Use the Following to Answer Questions 4-8

Name: ______Date: ______

1. / A binding price ceiling is designed to:
A) / keep prices low. B) increase the quality of the good
C) / Prevent shortages D) increase efficiency
2. / The government decides to impose a price ceiling on a good, because it thinks the market-determined price is “too high.” If the government imposes the price ceiling below the equilibrium price:
A) / consumers will respond to the lower price and therefore wish to purchase more of the good than at the equilibrium price.
B) / producers will respond to the lower price and therefore offer more units for sale.
C) / consumers will be able to purchase more of the good after the price ceiling is imposed.
D) / it will not be binding.
3. / Which of the following is an example of a black market?
A) / a tenant in a rent-controlled apartment subletting at a higher rent
B) / the purchase of an inferior radio at a department store
C) / waiting in line during the gasoline shortages of the 1970s
D) / the oil market

Use the following to answer questions 4-8:

4. / (Table: Market for a Can of Soda) If the government does not impose a price control, the price of a can of soda will equal:
A) / $0.50. B) $0.75 C) $1.00 D) $1.25
5. / (Table: Market for a Can of Soda) If the government imposes a price ceiling of $0.50 per can of soda, the quantity of soda demanded will be:
A) / 10 units. B) 8 units C) 6 units D) 4 units
6. / (Table: Market for a Can of Soda) If the government imposes a price ceiling of $0.50 per can of soda, there will be:
A) / a shortage of 2 units. B) a shortage of 3 units
C) / a surplus of 3 units. D) equilibrium in the market for soda
7. / (Table: Market for a Can of Soda) If the government imposes a price ceiling of $1.00 per can of soda, the quantity of soda supplied will be:
A) / 7 units. B) 8 units C) 9 units D) 10 units
8. / (Table: Market for a Can of Soda) If the government imposes a price ceiling of $1.00 per can of soda, the quantity of soda demanded will be:
A) / 10 units. B) 8 units C) 6 units D) 4 units

Use the following to answer questions 9-10:

Figure: Supply and Demand

9. / (Figure: Supply and Demand) In the market shown in the figure, a price ceiling of P1 causes:
A) / a shortage equal to the distance AB.
B) / a surplus equal to the distance AB.
C) / a shortage equal to the distance DE.
D) / no change to the market.
10. / (Figure: Supply and Demand) In the market shown in the figure, a price ceiling of P3 causes:
A) / a shortage equal to the distance AB.
B) / a surplus equal to the distance AB.
C) / a shortage equal to the distance DE.
D) / no change to the market.
11. / If the minimum wage is a binding price floor, then:
A) / the number of workers who want to work will be greater than the number of jobs available.
B) / the equilibrium wage will increase.
C) / there will be a job for everyone who is willing to work.
D) / business owners will hire more workers.

Use the following to answer questions 12-13: Figure: Market for Hybrid Cars

12. / Identify the area(s) that represent consumer surplus if there is a binding price floor.
A) / a B) a + b C) a + b + c D) a + b + d
13. / Identify the area(s) that represent deadweight loss if there is a binding price floor.
A) / a + b + c B) b + c + d + e C) c + e D) c

Use the following to answer questions 14-15:

Figure: Supply and Demand in Agriculture

14. / (Figure: Supply and Demand in Agriculture) If a price floor at P4 is set to help improve farm incomes and the government wants to assure farmers that their output will be purchased, the government would have to purchase an amount of output equal to:
A) / Q3 – Q0.
B) / Q3 – Q1.
C) / Q2 – Q1.
D) / Q1 – Q3.
15. / (Figure: Supply and Demand in Agriculture) If the equilibrium price for wheat is defined by the graph, how could the government help increase farmers' income?
A) / A price floor could be set at P4, causing a surplus of Q3 – Q0.
B) / A price floor could be set at P2, causing a surplus of Q2 – Q0.
C) / A price ceiling could be set at P4, causing a surplus of Q2 – Q1.
D) / A price floor could be set at P1, causing a shortage of Q3 – Q0.
16. / TRUE or FALSE: A consumer's willingness to pay for a surfboard is the minimum price at which he or she would buy the surfboard.
17. / TRUE OR FALSE: Producer surplus is the amount sellers receive from the sale of a good minus the minimum amount they are willing to accept for supplying the good.
18. / TRUE OR FALSE: A binding price ceiling will cause a reduction in total surplus.

Use the following to answer questions 19-22:

Figure: Producer Surplus II

19. / (Figure: Producer Surplus II) At a price of P1, producer surplus equals the area:
A) / LMK.
B) / P1K0.
C) / P2M0.
D) / P2P1KM.
20. / (Figure: Producer Surplus II) At a price of P2, producer surplus equals the area:
A) / LMK.
B) / P1K0.
C) / P2M0.
D) / P2P1KM.
21. / (Figure: Producer Surplus II) If the price falls from P2 to P1, producer surplus decreases by the area:
A) / LMK.
B) / P1K0.
C) / P2M0.
D) / P2P1KM.
22. / (Figure: Producer Surplus II) If the price rises from P1 to P2, producer surplus increases by the area:
A) / LMK.
B) / P1K0.
C) / P2M0.
D) / P2P1KM.

Use the following to answer questions 23-25:

23. / (Table: Consumer Surplus and Phantom Tickets) Using the information in the table, if the price of a ticket to see Phantom of the Opera is $50, then Robert's consumer surplus is:
A) / $60. B) $50 C) $10 D) $240
24. / (Table: Consumer Surplus and Phantom Tickets) If the box-office price of a ticket to see Phantom of the Opera is $50, and there is no other market for tickets, then total consumer surplus for the five students is:
A) / $100. B) $175 C) $230 D) $240
25. / (Table: Consumer Surplus and Phantom Tickets) If the box-office price of a ticket to see Phantom of the Opera is $130, and there is no other market for tickets, the total consumer surplus for the five students is:
A) / $150. B) $125 C) $20 D) $0

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