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WorksheetsPrice Controls and Externalities
Total questions: 21
Worksheet time: 16mins
Name
Class
Date
1.
A price control is:
a)
control of the price of a good by the firm that produces it.
b)
a legal restriction on how high or low a price in a market may go.
c)
an upper limit on the quantity of some good that can be bought or sold.
d)
a tax on the sale of a good that controls the market price.
2.
A binding price ceiling is designed to:
a)
keep prices below the equilibrium level.
b)
increase the quality of the good.
c)
prevent shortages.
d)
increase efficiency.
3.
To be binding, a price ceiling must be set at a price:
a)
lower than the equilibrium price.
b)
higher than the equilibrium price.
c)
the same as the equilibrium price.
d)
Any price ceiling is binding.
4.
A maximum price set below the equilibrium price is a:
a)
demand price.
b)
supply price.
c)
price floor.
d)
price ceiling.
5.
A price ceiling is:
a)
a maximum price sellers are allowed to charge for a good or service.
b)
the difference between the quantity supplied and quantity demanded.
c)
a minimum price buyers are required to pay for a good or service.
d)
the deadweight loss caused by an inefficiently low quantity.
6.
When price controls take the form of maximum prices set below the equilibrium price, they are:
a)
illegal.
b)
equal to the demand price.
c)
price floors.
d)
price ceilings.
7.
A maximum price legislated by the government is called:
a)
a price support.
b)
a price floor.
c)
a price ceiling.
d)
the parity price.
8.
Rent controls usually set a ceiling below the equilibrium price, and therefore:
a)
quantity supplied exceeds the quantity demanded.
b)
quantity demanded exceeds the quantity supplied.
c)
a surplus of rental units will result.
d)
all low-income recipients will clearly be helped.
9.
By definition, in a black market, goods or services are bought and sold:
a)
at night.
b)
without any information about quality.
c)
without any information about price.
d)
illegally.
10.
When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling:
a)
it is inefficient.
b)
the transaction takes place on a black market.
c)
there is an increase in quantity demanded.
d)
there is a decrease in quantity demanded.
11.
In a(n) _____________ market goods or services are bought and sold illegally.
a)
black
b)
uncontrolled
c)
unregulated
d)
unproductive
12.
Economists in general agree that rent controls are:
a)
an efficient and equitable way to help low-income families.
b)
an inefficient but sometimes effective way to help low-income families.
c)
an efficient method of dealing with the shortages caused by price ceilings.
d)
the only way to solve the problem of poverty.
13.
A binding price floor causes:
a)
a shortage in the market.
b)
a surplus in the market.
c)
wasted resources.
d)
a surplus in the market and wasted resources.
14.
A price floor or a price ceiling is an example of:
a)
a quantity control.
b)
a price control.
c)
market equilibrium price.
d)
a quota.
15.
The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the market at a price of $0.40 per pound:
a)
quantity demanded will decrease.
b)
quantity supplied will increase.
c)
there will be a shortage of apples.
d)
the price floor will not affect the market price or output.
16.
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 visit at $20 to control rising health costs but the current market price is $40. What will happen?
a)
More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price.
b)
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.
c)
More people will be able to see the doctor, since the price is lower.
d)
Fewer people will try to see the doctor, and fewer doctors are willing to see patients at that price.
17.
A negative externality:
a)
is any cost above the economic cost.
b)
equals the social cost plus the firm's private cost.
c)
is an uncompensated cost imposed by an individual or firm on others.
d)
equals the opportunity cost minus the social costs.
18.
Whenever human activity generates a concentration of a substance in the environment sufficient to cause harm to living things, it is called:
a)
a free good.
b)
an external shock.
c)
a result of human greed.
d)
pollution.
19.
The socially optimal amount of pollution occurs where the marginal social benefit of pollution is ___________ the marginal social cost of pollution.
a)
equal to
b)
greater than
c)
less than
d)
There is no socially optimal amount of pollution.
20.
The additional cost imposed on society as a whole by an additional unit of pollution is:
a)
the marginal social benefit of pollution.
b)
the marginal social cost of pollution.
c)
the optimal Pigouvian tax.
d)
a technology spillover.
21.
A coal-powered electrical generator that discharges smoke into the air and causes uncompensated costs and discomfort to residents of a town has a(n):
a)
quasi-public good.
b)
external cost.
c)
external benefit.
d)
specific tax.
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