Test Review

These concepts will be on the test tomorrow. I set the testing software to randomly copy 30 questions. Many of the questions are a repeat of a concept. 1. Determine the equilibrium price and quantity in a perfectly competitive market. Remember that a perfectly competitive market has many buyers and sellers, selling a homogeneous good with no control over the price. 2. Determine the effectiveness of a price control that has been placed below the equilibrium price. 3. When the government uses a quota to limit the quantity of shrimp determine the equivalent tax that would arrive at the same quantity. 4. Define a quota rent. In the case of a quota, resources are held captive over and above their opportunity cost. 5. Explain the inefficiencies of both a price floor and a price ceiling. For example, when a rent control is placed on the housing market, is the quality inefficiently low or high? 6. Be able to determine the amount of a surplus when a price floor is imposed on the soda market. 7. A binding price ceiling is a price control that is lower than the equilibrium quantity. This creates a shortage. 8. When given the equilibrium price and quantity, determine what happens to the price and quantity when a tax is imposed on the producer. 9. When a quota is imposed on a market, determine the new price of the good. 10. What happens when a price ceiling is placed above the equilibrium price? 11. In a market where there is a price control, explain how the market will adjust to equilibrium. 12. What is a black market and how does it develop? 13. What happens in the labor market when the government mandates a minimum wage.