Which of the following is true of a price floor?
a. A price floor allows supply and demand to function effectively.
b. A price floor is set such that the price is not allowed to increase above a certain level.
c. A price floor is beneficial to buyers in a market.
d. A price floor usually creates a shortage of a good in a market.
e. A price floor is set such that the price is not allowed to decrease below a certain level.
QUESTION 2When a good is subsidized by the government, the amount of the good produced or consumed declines.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3In a market where the price is restricted by price floors or price ceilings,
a. all sellers will be able to sell everything they produce.
b. surpluses and shortages will exist.
c. all buyers will get what they want.
d. disequilibrium will automatically correct itself.
e. surpluses and shortages will put pressure on the price to move to its equilibrium.
QUESTION 4A pollution tax has the effect of reducing the costs of production for a firm, leading to a rightward shift of the supply curve.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 5Which of the following is not an example of a price ceiling?
a. The Chinese government sets the price of housing in China below equilibrium.
b. The government of the former Soviet Union sets the price on food below those prevailing in the free market.
c. In the 1970s, the Nixon administration imposed wage and price controls, thereby keeping wages and prices from rising.
d. In the late 1970s, the U.S. government required gasoline to be sold at a price per gallon that was below what would have prevailed in a free market.
e. The U.S. government requires that sugar be sold at a price that exceeds the world price of sugar.
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