Reference no: EM13148972
During the winter of 1973-74 a general system of wage and price controls (including a price ceiling on gasoline) was in force in the U.S. At the beginning of 1974, some oil-producing countries imposed an oil embargo on the West. In the spring of 1974, price controls were abolished.
1) Refer to situation. Before the oil embargo, the price ceiling on gasoline had no noticeable effect on the market. What is the most likely explanation?
A) The equilibrium price of gasoline was close to the ceiling price and probably below it
B) Twenty years ago, the demand curve for gasoline was quite different from todays
C) Twenty years ago the supply curve for gasoline was quite different from todays
D) The effects of price ceilings are dependent upon the benevolence of the government imposing them
2) Refer to situation. An economist would predict that once price controls were abolished in the spring of 1974,
A) The price of gasoline would decline sharply
B) The surplus of gasoline would vanish
C) The shortage of gasoline would vanish
D) The demand for gasoline would decrease
E) Both C and D
3) If the price of good X is 40 and the price of good Y is 30, it follows that the relative price of one unit of good Y is:
A) 1 unit of X
B) 1.33 units of X
C) .75 units of X
D) 2 units of X
E) not enough information
4) Someone says, even though the equilibrium wage rate is $6 an hour in the unskilled labor market, if we impose a minimum wage of 7 an hour, no one currently working will lose their job. This person must believe that the:
A) Demand curve for unskilled labor is vertical
B) Demand curve for unskilled labor is downward sloping
C) Firms that hire unskilled laborers are earning high profits
D) Firms that hire unskilled laborers have relatively low costs
E) None of the above