Supply, Demand, And Government Policies

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| By Jeffusmc
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Quizzes Created: 5 | Total Attempts: 18,995
Questions: 10 | Attempts: 2,532

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Supply, Demand, And Government Policies - Quiz

You will have 30 minutes to complete the 10 question quiz by Monday night at 11:59 p. M.


Questions and Answers
  • 1. 

    A price floor is binding if:

    • A.

      It is higher than the equilibrium price

    • B.

      It is lower than the equilibrium price

    • C.

      It is equal to the equilibrium price

    • D.

      It is set by the government

    Correct Answer
    A. It is higher than the equilibrium price
    Explanation
    A price floor is binding when it is set at a level higher than the equilibrium price. In a market, the equilibrium price is determined by the intersection of the demand and supply curves. When the government sets a price floor above this equilibrium price, it creates a situation where the price cannot fall below the floor. This results in a surplus of the good or service, as suppliers are willing to sell more at the higher price, but consumers are not willing to buy as much at that price. Therefore, a price floor is only binding when it exceeds the equilibrium price.

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  • 2. 

    Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

    • A.

      With shortages and wait lists, they have no incentive to maintain and improve their property

    • B.

      They know they can never please their tenants

    • C.

      The law no longer requires them to maintain their buildings

    • D.

      That is the government's responsibility

    Correct Answer
    A. With shortages and wait lists, they have no incentive to maintain and improve their property
    Explanation
    Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because of shortages and wait lists. This is because when there is a high demand for rental properties and limited availability, landlords do not have to worry about attracting new tenants or retaining existing ones. As a result, they have no incentive to invest in maintaining or improving their property since they know they will still be able to find tenants regardless of the condition of the housing.

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  • 3. 

    Economists generally hold that rent control is

    • A.

      A common example of a social problem solved by government regulations

    • B.

      A common example of a price ceiling

    • C.

      The most ineffective way to provide affordable housing

    • D.

      The most efficient way to allocate housing

    Correct Answer
    B. A common example of a price ceiling
    Explanation
    Rent control is a common example of a price ceiling because it sets a maximum price that landlords can charge for rent. This government regulation aims to make housing more affordable for tenants by preventing landlords from charging excessively high rents. However, economists generally view rent control as the most ineffective way to provide affordable housing because it can lead to a decrease in the supply and quality of rental housing, as landlords may be less incentivized to maintain or invest in their properties.

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  • 4. 

    Minimum wage laws dictate

    • A.

      The average price employers must pay for labor

    • B.

      The highest price employers may pay for labor

    • C.

      The lowest price employers may pay for labor

    • D.

      The quality of labor which must be supplied

    Correct Answer
    C. The lowest price employers may pay for labor
    Explanation
    Minimum wage laws dictate the lowest price employers may pay for labor. These laws set a legal floor on the wages that employers can offer to their employees. The purpose of minimum wage laws is to ensure that workers are paid a fair and decent wage that allows them to meet their basic needs. By setting a minimum wage, these laws aim to prevent exploitation and ensure that workers receive a reasonable compensation for their work.

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  • 5. 

    If minimum wage is above the equilibrium wage,

    • A.

      The quantity demanded of labor will be greater than the quantity supplied

    • B.

      The quantity demanded of labor will be less than the quantity supplied

    • C.

      The quantity demanded of labor will be equal to the quantity supplied

    • D.

      Anyone who wants a job at the minimum wage can find one

    Correct Answer
    B. The quantity demanded of labor will be less than the quantity supplied
    Explanation
    When the minimum wage is set above the equilibrium wage, it means that the minimum wage is higher than the wage at which the quantity demanded of labor is equal to the quantity supplied. In this situation, the higher minimum wage creates a surplus of labor, as the quantity demanded of labor will be less than the quantity supplied. This means that there are more people willing to work at the higher minimum wage than there are available jobs at that wage level. As a result, there will be unemployment or a higher competition for the limited jobs available at the higher wage.

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  • 6. 

    Policymakers are led to control prices because

    • A.

      They view the market's outcome to be inefficient

    • B.

      They view the market's outcome to be unfair

    • C.

      All politicians enjoy exercising their power

    • D.

      They are required to do so under the Employment Act of 1946

    Correct Answer
    B. They view the market's outcome to be unfair
    Explanation
    Policymakers may choose to control prices because they perceive the market's outcome to be unfair. This means that they believe the distribution of goods and services is inequitable and that certain individuals or groups are being disadvantaged. By implementing price controls, policymakers aim to address this perceived unfairness and create a more equitable distribution of resources.

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  • 7. 

    The initial effect of a tax on the consumer of a good

    • A.

      Is on the supply of that good

    • B.

      Is on the demand for that good

    • C.

      Is on both the supply of the good and the demand for the good

    • D.

      Is on the price of the good

    Correct Answer
    B. Is on the demand for that good
    Explanation
    When a tax is imposed on a consumer of a good, it directly affects the cost of purchasing that good. As a result, the price that consumers are willing to pay for the good decreases, leading to a decrease in the demand for the good. Therefore, the initial effect of a tax on the consumer of a good is on the demand for that good.

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  • 8. 

    If buyers are required to pay a $.10 tax per bag on popcorn, the demand for popcorn will

    • A.

      Shift up by $.10 per bag

    • B.

      Shift up by $.05 per bag

    • C.

      Shift down by $.10 per bag

    • D.

      Shift down by $.05 per bag

    Correct Answer
    C. Shift down by $.10 per bag
    Explanation
    When buyers are required to pay a tax on popcorn, the price of popcorn for the buyers increases by the amount of the tax. This increase in price leads to a decrease in the quantity of popcorn demanded, as consumers are less willing to purchase the popcorn at the higher price. Therefore, the demand for popcorn will shift down by the amount of the tax, which in this case is $.10 per bag.

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  • 9. 

    The initial impact of a tax on the sellers of a product

    • A.

      Is on the supply of the product

    • B.

      Is on the demand for the product

    • C.

      Is on both supply and demand of the product

    • D.

      Is on the price of the product

    Correct Answer
    A. Is on the supply of the product
    Explanation
    When a tax is imposed on the sellers of a product, it directly affects their costs of production. This increase in costs reduces the profitability of selling the product, leading to a decrease in the quantity supplied. As a result, the initial impact of the tax is on the supply of the product. The sellers may choose to pass on the burden of the tax to the consumers by increasing the price of the product, but this is a secondary effect of the tax.

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  • 10. 

    Refer to the graphs given. In which market will the majority of a tax be paid by the consumer?

    • A.

      Market (a)

    • B.

      Market (b)

    • C.

      Market (c)

    • D.

      All of the above

    Correct Answer
    B. Market (b)
    Explanation
    In market (b), the majority of the tax will be paid by the consumer. This can be inferred from the graph, where the demand curve is relatively inelastic compared to the supply curve. When the tax is imposed, the price increases, and the quantity demanded decreases by a smaller proportion compared to the increase in price. As a result, consumers bear a larger burden of the tax as they continue to purchase the product at a higher price.

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  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Oct 14, 2009
    Quiz Created by
    Jeffusmc
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