Economics Chapters 4 & 6 Test – Flashcards
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Price controls are usually enacted because or why?
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Because policy makers believe that the market price of a good or service is unfair to buyers or sellers.
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Price controls can cause inequities of their own: True or False
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true
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A legal maximum price at which a good can be sold is a price what?
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price ceiling
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A legal minimum price at which a good can be sold is a what?
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price floor
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A price ceiling will be binding only if it is set where?
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below equilibrium
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A price ceiling that is not binding will have what type of effect?
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no effect
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A shortage results when what happens?
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when a binding price ceiling is imposed
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A price floor is binding if it is what?
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If it leads to a surplus
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An example of a price floor is what?
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minimum wage
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A binding price floor causes what?
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a surplus
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Suppose the government has imposed a price ceiling on televisions. Which of the following events could transform the price ceiling from one that is not binding into one that is binding?
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B.
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When policymakers set prices by legal decree, they..
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They are obscuring the signals that normally guide the allocation of society's resources.
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An outcome that can result from either a price ceiling or a price floor is..
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undesirable rationing mechanisms
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Rationing by long lines is an example of what?
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it is inefficient because it wastes buyers time
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In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that what happened?
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The US government maintained a price ceiling on the sale of gasoline.
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When OPEC raised the price of crude oil in the 1970s, it caused the what?
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It caused the supply of gasoline to decrease.
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In the housing market, rent control causes what to happen?
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It causes quantity supply to fall and quantity demanded to rise.
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Which of the following is not a rationing mechanism used by landlords in cities?
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C.
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One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?
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He fears that rent control will eliminate the incentive to maintain buildings leading to a deterioration of the city.
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Which of the following is a correct statement about the labor market?
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A.
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A minimum wage that is set above a market's equilibrium wage will result in what?
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excess supply of labor (unemployment)
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Advocates of the minimum wage argue what?
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They emphasize the low annual incomes of those who work for minimum wage.
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The Earned Income Tax Credit is an example of what?
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wage subsidy
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A ______________ is a group of buyers and sellers of a particular good or service.
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market
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A market in which there are many buyers and many sellers so that each has a negligible impact on the market price is a ________________ market.
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competitive
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If Price goes up, and Demand goes down... this is an example of what economic law?
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law of demand
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If Price goes up, and Supply goes up... this is an example of what economic law?
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law of supply
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The ___________________ is the amount of a good that buyers are willing able to purchase.
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quantity demanded
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A graph of the relationship between the price of a good and the quantity demanded is a _____________ curve.
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demand
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An example of an inferior good might be a bus ride. True or False
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true
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When a fall in the price of one good raises the demand for another good, the two goods are called what?
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compliments
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This represents a movement along the Supply Curve:
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A. price
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A situation in which the market price has reached the level at which quantity supplied equals quantity demanded is called _________________ .
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equilibrium
