Page 129 - Krugmans Economics for AP Text Book_Neat

2. Refer to the graph provided. A price floor set at $5 will result in a. 30
a. a shortage of 100 units. b. 50
b. a surplus of 100 units. c. 60
c. a shortage of 200 units. d. 80
d. a surplus of 200 units. e. 110
e. a surplus of 50 units. Section 2 Supply and Demand
5. Refer to the graph for question 4. With a minimum wage of
3. Effective price ceilings are inefficient because they $10, how many workers are unemployed (would like to work,
a. create shortages. but are unable to find a job)?
b. lead to wasted resources. a. 30
c. decrease quality. b. 50
d. create black markets. c. 60
e. do all of the above. d. 80
e. 110
4. Refer to the graph provided. If the government establishes a
minimum wage at $10, how many workers will benefit from
the higher wage?
Wage
(per hour) S

$10

7 E

D

0 50 80 110
Number of workers

Tackle the Test: Free-Response Questions
1. Refer to the graph provided to answer the following questions. i. how many workers would supply their labor?
ii. how many workers would be hired?
Wage
(per hour) S l iii. how many workers would want to work that did not want
to work for the equilibrium wage?
$8
iv. how many previously employed workers would no longer
have a job?
E
6
Answer (6 points)
1 point: wage = $6, quantity of labor = 1,800
4
1 point: anywhere above $6
D l
1 point: 2,600 workers would supply their labor
1 point: 1,000 workers would be hired
0 1,000 1,800 2,600 1 point: 800 (the number of workers who would want to work for $8 but did not
Number of workers supply labor for $6)

a. What are the equilibrium wage and quantity of workers in 1 point: 800 (at equilibrium, 1,800 workers were hired, at a wage of $8, 1,000
this market? workers would be hired. 1,800 − 1,000 = 800)
b. For it to be effective, where would the government have to
set a minimum wage? 2. Draw a correctly labeled graph of a housing market in equilibrium.
c. If the government set a minimum wage at $8, On your graph, illustrate an effective legal limit (ceiling) on rent.
Identify the quantity of housing demanded, the quantity of
housing supplied, and the size of the resulting surplus or shortage.
module 8 Supply and Demand: Price Controls (Ceilings and Floors) 87