Question 1

Suppose the government imposes a price ceiling on gasoline below the market-clearing price. According to the supply and demand model, what is the most likely outcome?

Accepted Answer

A shortage of gasoline, as quantity demanded exceeds quantity supplied.

Question 2

Which of the following best describes the unintended consequence of rent controls set below the market-clearing rent?

Accepted Answer

A shortage of apartments, as quantity demanded exceeds quantity supplied.

Question 3

If the minimum wage is set above the equilibrium wage in the market for unskilled labor, what is the likely effect on employment?

Accepted Answer

Unemployment will increase because quantity of labor supplied exceeds quantity demanded.

Question 4

Consider the following: In output markets, $$Q 	imes P$$ equals total revenue for businesses. In input markets, $$Q 	imes P$$ equals income for workers. If the wage rate increases and the demand for labor is elastic, what happens to total income for workers?

Accepted Answer

Total income decreases.

Question 5

Which of the following is a normative statement?

Accepted Answer

Rent controls should be implemented to help the poor.

Question 6

A government wants to help the working poor without causing unemployment. Which policy is most likely to achieve this goal without sacrificing market flexibility?

Accepted Answer

Providing wage supplements or training programs.

Question 7

If a price floor is set above the equilibrium price in a market, what will be the result?

Accepted Answer

A surplus, as quantity supplied exceeds quantity demanded.

Question 8

Which of the following best explains why rent controls can lead to inefficiency in the housing market?

Accepted Answer

They reduce total surplus below market-clearing amounts.

Question 9

In the context of efficiency and equity, which of the following statements is correct?

Accepted Answer

There is often a trade-off between efficiency and equity.

Question 10

Suppose the demand for unskilled labor is inelastic. If the minimum wage increases, what is the likely effect on total income for workers who remain employed?

Accepted Answer

Total income increases.

Question 11

Which of the following is an example of a positive (empirical) statement?

Accepted Answer

Rent controls cause apartment shortages.

Question 12

A price ceiling is set at $$P_c$$ below the equilibrium price $$P^*. $$Which area on a standard supply and demand graph represents the deadweight loss caused by this policy?

Accepted Answer

The area between the supply and demand curves from $$Q_c to$$ $$Q^*.$$

Question 13

Which of the following best describes the Robin Hood principle as it relates to rent controls?

Accepted Answer

Taking from the rich (landlords) and giving to the poor (tenants).

Question 14

If a government fixes the price of a good, what adjusts to clear the market?

Accepted Answer

Only quantity adjusts to whichever is less: quantity supplied or quantity demanded.

Question 15

Which of the following is an unintended consequence of a price ceiling on apartments?

Accepted Answer

A shortage of apartments and increased bargaining power for landlords.

Question 16

Which policy is most likely to increase both efficiency and equity in the labor market?

Accepted Answer

Providing training programs to increase worker skills.

Question 17

In the context of health care, what is the main trade-off between the U.S. market-driven system and the Canadian universal system?

Accepted Answer

The Canadian system is more equitable but less efficient.

Question 18

Which of the following best describes the opportunity cost of allowing markets to operate without government intervention?

Accepted Answer

Potential unfairness or inequality.

Question 19

A politician argues that everyone should have the same amount of income at the end, regardless of starting point. This view aligns with which definition of equity?

Accepted Answer

Equal outcomes.

Question 20

If the government wants to maximize total surplus in a market, which policy should it avoid?

Accepted Answer

Imposing price ceilings or price floors.

Government Policy Choices: Price Controls, Market Outcomes, and Equity in Microeconomics

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