Izmir University of Economics

Department of Economics
Econ 101 - Principles of Microeconomics

PROBLEM SET - 3
Multiple Choice Questions
1. A price ceiling is
a. a minimum price set by government that sellers must charge for a good.B
b. a maximum price set by government that sellers may charge for a good.
c. the difference between the initial equilibrium price and the equilibrium price after
a decrease in supply.
d. the minimum price that consumers are willing to pay for a good.

2. A price floor is
a. a government set minimum price that sellers may charge for a good.
b. a government set maximum price that sellers may charge for a good.
c. the difference between the initial equilibrium price and the equilibrium price after
a decrease in supply.
d. the minimum price that buyers are able and willing to pay for a good.

3. Assume the market equilibrium price of rice is $5.00 per pound. If the government
does not allow rice farmers to charge more than $1.00 per pound of rice,
a. there will be a rice surplus.
b. there will be a rice shortage.
c. quantity demanded will equal quantity supplied.
d. the market equilibrium price will move from $5.00 to $1.00.

4. Refer to the Figure below. At the world price of $10 per barrel of oil, the United States
imports __________ million barrels of oil per day.

a. 3 b. 5 c. 8 d. 11
1
Izmir University of Economics
Department of Economics
Econ 101 - Principles of Microeconomics

5. The difference between the maximum amount a person is willing to pay for a good
and its current market price is known as
a. producer surplus.
b. profits.
c. revealed preferences.
d. consumer surplus.

6. You would be willing to pay a maximum of $50 to attend a concert, and you can buy a
ticket for $30. Your consumer surplus is
a. $10
b. $20
c. $30
d. $50

7. The difference between the minimum amount a firm is willing to accept for a good
and its current market price is known as
a. the paradox of value.
b. profits.
c. producer surplus.
d. consumer surplus.

Refer to the information provided in Figure 1 below to answer the questions that follow.

Figure 1

2
Izmir University of Economics
Department of Economics
Econ 101 - Principles of Microeconomics

8. Refer to Figure 4.5. Which of the following areas represents consumer surplus?
a. A
b. B
c. C
d. E

9. Refer to Figure 4.5. Which of the following areas represents producer surplus?
a. A
b. B
c. C
d. E

Refer to the information provided in Figure 2 below to answer the questions that follow.

Figure 2

10. Refer to Figure 2. Which areas amount to a deadweight loss?

a. Areas B+E
b. Areas C+D
c. Areas A+B
d. Areas E+F

11. Refer to Figure 2. Which price maximizes the sum of consumer and producer surplus?
a. 1.50 b. 2.50 c. 3.70 d. Any price greater than 3.75

3
Izmir University of Economics
Department of Economics
Econ 101 - Principles of Microeconomics

Essay Questions

1. Explain how the price system eliminates a shortage and a surplus.

2. List and briefly define some types of non-price rationing systems.