Supply, Demand, And Government Policies
You will have 30 minutes to complete the 10 question quiz by Monday night at 11:59 p. M.
- 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 priceExplanation
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.Rate this question:
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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 propertyExplanation
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.Rate this question:
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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 ceilingExplanation
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.Rate this question:
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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 laborExplanation
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.Rate this question:
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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 suppliedExplanation
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.Rate this question:
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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 unfairExplanation
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.Rate this question:
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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 goodExplanation
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.Rate this question:
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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 bagExplanation
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.Rate this question:
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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 productExplanation
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.Rate this question:
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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.Rate this question:
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Mar 22, 2023Quiz Edited by
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Oct 14, 2009Quiz Created by
Jeffusmc
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