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.

Price controls are usually enacted

• a.

  when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

• b.

  as a means of raising revenue for public purposes.

• c.

  when policymakers detect inefficiencies in a market.

• d.

  All of the above are correct.

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.

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 nonbinding price ceiling is imposed on a market, then

• a.

  the quantity sold in the market will decrease.

• b.

  the quantity sold in the market will stay the same.

• c.

  the price in the market will increase.

• d.

  the price in the market will decrease.

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.

If a price ceiling is a binding constraint on a market, then

• a.

  the equilibrium price must be below the price ceiling.

• b.

  the quantity supplied must exceed the quantity demanded.

• c.

  sellers cannot sell all they want to sell at the price ceiling.

• d.

  buyers cannot buy all they want to buy at the price ceiling.