Price Quantity demanded Quantity Supplied

100 0 200

80 50 150

60 100 100

40 150 50

20 200 0

Question 1: If the government mandates that prices in this market can fall no lower than $50, this results in

a. a situation of excess quantity of schmoos demanded.

b. a situation of excess quantity schmoos supplied.

c. fewer than 100 units of schmoos being supplied in the market

d. no effect in the schmoo market, since the equilibrium price is greater than $50.

Question 2: Suppose a price ceiling of $40 is imposed in this market.This results in

a. an excess demand of 100 units.

b. an excess supply of 100 units.

c. no effect in this market, since the price ceiling is set below the equilibrium price.

d. a temporary shortage of the good while prices rise, and the quantity demanded and the quantity supplied adjust until they are equal.

Question 3: If the price ceiling is set at $40 in this market, then

a. too few resources are being allocated to the production of this good.

b. too many resources are being allocated to the production of this good.

Question 4: If the price ceiling is set at $40 in this market, the loss in total surplus (deadweight loss) in this market equals

a. 2000

b. 1000

c. 500

d. 200

Question 5: The consumer surplus without the price ceiling is $_______.The consumer surplus with the price ceiling is $_______.

a. 2000 750

b. 2000 500

c. 1500 750

d. 1500 500

Question 6: The producer surplus without the price ceiling is $_______.The producer surplus with the price ceiling is $_______.

a. 2000 750

b. 2000 500

c. 1500 750

d. 1500 500

Question 7: An effective price floor prevents suppliers from competing for customers through lower prices, so suppliers compete for customers by offering goods with

a. greater quality than consumers desire.

b. lower quality than consumers desire.

Question 8: Which of the following statements are true?

I. Price ceilings are inefficient because they result in too much of the good being produced in the market.

II. Price ceilings are inefficient because they result in the production of goods with too low a level of quality.

III. Price ceilings are inefficient because they lead to wasted resources since they increase the amount of time consumers must search for the price-controlled good.

a. Statement I is true

b. Statement II is true

C. Statements I and II is true

D. Statements II and III are true