Question 1

Which of the following best describes the likely effect of a binding minimum wage on the labor market, according to standard microeconomic theory?

Accepted Answer

It creates a surplus of labor, leading to unemployment among low-skilled workers.

Question 2

Suppose the demand for labor is given by $$Q_d = 100 - 2W$$ and the supply of labor is $$Q_s = 3W - 20. If $$the government sets a minimum wage of $$W = 30$$, what is the resulting unemployment?

Accepted Answer

Unemployment is $$Q_s - Q_d = 70 - 40 = 30$$

Question 3

Which real-world policy is most likely to cause a shortage in the housing market, according to microeconomic theory?

Accepted Answer

Rent control that sets prices below equilibrium.

Question 4

If California passes a law to allow for taller residential buildings near public transport stops, what is the expected effect on the supply curve for housing?

Accepted Answer

The supply curve will shift to the right, increasing housing supply.

Question 5

Which equation best represents the equilibrium condition in a competitive market?

Accepted Answer

$$Q_d = Q_s$$

Question 6

A city implements rent control, capping rents below the market equilibrium. What is a likely long-term consequence?

Accepted Answer

A decrease in the quality and quantity of available rental housing.

Question 7

Which of the following best explains why minimum wage increases may not always reduce employment, according to recent empirical studies?

Accepted Answer

Labor demand may be inelastic, and firms may absorb higher costs without reducing jobs.

Question 8

Suppose a government wants to increase equity in the labor market. Which policy is most likely to sacrifice efficiency for equity?

Accepted Answer

Imposing a binding minimum wage.

Question 9

If the price elasticity of demand for rental housing is $$-0.5$$, what happens to quantity demanded if rent increases by 10%?

Accepted Answer

Quantity demanded decreases by 5%.

Question 10

Which of the following is a plausible reason why rent control policies persist despite evidence of inefficiency?

Accepted Answer

They provide immediate relief to tenants facing high rents.

Question 11

A minimum wage is set above the equilibrium wage. What is the effect on the labor market?

Accepted Answer

A surplus of labor (unemployment) occurs.

Question 12

Which formula would you use to calculate the price elasticity of demand?

Accepted Answer

$$\frac{\%	ext{ change in quantity demanded}}{\%	ext{ change in price}}$$

Question 13

Which of the following is a likely unintended consequence of rent control in New York City, as discussed in the readings?

Accepted Answer

Reduced incentives for landlords to maintain or improve properties.

Question 14

If a city council wants to increase housing density, which policy would most directly achieve this goal?

Accepted Answer

Rezoning land to allow for taller residential buildings.

Question 15

Which of the following best describes the effect of global trade on labor markets in advanced economies?

Accepted Answer

It can create winners and losers, with some workers benefiting and others facing job losses.

Question 16

Suppose the supply of housing is perfectly inelastic. What is the effect of a price ceiling (rent control) on the market?

Accepted Answer

Quantity supplied remains unchanged, but excess demand increases.

Question 17

Which of the following is a common misconception about minimum wage laws?

Accepted Answer

They always reduce employment among low-skilled workers.

Question 18

If the government subsidizes housing construction, what is the expected effect on the equilibrium price and quantity of housing?

Accepted Answer

Equilibrium price decreases and equilibrium quantity increases.

Question 19

Which policy is most likely to address both efficiency and equity in the housing market?

Accepted Answer

Providing targeted subsidies to low-income renters.

Microeconomic Policy Applications: Minimum Wage, Global Trade, and Rent Control

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