SOLVED

4.3  Government Intervention in the Market: Price Floors and Price Ceilings 1) When a competitive equilibrium is achieved in a market A) all individuals are better off than they would be if a price ceiling or price floor was imposed by government. B) the total net benefit to society is maximized. C) the total benefits to consumers are equal to the total benefits to producers. D) economic surplus equals the deadweight loss.    2) Refer to Table 4-3. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)? A) W* = $10.50; Q* = 590,000 B) W* = $11.50; Q* = 570,000 C) W* = $9.50; Q* = 570,000 D) W* = $10.50; Q* = 1,200,000 3) Refer to Table 4-3. If a minimum wage of $9.50 an hour is mandated, what is the quantity of labor demanded? A) 40,000 B) 570,000 C) 610,000 D) 1,180,000 4) Refer to Table 4-3. If a minimum wage of $9.50 an hour is mandated, what is the quantity of labor supplied? A) 40,000 B) 570,000 C) 610,000 D) 1,180,000 5) Refer to Table 4-3. If a minimum wage of $9.50 is mandated there will be a A) shortage of 20,000 units of labor. B) surplus of 20,000 units of labor. C) shortage of 40,000 units of labor. D) surplus of 40,000 units of labor. 6) Refer to Table 4-3. Suppose that the quantity of labor demanded decreases by 80,000 at each wage level. What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor? A) W = $8.50; Q = 550,000 B) W = $12.50; Q = 630,000 C) W = $9.50; Q = 570,000 D) W = $9.50; Q = 590,000 7) Which of the following is not a consequence of minimum wage laws? A) Low skilled workers are hurt because minimum wage reduces the number of jobs providing low skilled workers with training. B) Employers will be reluctant to offer low-skill workers jobs with training. C) Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage. D) Some workers benefit when the minimum wage is increased. 8) Rent control is an example of A) a subsidy for low-skilled workers. B) a price floor. C) a price ceiling. D) a black market. 9) To affect the market outcome, a price ceiling A) must be set below the black market price. B) must be set below the legal price. C) must be set below the price floor. D) must be set below the equilibrium price. 10) Government intervention in agricultural markets in the U.S. began in the A) 1920s. B) 1930s. C) 1950s. D) 1970s.