7.2 Price Floors
1) A price floor is
A) the highest possible legal price that can be charged for a good or service.
B) usually equal to the equilibrium price established before the government imposed the price floor.
C) the lowest legal price at which a good or service can be traded.
D) a legal price of zero that can be charged for a good or service.
E) almost always equal to the price ceiling.
2) A price floor makes prices
A) below the price floor illegal.
B) above the price floor illegal.
C) below the equilibrium price illegal.
D) above the equilibrium price illegal.
E) None of the above answers is correct.
3) Which of the following is an example of a price floor?
A) a law passed in a city to lower apartment rents by setting the maximum price that can be charged for rent
B) an equilibrium price
C) a minimum wage law
D) a law setting the highest price that can legally be charged for a gallon of gasoline.
E) None of the above answers give examples of a price floor.
4) A price floor set above the equilibrium price
A) creates a surplus.
B) creates a shortage.
C) creates excess demand.
D) balances supply and demand.
E) has no effect.
5) A price floor
A) changes the equilibrium price if it is imposed in black markets.
B) changes the price and quantity if it is set below the equilibrium price.
C) changes the price and quantity if it is set above the equilibrium price.
D) does not create a black market if it is set above the equilibrium price.
E) changes the price and quantity only if it equals the equilibrium price.
6) Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a price floor of $5 per gallon of milk, the
A) quantity supplied of milk falls short of the quantity demanded.
B) quantity supplied of milk exceeds the quantity demanded.
C) supply increases.
D) demand decreases.
E) price of milk remains $4 per gallon.
7) Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a price floor of $5 per gallon of milk,
A) the quantity supplied of milk exceeds the quantity demanded.
B) the quantity supplied of milk falls short of the quantity demanded.
C) the supply increases.
D) the market will not be affected.
E) there will be a shortage of milk.
8) In the labor market, as wages rise, households
A) decrease the quantity of labor supplied.
B) increase the quantity of labor supplied.
C) decrease the quantity of labor demanded.
D) increase the quantity of labor demanded.
E) increase the supply of labor.
9) A stated goal of a minimum wage is to
A) increase government tax revenue.
B) stabilize production costs.
C) boost the incomes of low-wage earners.
D) decrease business profits.
E) increase business profits by making the labor market more efficient.
10) In a competitive labor market, a minimum wage law set above the equilibrium wage rate
A) creates a shortage of labor.
B) causes equality between the quantity of labor supplied and the quantity demanded.
C) creates a surplus of labor.
D) lowers the wage rate paid to workers.
E) has no impact.
