Allocating and Rationing: Sample Quiz

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1. In 2006 there was renewed enthusiasm by politicians and the news media for raising the minimum wage as a way of reducing poverty. Many economists suspect that a higher minimum wage is likely to have little effect on poverty and could actually increase it. What is the major problem these economists see with the minimum wage?

It is a price floor that will make finding jobs more difficult for low-skilled workers.
 Because it takes money from employers and give it to employees, there is no net benefit to society.
 Too few people work at the minimum-wage level for it to matter much.
 Because the increase costs to business will be passed on to consumers, the minimum wage may not help the poor.

2. In a competitive market economy, the group that ultimately decides which goods will be produced is:

business.
 the government.
 the consumers.
 labor.
 resource owners.

3. If a market has a shortage that persists, economists will look for price:

ceilings above equilibrium price.
 ceilings below equilibrium price.
 floors above equilibrium price.
 floors below equilibrium price.

4. During the Second World War the United States rationed with:

coupons.
 central planning.
 queues.
the Lorenz system.

5. When an economist says that every society must have a way to allocate goods, he means that it must:

decide who gets what is produced.
 distribute power in some way.
 find ways to prevent fraud and deceit.
 decide what goods to produce.

6. "When John has too much to drink, he has problems with his job. When he has problems at work, he gets depressed and drinks more." This situation is an example of:

the Lorenz Curve.
 amplifying or positive feedback.
 price floors.
 queuing.

7. A black market:

is an example of normative economics.
 results from price controls.
 is an example of moral hazard.
 illustrates dampening or negative feedback.

8. In a society that relies heavily on coupon rationing, which of the following will NOT be true?

Goods will be more equally distributed than in a system of price rationing.
 The shortages of products will cause consumers to waste time in lines.
 People will be less motivated by money than in a market economy.
 The government will be involved in deciding how much of a good each household receives.

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Copyright Robert Schenk