Chapter 6: Government Actions

Question 1

Black Market

Answer 1

illegal market in which the equilibrium price exceeds the legally imposed price ceiling.

Question 2

Minimum wage

Answer 2

regulation that makes the hiring of labour below a specified wage rate illegal. The lowest wage at which a firm may legally hire labour.

Question 3

Price cap

Answer 3

regulation that makes it illegal to charge a price higher than a specified level.

Question 4

Price ceiling

Answer 4

regulation that makes it illegal to charge a price higher than a specified level.

Question 5

Price floor

Answer 5

regulation that makes it illegal to trade at a price lower than a specified level.

Question 6

Production quota

Answer 6

upper limit to the quantity of a good that may be produced in a specified period.

Question 7

Rent ceiling

Answer 7

regulation that makes it illegal to charge a rent higher than a specified level.

Question 8

Search activity

Answer 8

time spent looking for someone with whom to do business.

Question 9

Subsidy

Answer 9

payment made by the government to a producer.

Question 10

Tax incidence

Answer 10

division of the burden of the tax between the buyer and the seller.