The price ceiling the surplus equals units

Please Pay Attention: These are the same questions that you will see in the chapter 4 homework. This questions are just for doing exercise to find the right answers before submitting your final answers. However, you MUST use the quiz on moodle to answer the homework questions.

1.A price ceiling is a government-mandated
A. minimum price below which legal trades cannot be made. B. maximum price above which legal trades cannot be made. C. minimum price above which legal trades cannot be made. D. maximum price below which legal trades cannot be made.

B. Some buyers and sellers will be willing to risk breaking the law in order to exchange the goods.

C. No change will occur in the market.

C. an exclusive contract.

D. a cross subsidy.

06. Refer to Exhibit 4-1. How many fewer units are exchanged because of the price ceiling than ultimately would be exchanged in a free market?

A. 50
B. 60
C. 65
D. 100

09. A price floor is a government-mandated
A. minimum price below which legal trades cannot be made.

B. maximum price above which legal trades cannot be made.

11. Suppose the government sets a price floor that is above the equilibrium price for a given good. It can be said that at the price floor,
A. although sellers are selling all of the product that they desire at this price, the consumers are not able to buy all that they desire.

B. although consumers are purchasing all of the product that they desire at this price, the sellers are not selling all that they desire.

12. Exhibit 4-2 represents the orange juice market. The horizontal line represents a price ceiling imposed by the government. Which of the following is true?

A. At equilibrium, the quantity demanded is 700 units.

B. At the price ceiling the shortage equals 400 units.

C. At the price ceiling the surplus equals 300 units.

D. clear the market for rice.

E. both a and b

D. the price at which exchange legally takes place is P1.

E. both a and b

17. Refer to Exhibit 4-3. If price P3 is a price ceiling, then
A. the price ceiling does not have an effect on the market for good X. B. the price at which exchange takes place is P3.

C. the price at which exchange takes place is P2.

D. Price P3 is the highest price that can legally be charged in the market for good X.

19. Refer to Exhibit 4-3. If price P1 is a price ceiling, then A. the quantity exchanged is Q3.

A. 1.00
B. 2.00
C. 0.75
D. 1.33
E. 0.50

21. If the price of good X is $100 and the price of good Y is $40, it follows that the relative price of one unit of good Y is ___________ unit(s) of good X.

E. a and b

24. If the relative price of one unit of good X is 5 units of good Y, then it follows that the absolute price of good X can be __________ and the absolute price of good Y can be __________.

C. minimum wage will not impact the unskilled labor market.

D. unskilled labor market will change, but we cannot be certain how.

Exhibit 4-8

S

A. Producers’ surplus has risen by (area 2 + 3)
B. Producers’ surplus has fallen by (area 4 + 5)
C. Producers’ surplus has changed by (area 3 - area 5)
D. Producers’ surplus has changed by (area 2 - area 5)

28. Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium, the consumers’ surplus will equal A. area 1 + 2 + 3
B. area 1 + 2 + 4
C. area 3 + 5
D. area 1 + 2 + 3 + 4 + 5
E. area 6

31. Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What has happened to the consumers’ surplus as a result of the imposition of the price floor?

A. consumers’ surplus has gone down by (area 2 + 4) B. consumers’ surplus has risen by (area 2 + 4)
C. consumers’ surplus has gone down by (area 3 - area 5) D. consumers’ surplus has risen by (area 2 + 3)

A. area 5
B. area 6
C. area 1 + 2 + 4
D. area 1

35. Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. How many fewer units of wheat will be sold at the price floor than at the equilibrium price?

38. In the market for a given product, when a price floor is set above the equilibrium price the result will be A. more exchanges made in the market.
B. an increase in the supply of the product.
C. a decrease in the demand for the product.
D. a deadweight loss.

39. Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound. If the price of butter rises to $3.60 and the price of margarine rises to $3, then the absolute price of butter has _______________ and the relative price of butter has _______________.

40. Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $15. The number of units that would be exchanged in this market would be
A. 150, since that is the equilibrium quantity and the price ceiling is above the equilibrium
price.

B. 80, since that is the number of units demanded at the price ceiling.

C. 90, since that is the number of units supplied at the price ceiling (and the quantity supplied is less than the quantity demanded).

D. 155, since that is the average of the quantity demanded and the quantity supplied at the price ceiling.

44. Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $13. _________ units would be exchanged in a free market, and ____________ units would be exchanged with the price ceiling in effect.

A. 150; 220
B. 150; 150
C. 110; 180
D. 150; 90

C. means of determining who gets what of the available limited resources and goods.

D. a and b
E. all of the above

48. A price ceiling is usually set _____________ the equilibrium price.

A. above
B. at
C. below
D. at or above