Principles of Economics International Edition 5th Edition By N. Gregory Mankiw – Test Bank

Principles of Economics International Edition 5th Edition By N. Gregory Mankiw – Test Bank

Chapter 6

Supply, Demand, and Government Policies

TRUE/FALSE

1. Economic policies often have effects that their architects did not intend or anticipate.

ANS: T DIF: 1 REF: 6-0

NAT: Analytic LOC: The study of economics and definitions of economics

TOP: Public policy MSC: Definitional

2. Rent-control laws dictate a minimum rent that landlords may charge tenants.

ANS: F DIF: 1 REF: 6-0

NAT: Analytic LOC: Supply and demand TOP: Rent control

MSC: Definitional

3. Minimum-wage laws dictate the lowest wage that firms may pay workers.

ANS: T DIF: 1 REF: 6-0

NAT: Analytic LOC: Labor markets TOP: Minimum wage

MSC: Definitional

4. Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

ANS: T DIF: 1 REF: 6-0

NAT: Analytic LOC: Supply and demand TOP: Price controls

MSC: Definitional

5. Price controls can generate inequities.

ANS: T DIF: 1 REF: 6-0

NAT: Analytic LOC: Supply and demand TOP: Price controls

MSC: Definitional

6. Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

ANS: T DIF: 1 REF: 6-0

NAT: Analytic LOC: Supply and demand TOP: Taxes

MSC: Definitional

7. If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

ANS: T DIF: 1 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Prices

MSC: Definitional

8. At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers want to sell.

ANS: T DIF: 1 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Prices

MSC: Definitional

9. A price ceiling is a legal minimum on the price at which a good or service can be sold.

ANS: F DIF: 1 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings

MSC: Definitional

10. A price ceiling set above the equilibrium price is not binding.

ANS: T DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings

MSC: Interpretive

11. If a price ceiling is not binding, then it will have no effect on the market.

ANS: T DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings

MSC: Interpretive

12. To be binding, a price ceiling must be set above the equilibrium price.

ANS: F DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings

MSC: Interpretive

13. A price ceiling set below the equilibrium price is binding.

ANS: T DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings

MSC: Interpretive

14. A price ceiling set below the equilibrium price causes quantity demanded to exceed quantity supplied.

ANS: T DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings | Shortages

MSC: Interpretive

15. A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied.

ANS: F DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings

MSC: Interpretive

16. A binding price ceiling causes quantity demanded to be less than quantity supplied.

ANS: F DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings | Shortages

MSC: Interpretive

17. A price ceiling set below the equilibrium price causes a shortage in the market.

ANS: T DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings | Shortages

MSC: Interpretive

18. A price ceiling set above the equilibrium price causes a surplus in the market.

ANS: F DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings

MSC: Interpretive

19. A binding price ceiling causes a shortage in the market.

ANS: T DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings | Shortages

MSC: Interpretive

20. When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

ANS: T DIF: 2 REF: 6-1

NAT: Analytic LOC: Supply and demand TOP: Price ceilings | Shortages

MSC: Interpretive