price is too high If the government imposes the price ceiling below the equilibrium price consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price True Answer Correct producers will respond to the lower price and offer more 204 205 206 207 208 209 210 units for sale Incorrect consumers will be able to purchase more of the good after the price ceiling is imposed Incorrect it will not be binding Incorrect The government imposes a price ceiling below the equilibrium price The price ceiling will cause demand to decrease Incorrect supply to increase Incorrect a shortage of the good True Answer Correct an increase in the quality of the good Incorrect The NFL wants to give the common fan the opportunity to attend the Super Bowl so it sets Super Bowl prices low tickets for a regular seat at Super Bowl XXXVII cost just 400 Scalpers however sell tickets for 1 500 or more If there are no transaction costs to selling a ticket the true cost of a regular ticket to Super Bowl XXXVII is at most 400 Incorrect at least 1 500 True Answer Correct the monetary price paid to obtain the ticket Incorrect 1 100 less than the opportunity cost of a ticket Incorrect Rent controls set a price ceiling below the equilibrium price and therefore quantity supplied exceeds the quantity demanded Incorrect quantity demanded exceeds the quantity supplied True Answer Correct a surplus of rental units will result Incorrect all poor people will be helped Incorrect A price ceiling will have no effect if it is set above the equilibrium price True Answer Correct the equilibrium price is above the price ceiling Incorrect it is set below the equilibrium price Incorrect it creates a shortage Incorrect 211 212 Reference Ref 5 1 Table The Market for Soda Look at the table The Market for Soda If the government does not impose a price control the price of a can of soda will equal 0 50 Incorrect 0 75 True Answer Correct 1 00 Incorrect 1 25 Incorrect Reference Ref 5 1 Table The Market for Soda Look at the table The Market for Soda If the government imposes a price ceiling of 0 50 per can of soda the quantity of soda demanded will be 10 cans True Answer Correct 8 cans Incorrect 6 cans Incorrect 4 cans Incorrect 213 214 Reference Ref 5 1 Table The Market for Soda Look at the table The Market for Soda If the government imposes a price ceiling of 0 50 per can of soda there will be a shortage of 2 cans Incorrect a shortage of 3 cans True Answer Correct a surplus of 3 cans Incorrect equilibrium in the market for soda Incorrect Reference Ref 5 1 Table The Market for Soda Look at the table The Market for Soda If the government imposes a price ceiling of 1 00 per can of soda the quantity of soda supplied will be 7 cans Incorrect 8 cans True Answer Correct 9 cans Incorrect 10 cans Incorrect 215 216 217 Reference Ref 5 1 Table The Market for Soda Look at the table The Market for Soda If the government imposes a price ceiling of 1 00 per can of soda the quantity of soda demanded will be 10 cans Incorrect 8 cans True Answer Correct 6 cans Incorrect 4 cans Incorrect Reference Ref 5 2 Table Market for Fried Twinkies Look at the table The Market for Fried Twinkies In response to popular anger over the high price of fried Twinkies and the extreme wealth of fried Twinkie producers the government imposes a price ceiling of 1 20 per fried Twinkie From this table the price ceiling causes a shortage of 3 000 fried Twinkies True Answer Correct a shortage of 5 000 fried Twinkies Incorrect a surplus of 8 000 fried Twinkies Incorrect a surplus of 3 000 fried Twinkies Incorrect Table Market for Apartments Reference Ref 5 3 Table Market for Apartments Look at the table Market for Apartments If a government price ceiling of 700 is imposed on this market an inefficiency will result in the form of a surplus of 0 6 million apartments Incorrect shortage of 0 6 million apartments True Answer Correct surplus of 0 2 million apartments Incorrect shortage of 0 2 million apartments Incorrect Table Market for Apartments 218 Reference Ref 5 3 Table Market for Apartments Look at the table Market for Apartments If a government price ceiling of 900 is imposed on this market an inefficiency will result in the form of a surplus of 0 6 million apartments Incorrect shortage of 0 6 million apartments Incorrect surplus of 0 2 million apartments Incorrect shortage of 0 2 million apartments True Answer Correct 219 Table Market for Apartments Reference Ref 5 3 Table Market for Apartments Look at the table Market for Apartments If a government price ceiling of 600 is imposed on this market an inefficiency will result in the form of a surplus of 0 6 million apartments Incorrect surplus of 0 8 million apartments Incorrect shortage of 0 8 million apartments True Answer Correct shortage of 0 6 million apartments Incorrect Suppose the Jamaican government sets coffee prices at 1 per pound when the market price is 10 The government s actions will improve efficiency since the low prices will force producers to find cheaper production methods Incorrect result in coffee surpluses even in a coffee rich country Incorrect cause coffee shortages even in a
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