Question

1. A rent control is a regulation that:

1. controls rents at constant levels.
2. ensures that there are apartments available for rent.
3. prevents rents from rising to equilibrium levels.
4. upholds rents to above equilibrium levels

2. When a price ceiling is in effect:

1. all mutually beneficial trades between buyers and sellers occur.
2. it is impossible to say if any, some, or all beneficial trades between buyers or sellers fail to occur.
3. some mutually beneficial trades between buyers and sellers do not occur.
4. no mutually beneficial trades between buyers and sellers occur.

3. How can sellers increase profits when they face a price ceiling?

1. produce and sell more output
2. reduce the quality of the product and provide less customer service
3. charge a higher price for the good
4. charge a lower price for the good to undercut rival sellers

4. New housing takes some time to build, so rent control creates larger shortages in the:

1. short run than in the long run because short-run supply is more elastic.
2. long run than in the short run because short-run supply is more elastic.
3. short run than in the long run because long-run supply is more elastic.
4. long run than in the short run because long-run supply is more elastic.

5. Price floors would create all of the following effects EXCEPT:

1. deadweight loss.
2. wasteful decreases in product quality.
3. surpluses.
4. misallocation of resources.

6. Why do many consumers and politicians advocate for price controls?

1. Most consumers and politicians do not advocate for price controls because they understand their negative consequences.
2. The gains in consumer surplus typically outweigh the loss in producer profits.
3. Price controls are the only way for the poor to obtain certain goods when prices rise.
4. Price controls appear to be a straightforward response to the problem of price increases.

7.Under a binding price ceiling, one expects the quality of a good to:

1. change in an indeterminate direction.
2. rise.
3. fall.
4. remain the same.

7. Price controls cause resources to be misallocated by:

1. distorting the signals of demanders' willingness to pay and eliminating the incentives for suppliers to supply.
2. distorting the incentives for suppliers to supply and eliminating the signals of demanders' willingness to pay.
3. distorting the incentives for demanders to pay and eliminating the signals of suppliers' willingness to supply.
4. distorting the signals of suppliers' willingness to supply and eliminating the incentives for demanders to pay.

8. An economy with permanent, universal price controls is in essence a:

1. market economy.
2. social economy.
3. command economy.
4. free economy.

Answer 1

1. A rent control is a regulation that controls rent at constant levels.

2. When price ceiling is in effect, some mutually beneficial trdaes between buyers and sellers do not occur.

3. When there is a prive ceiling sellers can increase profits by producing and selling more output .

4. Rent control creates more shortages in the short run than in the long run because long run supply is more elastic .

5. Price floors will not cause wasteful decreases in product quality  

6. Consumers and politicians advocate for price controls because they seem to be a straightforward response to the problem of price increases.

7. Under a binding price ceiling one expects the quality of the goods to fall

8. Price controls cause resources to be misallocated by distorting the incentives for suppliers to supply and eliminating the signals of demanders willingness to pay.

9. An economy with universal permanent price controls is a command economy .