Question 1

If the government imposes a price ceiling for some product, and a black market subsequently develops that gains control of all of the reduced output of the product, then

Accepted Answer

A)  the quantity demanded will exceed quantity supplied at the black market price. 
B)  the black market price will be lower than the ceiling price. 
C)  consumers will be better off than they would be in the absence of the black market. 
D)  excess profits will flow back to consumers. 
E)  the black market price will be higher than the free- market equilibrium price. 
A)  the quantity demanded will exceed quantity supplied at the black market price. 
B)  the black market price will be lower than the ceiling price. 
C)  consumers will be better off than they would be in the absence of the black market. 
D)  excess profits will flow back to consumers. 
E)  the black market price will be higher than the free- market equilibrium price.

Question 2

FIGURE 5- 7
-Refer to Figure 5- 7. The market for good X is in equilibrium at P0 and Q0. Now suppose the government imposes a at P2. One result would be .

Accepted Answer

A)  price floor; a deadweight loss represented by area 8. 
B)  price ceiling; a deadweight loss represented by areas 5 and 6. 
C)  price floor; an increase in economic surplus represented by area 1. 
D)  price ceiling; an increase in economic surplus represented by areas 2 and 5. 
E)  price floor; a deadweight loss represented by areas 5 and 6. 
A)  price floor; a deadweight loss represented by area 8. 
B)  price ceiling; a deadweight loss represented by areas 5 and 6. 
C)  price floor; an increase in economic surplus represented by area 1. 
D)  price ceiling; an increase in economic surplus represented by areas 2 and 5. 
E)  price floor; a deadweight loss represented by areas 5 and 6.

Question 3

$\text { Demand and Supply Schedules for Chocolate Bars }$
$\begin{array}{|c|c|c|}
\hline \begin{array}{c}
\text { Price } \
(\$)
\end{array} & \begin{array}{c}
\text { Quantity Demanded } \
\text { (thousandsperweek) }
\end{array} & \begin{array}{c}
\text { Quantity Supplied } \
\text { (thousands per week) }
\end{array} \
\hline 2.00 & 1500 & 2100 \
\hline 1.80 & 1600 & 2050 \
\hline 1.60 & 1700 & 2000 \
\hline 1.40 & 1800 & 1950 \
\hline 1.20 & 1900 & 1900 \
\hline 1.00 & 2000 & 1850 \
\hline 0.80 & 2100 & 1800 \
\hline 0.60 & 2200 & 1750 \
\hline 0.40 & 2300 & 1700 \
\hline
\end{array}$
$\text { TABLE 5-1 }$
-Refer to Table 5- 1. Suppose the government imposed a price of $0.60 per chocolate bar. The result would be

Accepted Answer

A)  excess supply of 1750 chocolate bars per week. 
B)  stockpiling of unsold chocolate bars. 
C)  excess supply of 450 chocolate bars per week. 
D)  excess demand of 2200 chocolate bars per week. 
E)  excess demand of 450 chocolate bars per week. 
A)  excess supply of 1750 chocolate bars per week. 
B)  stockpiling of unsold chocolate bars. 
C)  excess supply of 450 chocolate bars per week. 
D)  excess demand of 2200 chocolate bars per week. 
E)  excess demand of 450 chocolate bars per week.

Question 4

The long- run elasticity of supply of rental housing is greater than the short- run elasticity of supply because

Accepted Answer

A)  changes in supply occur only after investment decisions are made regarding, for example, new construction or conversion of rental housing to other uses. 
B)  changes in supply can occur very quickly, especially when rent controls are in place. 
C)  in the long run, landlords have no incentive to alter the supply of rental housing. 
D)  the demand for rental housing is changing continuously. 
E)  investment in new rental housing has such a short payback period. 
A)  changes in supply occur only after investment decisions are made regarding, for example, new construction or conversion of rental housing to other uses. 
B)  changes in supply can occur very quickly, especially when rent controls are in place. 
C)  in the long run, landlords have no incentive to alter the supply of rental housing. 
D)  the demand for rental housing is changing continuously. 
E)  investment in new rental housing has such a short payback period.

Question 5

In the short run, the supply of rental accommodations tends to be

Accepted Answer

A)  very price elastic. 
B)  unit price elastic. 
C)  very or completely price inelastic. 
D)  irrelevant to the housing market price. 
E)  infinitely price elastic. 
A)  very price elastic. 
B)  unit price elastic. 
C)  very or completely price inelastic. 
D)  irrelevant to the housing market price. 
E)  infinitely price elastic.

Question 6

The short- run supply for housing is quite while the long- run supply for housing is quite
.

Accepted Answer

A)  inelastic; elastic 
B)  elastic; inelastic 
C)  flat; steep 
D)  inelastic; inelastic 
E)  elastic; elastic 
A)  inelastic; elastic 
B)  elastic; inelastic 
C)  flat; steep 
D)  inelastic; inelastic 
E)  elastic; elastic

Question 7

Consider a market that is in equilibrium with a market- clearing price. Economic surplus is shown by

Accepted Answer

A)  the area that is both below the demand curve and above the supply curve. 
B)  the area to the right of the market- clearing price and quantity. 
C)  the intersection of the supply and demand curves. 
D)  the area below the supply curve up to the equilibrium quantity and below the demand curve beyond the equilibrium quantity. 
E)  the area that is both above the demand curve and below the supply curve. 
A)  the area that is both below the demand curve and above the supply curve. 
B)  the area to the right of the market- clearing price and quantity. 
C)  the intersection of the supply and demand curves. 
D)  the area below the supply curve up to the equilibrium quantity and below the demand curve beyond the equilibrium quantity. 
E)  the area that is both above the demand curve and below the supply curve.

Question 8

In free and competitive markets, surpluses are eliminated by

Accepted Answer

A)  price decreases. 
B)  price increases. 
C)  government purchases. 
D)  government price controls. 
E)  black markets. 
A)  price decreases. 
B)  price increases. 
C)  government purchases. 
D)  government price controls. 
E)  black markets.

Question 9

Each point on a supply curve shows the _ _ acceptable price to firms for selling that unit; this price reflects to firms from producing that unit.

Accepted Answer

A)  maximum; the additional value 
B)  maximum; the additional cost 
C)  minimum; the equilibrium price 
D)  minimum; the additional value 
E)  minimum; the additional cost 
A)  maximum; the additional value 
B)  maximum; the additional cost 
C)  minimum; the equilibrium price 
D)  minimum; the additional value 
E)  minimum; the additional cost

Question 10

Consider the following demand and supply schedules for some agricultural commodity. $$\begin{array}{l}
\begin{array} { | l | l | l | } 
\hline \text { Price } & \begin{array} { l } 
\text { Quantity } \
\text { Supplied }
\end{array} & \begin{array} { l } 
\text { Quantity } \
\text { Demanded }
\end{array} \
\hline \$ 10 & 300 & 1100 \
\hline \$ 30 & 500 & 900 \
\hline \$ 50 & 700 & 700 \
\hline \$ 70 & 900 & 500 \
\hline \$ 90 & 1100 & 300 \
\hline \$ 110 & 1300 & 100 \
\hline
\end{array}\
\text { TABLE 5- } 2
\end{array}$$
-Refer to Table 5- 2. Suppose we begin in a free- market equilibrium. If the government then imposes a production quota of 500 units, total farmers' income

Accepted Answer

A)  remains unchanged. 
B)  decreases by $500. 
C)  increases by $800. 
D)  decreases by $700. 
E)  increases by $500. 
A)  remains unchanged. 
B)  decreases by $500. 
C)  increases by $800. 
D)  decreases by $700. 
E)  increases by $500.

Question 11

In competitive markets, price floors and price ceilings usually lead to

Accepted Answer

A)  more equitable distributions of commodities. 
B)  surpluses. 
C)  production control by the government. 
D)  shortages. 
E)  a reduction in quantities exchanged. 
A)  more equitable distributions of commodities. 
B)  surpluses. 
C)  production control by the government. 
D)  shortages. 
E)  a reduction in quantities exchanged.

Question 12

FIGURE 5- 3
-Refer to Figure 5- 3. If the government imposes a price floor at P3, the result would be a price and quantity combination of

Accepted Answer

A)  P1 and Q0. 
B)  P3 and Q0. 
C)  P3 and Q3. 
D)  P2and Q1. 
E)  P3 and Q4. 
A)  P1 and Q0. 
B)  P3 and Q0. 
C)  P3 and Q3. 
D)  P2and Q1. 
E)  P3 and Q4.

Question 13

An excess demand for some product is the same thing as

Accepted Answer

A)  back market. 
B)  an excess supply. 
C)  a shortage. 
D)  a surplus. 
E)  price ceiling. 
A)  back market. 
B)  an excess supply. 
C)  a shortage. 
D)  a surplus. 
E)  price ceiling.

Question 14

FIGURE 5- 6
-Refer to Figure 5- 6. The market for good X is in equilibrium at P0 and Q0. Economic surplus is represented by

Accepted Answer

A)  areas 2, 3, 4, 6, 7, 8. 
B)  areas 1, 2, 3, 5, 6. 
C)  areas 2, 3, 4, 6, 7, 8, 9. 
D)  areas 1 and 5. 
E)  areas 1, 2, 3, 4, 5, 6, 7, 8. 
A)  areas 2, 3, 4, 6, 7, 8. 
B)  areas 1, 2, 3, 5, 6. 
C)  areas 2, 3, 4, 6, 7, 8, 9. 
D)  areas 1 and 5. 
E)  areas 1, 2, 3, 4, 5, 6, 7, 8.

Question 15

FIGURE 5- 1
-Refer to Figure 5- 1. To be binding, a legal price ceiling must lie

Accepted Answer

A)  anywhere above 0. 
B)  below P0 but above P3. 
C)  anywhere above P0. 
D)  above P0 but below P2. 
E)  anywhere below P0. 
A)  anywhere above 0. 
B)  below P0 but above P3. 
C)  anywhere above P0. 
D)  above P0 but below P2. 
E)  anywhere below P0.

Question 16

With respect to some commodity, X, if government objectives are to (1) restrict production and (2) keep prices down to protect consumers, then legislated price ceilings will

Accepted Answer

A)  be a dismal failure as neither goal can ever be achieved with price ceilings. 
B)  satisfy both goals as long as a black market does not develop. 
C)  only have an effect on commodities at the international level. 
D)  satisfy only the second goal if a black market develops. 
E)  satisfy both goals but only if a black market develops. 
A)  be a dismal failure as neither goal can ever be achieved with price ceilings. 
B)  satisfy both goals as long as a black market does not develop. 
C)  only have an effect on commodities at the international level. 
D)  satisfy only the second goal if a black market develops. 
E)  satisfy both goals but only if a black market develops.

Question 17

An excess supply of some product is the same thing as

Accepted Answer

A)  scarcity. 
B)  a shortage. 
C)  price floor. 
D)  a surplus. 
E)  an excess demand. 
A)  scarcity. 
B)  a shortage. 
C)  price floor. 
D)  a surplus. 
E)  an excess demand.

Question 18

$\text { Demand and Supply Schedules for Chocolate Bars }$
$\begin{array}{|c|c|c|}
\hline \begin{array}{c}
\text { Price } \
(\$)
\end{array} & \begin{array}{c}
\text { Quantity Demanded } \
\text { (thousandsperweek) }
\end{array} & \begin{array}{c}
\text { Quantity Supplied } \
\text { (thousands per week) }
\end{array} \
\hline 2.00 & 1500 & 2100 \
\hline 1.80 & 1600 & 2050 \
\hline 1.60 & 1700 & 2000 \
\hline 1.40 & 1800 & 1950 \
\hline 1.20 & 1900 & 1900 \
\hline 1.00 & 2000 & 1850 \
\hline 0.80 & 2100 & 1800 \
\hline 0.60 & 2200 & 1750 \
\hline 0.40 & 2300 & 1700 \
\hline
\end{array}$
$\text { TABLE 5-1 }$
-Refer to Table 5- 1. Suppose that as a public- health measure the government wants to reduce the number of chocolate bars that children consume. To achieve this outcome the government could implement which of the following policies?

Accepted Answer

A)  Impose an equilibrium price of $1.20. 
B)  Impose a price ceiling of $2.00. 
C)  Impose a price floor of $1.80. 
D)  Impose an equilibrium price of $1.80. 
E)  Impose a price ceiling of $1.80. 
A)  Impose an equilibrium price of $1.20. 
B)  Impose a price ceiling of $2.00. 
C)  Impose a price floor of $1.80. 
D)  Impose an equilibrium price of $1.80. 
E)  Impose a price ceiling of $1.80.

Question 19

One measure of market inefficiency is

Accepted Answer

A)  the size of the deadweight loss. 
B)  the size of the economic surplus. 
C)  how far quantity exchanged deviates from equilibrium. 
D)  how far market price deviates from equilibrium. 
E)  the difference between total economic surplus and deadweight loss. 
A)  the size of the deadweight loss. 
B)  the size of the economic surplus. 
C)  how far quantity exchanged deviates from equilibrium. 
D)  how far market price deviates from equilibrium. 
E)  the difference between total economic surplus and deadweight loss.

Question 20

Each point on a demand curve shows the quantity. The demand curve therefore shows the product.

Accepted Answer

A)  maximum; cost 
B)  minimum; value 
C)  minimum; cost 
D)  equilibrium; equilibrium price 
E)  maximum; value 
A)  maximum; cost 
B)  minimum; value 
C)  minimum; cost 
D)  equilibrium; equilibrium price 
E)  maximum; value

If the government imposes a price ceiling for some product, and a black market subsequently develops that gains control of all of the reduced output of the product, then

FIGURE 5- 7 -Refer to Figure 5- 7. The market for good X is in equilibrium at P0 and Q0. Now suppose the government imposes a at P2. One result would be .

The long- run elasticity of supply of rental housing is greater than the short- run elasticity of supply because

In the short run, the supply of rental accommodations tends to be

The short- run supply for housing is quite while the long- run supply for housing is quite .

Consider a market that is in equilibrium with a market- clearing price. Economic surplus is shown by

In free and competitive markets, surpluses are eliminated by

Each point on a supply curve shows the _ _ acceptable price to firms for selling that unit; this price reflects to firms from producing that unit.

In competitive markets, price floors and price ceilings usually lead to

FIGURE 5- 3 -Refer to Figure 5- 3. If the government imposes a price floor at P3, the result would be a price and quantity combination of

An excess demand for some product is the same thing as

FIGURE 5- 6 -Refer to Figure 5- 6. The market for good X is in equilibrium at P0 and Q0. Economic surplus is represented by

FIGURE 5- 1 -Refer to Figure 5- 1. To be binding, a legal price ceiling must lie

With respect to some commodity, X, if government objectives are to (1) restrict production and (2) keep prices down to protect consumers, then legislated price ceilings will

An excess supply of some product is the same thing as

One measure of market inefficiency is

Each point on a demand curve shows the quantity. The demand curve therefore shows the product.

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Elasticity

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

Filters

Exam 5: Markets in Action

If the government imposes a price ceiling for some product, and a black market subsequently develops that gains control of all of the reduced output of the product, then

FIGURE 5- 7 -Refer to Figure 5- 7. The market for good X is in equilibrium at P0 and Q0. Now suppose the government imposes a at P2. One result would be .

The long- run elasticity of supply of rental housing is greater than the short- run elasticity of supply because

In the short run, the supply of rental accommodations tends to be

The short- run supply for housing is quite while the long- run supply for housing is quite .

Consider a market that is in equilibrium with a market- clearing price. Economic surplus is shown by

In free and competitive markets, surpluses are eliminated by

Each point on a supply curve shows the _ _ acceptable price to firms for selling that unit; this price reflects to firms from producing that unit.

In competitive markets, price floors and price ceilings usually lead to

FIGURE 5- 3 -Refer to Figure 5- 3. If the government imposes a price floor at P3, the result would be a price and quantity combination of

An excess demand for some product is the same thing as

FIGURE 5- 6 -Refer to Figure 5- 6. The market for good X is in equilibrium at P0 and Q0. Economic surplus is represented by

FIGURE 5- 1 -Refer to Figure 5- 1. To be binding, a legal price ceiling must lie

With respect to some commodity, X, if government objectives are to (1) restrict production and (2) keep prices down to protect consumers, then legislated price ceilings will

An excess supply of some product is the same thing as

One measure of market inefficiency is

Each point on a demand curve shows the quantity. The demand curve therefore shows the product.

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Elasticity

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

Filters