ECO 201 exam 2 Questions and
Answers 100% Pass
For a price ceiling to be a binding constraint on the market, the government must set it
________
.a. at any price because all price ceilings are binding constraints
b. below the equilibrium price
c. precisely at the equilibrium price
d. above the equilibrium price - ✔✔b. below the equilibrium price
A binding price ceiling creates a(n) ________.
a. surplus
b. shortage
c. shortage or a surplus depending on whether the price ceiling is set above or below
the equilibrium price
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
,d. equilibrium - ✔✔b. shortage
Suppose the equilibrium price for apartments is $1,500 per month and the government
imposes rent controls of $900 per month. Which of the following is unlikely to occur as
a result of the rent controls?
a. Landlords may be offered bribes to rent apartments.
b. Landlords may discriminate among apartment renters.
c. There may be long lines of buyers waiting for apartments.
d. The quality of apartments will improve.
e. There will be a shortage of housing. - ✔✔d. The quality of apartments will improve.
A price floor ________.
a. sets a legal minimum on the price at which a good can be sold
b. sets a legal maximum on the price at which a good can be sold
c. is not a binding constraint if it is set above the equilibrium price
d. always determines the price at which a good must be sold - ✔✔a. sets a legal
minimum on the price at which a good can be sold
Which of the following statements about a binding price ceiling is true?
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
,a. The surplus created by the price ceiling is greater in the long run than in the short
run.
b. The shortage created by the price ceiling is greater in the short run than in the long
run.
c. The surplus created by the price ceiling is greater in the short run than in the long
run.
d. The shortage created by the price ceiling is greater in the long run than in the short
run. - ✔✔d. The shortage created by the price ceiling is greater in the long run than in
the short run.
Which side of the market is more likely to lobby government for a price floor?
a. Neither buyers nor sellers desire a price floor.
b. Both buyers and sellers desire a price floor.
c. The sellers
d. The buyers - ✔✔c. The sellers
The surplus caused by a binding price floor will be greatest if ________.
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3
, a. both supply and demand are elastic
b. both supply and demand are inelastic
c. supply is inelastic and demand is elastic
d. demand is inelastic and supply is elastic - ✔✔a. both supply and demand are elastic
Which of the following is an example of a price floor?
a. Rent controls
b. Restricting gasoline prices to $2.00 per gallon when the equilibrium price is $4.00 per
gallon
c. The minimum wage
d. All of the answer choices are price floors. - ✔✔c. The minimum wage
Which of the following statements is true if the government places a price ceiling on
gasoline at $4.00 per gallon and the equilibrium price is $3.00 per gallon?
a. There will be a surplus of gasoline.
b. There will be a shortage of gasoline.
c. A significant increase in the demand for gasoline could cause the price ceiling to
become a binding constraint.
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 4
Answers 100% Pass
For a price ceiling to be a binding constraint on the market, the government must set it
________
.a. at any price because all price ceilings are binding constraints
b. below the equilibrium price
c. precisely at the equilibrium price
d. above the equilibrium price - ✔✔b. below the equilibrium price
A binding price ceiling creates a(n) ________.
a. surplus
b. shortage
c. shortage or a surplus depending on whether the price ceiling is set above or below
the equilibrium price
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
,d. equilibrium - ✔✔b. shortage
Suppose the equilibrium price for apartments is $1,500 per month and the government
imposes rent controls of $900 per month. Which of the following is unlikely to occur as
a result of the rent controls?
a. Landlords may be offered bribes to rent apartments.
b. Landlords may discriminate among apartment renters.
c. There may be long lines of buyers waiting for apartments.
d. The quality of apartments will improve.
e. There will be a shortage of housing. - ✔✔d. The quality of apartments will improve.
A price floor ________.
a. sets a legal minimum on the price at which a good can be sold
b. sets a legal maximum on the price at which a good can be sold
c. is not a binding constraint if it is set above the equilibrium price
d. always determines the price at which a good must be sold - ✔✔a. sets a legal
minimum on the price at which a good can be sold
Which of the following statements about a binding price ceiling is true?
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
,a. The surplus created by the price ceiling is greater in the long run than in the short
run.
b. The shortage created by the price ceiling is greater in the short run than in the long
run.
c. The surplus created by the price ceiling is greater in the short run than in the long
run.
d. The shortage created by the price ceiling is greater in the long run than in the short
run. - ✔✔d. The shortage created by the price ceiling is greater in the long run than in
the short run.
Which side of the market is more likely to lobby government for a price floor?
a. Neither buyers nor sellers desire a price floor.
b. Both buyers and sellers desire a price floor.
c. The sellers
d. The buyers - ✔✔c. The sellers
The surplus caused by a binding price floor will be greatest if ________.
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3
, a. both supply and demand are elastic
b. both supply and demand are inelastic
c. supply is inelastic and demand is elastic
d. demand is inelastic and supply is elastic - ✔✔a. both supply and demand are elastic
Which of the following is an example of a price floor?
a. Rent controls
b. Restricting gasoline prices to $2.00 per gallon when the equilibrium price is $4.00 per
gallon
c. The minimum wage
d. All of the answer choices are price floors. - ✔✔c. The minimum wage
Which of the following statements is true if the government places a price ceiling on
gasoline at $4.00 per gallon and the equilibrium price is $3.00 per gallon?
a. There will be a surplus of gasoline.
b. There will be a shortage of gasoline.
c. A significant increase in the demand for gasoline could cause the price ceiling to
become a binding constraint.
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 4
