The adjustment of ________ is the rationing mechanism in market economies.

1) In the short run, it is necessary to non-price ration a good whenever ________ exists.

A) excess demand

B) excess supply

C) a surplus

D) market equilibrium

2) Among the methods of nonprice rationing are

A) coupons.

B) favored customers.

C) waiting in line.

D) all of the above

3) The price system

A) automatically distributes scarce goods.

B) is inefficient.

C) requires government help to allocate goods.

D) is the only way to allocate goods.

4) Attempts to bypass price rationing in the market

A) are efficient.

B) are easily administered.

C) are costly.

D) always fail.

5) An example of an ineffective price ceiling would be the government setting the price of wheat at ________ per bushel when the market price is at $5.00 per bushel.

A) $2.25

B) $3.00

C) $4.75

D) $6.00

6) If the equilibrium price of gasoline is $4.00 per gallon and the government will not allow oil companies to charge more than $3.00 per gallon of gasoline, which of the following will happen?

A) Demand must eventually decrease so that the market will come into equilibrium at a price of $3.00. B) Supply must eventually increase so that the market will come into equilibrium at a price of $3.00.

C) A nonprice rationing system such as ration coupons must be used to ration the available supply of gasoline.

D) The market will be in equilibrium at a price of $3.00.

7) An example of a price ceiling would be the government setting the price of sugar

A) above the equilibrium market price.

B) at the equilibrium market price.

C) below the equilibrium market price.

D) none of the above

8) If the market price of coffee is $3.00 per pound but the government will not allow coffee growers to charge more than $2.00 per pound of coffee, which of the following will happen?

A) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.50. B) There will be a shortage of coffee.

C) Supply must eventually increase so that the market will come into equilibrium at a price of $2.50.

D) The market will be in equilibrium at a price of $2.00

9) It is necessary to ration a good whenever ________ exists.

A) excess demand

B) excess supply

C) a surplus

D) market equilibrium

10) The adjustment of ________ is the rationing mechanism in market economies.

A) quantity

B) price

C) supply

D) demand Answer: B Diff: 2 Topic: The Price System: Rationing and Allocating Resources Skill: Conceptual AACSB: Reflective Thinking

11) A price ceiling is

A) a minimum price set by government that sellers must charge for a good.

B) a maximum price set by government that sellers may charge for a good.

C) the difference between the initial equilibrium price and the equilibrium price after a decrease in supply.

D) the minimum price that consumers are willing to pay for a good.

12) A price floor is

A) a minimum price set by government that sellers must charge for a good.

B) a maximum price set by government that sellers may charge for a good.

C) the difference between the initial equilibrium price and the equilibrium price after a decrease in supply.

D) the minimum price that consumers are willing to pay for a good

13) A maximum price, set by the government, that sellers may charge for a good is known as

A) a price floor.

B) a price rationing mechanism.

C) a price ceiling.

D) a subsidy

14) If the price floor is set below the equilibrium price,

A) quantity demanded will be less than quantity supplied.

B) there will be a surplus.

C) there will be a shortage.

D) the floor will be ineffective.

15) If the price ceiling is set above the equilibrium price,

A) quantity demanded will equal quantity supplied.

B) there will be a surplus.

C) there will be a shortage.

D) demand will be less than supply

16) If the price floor is set above the equilibrium price,

A) quantity demanded will equal quantity supplied.

B) there will be a surplus.

C) there will be a shortage.

D) the floor will be ineffective.

17) The government imposes a maximum price on apartments that is ABOVE the equilibrium price. You accurately predict that

A) the law will have no economic impact.

B) the law will create a surplus of apartments.

C) renters will find that landlords start offering to furnish the apartments.

D) landlords are less likely to do routine maintenance work in the apartments

18) The type of non-price rationing that most closely approaches the market outcome is

A) coupon rationing with coupons that can be resold.

B) coupon rationing with coupons that cannot be resold.

C) first-come, first-served basis or queuing.

D) favored customer rationing.

19) The government imposes a price ceiling on gasoline that is below the market price. You are asked to suggest a rationing scheme that will minimize the misallocation of resources. You suggest

A) using rationing coupons that can be resold.

B) using rationing coupons that cannot be resold.

C) using rationing on a first-come, first-served basis.

D) using rationing only on weekdays

20) The government imposes a price ceiling on sugar that is above the market price. You are asked to suggest a rationing scheme that will minimize the misallocation of resources. You suggest

A) using rationing coupons that cannot be resold.

B) using rationing on a first-come, first-served basis.

C) using rationing coupons that can be resold.

D) that no rationing system will be necessary

21) People scalping tickets for a rock concert can sell their tickets for at least a normal profit

A) any time the rock group is popular.

B) when the price set by the concert hall is less than the market equilibrium price.

C) when prices are too high.

D) only when there is excess supply.

TRUE /FALSE

_________22) Goods are allocated in a market system by price rationing. Answer: TRUE Diff: 2 Topic: The Price System: Rationing and Allocating Resources Skill: Conceptual AACSB: Reflective Thinking

_______ 23) Non price rationing will happen whenever there is excess supply in a market.

_______24) When supply is fixed, price is supply determined.

____ ___25) With price rationing those who are both able and willing to pay for a product get it.

_______26) Queuing or waiting in line is an alternative rationing mechanism to price rationing

_______27) A shortage is when there is an excess supply in a market

_______28) In a ʺblack marketʺ goods are traded at market determined prices

_______ 29) Favored customers receive special treatment from dealers during periods of excess demand

_______ 30) Ration coupons are tickets or coupons that give someone a right to purchase a certain amount of a product each time period such as a month. Answer: TRUE Diff: 2 Topic: The Price System