Question 1

FIGURE 5- 1
-Refer to Figure 5- 1. If the diagram applies to the labour market, and P3 represents a legislated minimum wage,

Accepted Answer

A)  the labour market is in disequilibrium. 
B)  the amount of labour employed will rise from quantity F to quantity C. 
C)  there will be excess demand of AC in the labour market. 
D)  there will be unemployment of AC in the labour market. 
E)  the free- market equilibrium wage is P0 and the labour market is unaffected by the minimum wage. 
A)  the labour market is in disequilibrium. 
B)  the amount of labour employed will rise from quantity F to quantity C. 
C)  there will be excess demand of AC in the labour market. 
D)  there will be unemployment of AC in the labour market. 
E)  the free- market equilibrium wage is P0 and the labour market is unaffected by the minimum wage.

Question 2

Partial- equilibrium analysis considers

Accepted Answer

A)  all markets simultaneously, recognizing the interactions among the various markets. 
B)  a specific market while ignoring any feedback effects that may come from induced changes in other markets. 
C)  how government planning can improve upon the results of a free market. 
D)  only the existence of a market equilibrium, as if no other markets exist. 
E)  the linkages between markets specifically. 
A)  all markets simultaneously, recognizing the interactions among the various markets. 
B)  a specific market while ignoring any feedback effects that may come from induced changes in other markets. 
C)  how government planning can improve upon the results of a free market. 
D)  only the existence of a market equilibrium, as if no other markets exist. 
E)  the linkages between markets specifically.

Question 3

A binding minimum wage established by the government

Accepted Answer

A)  will be effective only if the minimum wage is set below the free- market equilibrium wage. 
B)  is a price floor that will create a surplus of workers if the labour market is competitive. 
C)  is essentially a price ceiling that creates a shortage of workers. 
D)  will affect adversely only those workers whose value of productivity is greater than this minimum wage. 
E)  will have no effect on the quantity of labour employed. 
A)  will be effective only if the minimum wage is set below the free- market equilibrium wage. 
B)  is a price floor that will create a surplus of workers if the labour market is competitive. 
C)  is essentially a price ceiling that creates a shortage of workers. 
D)  will affect adversely only those workers whose value of productivity is greater than this minimum wage. 
E)  will have no effect on the quantity of labour employed.

Question 4

A legal price ceiling, if it is binding, is a

Accepted Answer

A)  maximum price, above equilibrium, which price is not allowed to exceed. 
B)  maximum price, below equilibrium, which a price is not allowed to exceed. 
C)  any maximum price which price is not allowed to exceed. 
D)  minimum price, above equilibrium, which price is not allowed to fall below. 
E)  minimum price, below equilibrium, which price is not allowed to fall below. 
A)  maximum price, above equilibrium, which price is not allowed to exceed. 
B)  maximum price, below equilibrium, which a price is not allowed to exceed. 
C)  any maximum price which price is not allowed to exceed. 
D)  minimum price, above equilibrium, which price is not allowed to fall below. 
E)  minimum price, below equilibrium, which price is not allowed to fall below.

Question 5

Which of the following statements best differentiates price ceilings and price floors?

Accepted Answer

A)  Price ceilings represent minimum prices, while price floors represent maximum prices. 
B)  Binding price ceilings are always set below the equilibrium price, whereas binding price floors are always set above the equilibrium price. 
C)  Price ceilings and price floors have the same effects. 
D)  Price floors cause shortages to appear, whereas price ceilings have the opposite effect. 
E)  Price ceilings are always effective, whereas price floors are rarely effective. 
A)  Price ceilings represent minimum prices, while price floors represent maximum prices. 
B)  Binding price ceilings are always set below the equilibrium price, whereas binding price floors are always set above the equilibrium price. 
C)  Price ceilings and price floors have the same effects. 
D)  Price floors cause shortages to appear, whereas price ceilings have the opposite effect. 
E)  Price ceilings are always effective, whereas price floors are rarely effective.

Question 6

$\text { Demand and Supply Schedules for Chocolate Bars }$
$\begin{array}{|c|c|c|}
\hline \begin{array}{c}
\text { Price } \
(\$)
\end{array} & \begin{array}{c}
\text { Quantity Demanded } \
\text { (thousandsperweek) }
\end{array} & \begin{array}{c}
\text { Quantity Supplied } \
\text { (thousands per week) }
\end{array} \
\hline 2.00 & 1500 & 2100 \
\hline 1.80 & 1600 & 2050 \
\hline 1.60 & 1700 & 2000 \
\hline 1.40 & 1800 & 1950 \
\hline 1.20 & 1900 & 1900 \
\hline 1.00 & 2000 & 1850 \
\hline 0.80 & 2100 & 1800 \
\hline 0.60 & 2200 & 1750 \
\hline 0.40 & 2300 & 1700 \
\hline
\end{array}$
$\text { TABLE 5-1 }$
-Refer to Table 5- 1. Suppose that as a public health measure the government wants to reduce the number of chocolate bars consumed by children. If the government imposes a price of $1.60 per chocolate bar, how many fewer chocolate bars will be consumed each week, relative to the competitive equilibrium?

Accepted Answer

A)  200 
B)  300 
C)  1800 
D)  1700 
E)  2000 
A)  200 
B)  300 
C)  1800 
D)  1700 
E)  2000

Question 7

A legally imposed upper limit on a price is called

Accepted Answer

A)  a price support. 
B)  a government price. 
C)  a price floor. 
D)  a price ceiling. 
E)  an excise price. 
A)  a price support. 
B)  a government price. 
C)  a price floor. 
D)  a price ceiling. 
E)  an excise price.

Question 8

The diagram below shows the market for apartments in a city. Assume that all apartments are identical.   FIGURE 5- 4
-Refer to Figure 5- 4. The difference between supply curve S1 and supply curve S2 in this market for apartments is that

Accepted Answer

A)  S1 is not affected by a government controlled rental price. 
B)  S2 is not affected by a government controlled rental price. 
C)  S1 is a short- run supply curve and S2 is a long- run supply curve. 
D)  S1 is a long- run supply curve and S2 is a short- run supply curve. 
E)  S1 is more elastic than S2. 
A)  S1 is not affected by a government controlled rental price. 
B)  S2 is not affected by a government controlled rental price. 
C)  S1 is a short- run supply curve and S2 is a long- run supply curve. 
D)  S1 is a long- run supply curve and S2 is a short- run supply curve. 
E)  S1 is more elastic than S2.

Question 9

FIGURE 5- 5
-Refer to Figure 5- 5. At the market- clearing price and quantity of $30 per hour and 4000 hours of gardening services, we can say that

Accepted Answer

A)  economic surplus could be increased at a lower price because there would be more value to consumers. 
B)  the market is inefficient because there are some consumers who are not purchasing at this price. 
C)  the market is efficient because the government has imposed a market- clearing price and quantity. 
D)  economic surplus could be increased at a higher price because firms would generate more revenue. 
E)  economic surplus is maximized and the market is efficient. 
A)  economic surplus could be increased at a lower price because there would be more value to consumers. 
B)  the market is inefficient because there are some consumers who are not purchasing at this price. 
C)  the market is efficient because the government has imposed a market- clearing price and quantity. 
D)  economic surplus could be increased at a higher price because firms would generate more revenue. 
E)  economic surplus is maximized and the market is efficient.

Question 10

The price of a good or a service can be determined by free interaction of demand and supply or by a government price regulation. One important difference between these two price- determining methods is

Accepted Answer

A)  that a regulated price above the equilibrium price will always result in shortages. 
B)  there are no shortages or surpluses at the free- market equilibrium price. 
C)  one is capitalist and the other is communist. 
D)  regulated prices are fairer since more people can then afford the goods or services. 
E)  the government is in the best position to know the needs of the people. 
A)  that a regulated price above the equilibrium price will always result in shortages. 
B)  there are no shortages or surpluses at the free- market equilibrium price. 
C)  one is capitalist and the other is communist. 
D)  regulated prices are fairer since more people can then afford the goods or services. 
E)  the government is in the best position to know the needs of the people.

Question 11

If the equilibrium price for some product is $1000, a price ceiling of $1200 will result in

Accepted Answer

A)  the same general effects as an administered price of $1200. 
B)  massive surpluses of the good. 
C)  the same general effects as a price floor of $1200 
D)  no effects because the price ceiling is not binding at that price. 
E)  the same general effects as a price ceiling of $600. 
A)  the same general effects as an administered price of $1200. 
B)  massive surpluses of the good. 
C)  the same general effects as a price floor of $1200 
D)  no effects because the price ceiling is not binding at that price. 
E)  the same general effects as a price ceiling of $600.

Question 12

General- equilibrium analysis considers

Accepted Answer

A)  how government planning can improve upon the results of the free- market system. 
B)  all markets simultaneously, recognizing the interactions among the various markets. 
C)  the existence of a general market equilibrium as if no specific markets existed. 
D)  the linkages between markets specifically. 
E)  a specific market while ignoring any feedback effects that may come from induced changes in other markets. 
A)  how government planning can improve upon the results of the free- market system. 
B)  all markets simultaneously, recognizing the interactions among the various markets. 
C)  the existence of a general market equilibrium as if no specific markets existed. 
D)  the linkages between markets specifically. 
E)  a specific market while ignoring any feedback effects that may come from induced changes in other markets.

Question 13

If 10 000 snow tires are produced and purchased in the month of November, we can say that economic surplus is

Accepted Answer

A)  the number of snow tires that are produced in excess of the equilibrium quantity. 
B)  the net value that society as a whole receives by producing and consuming those 10 000 snow tires. 
C)  the net value to those consumers who purchased the 10 000 snow tires. 
D)  the profit earned by the producers of those 10 000 snow tires. 
E)  the price at which the tires are sold multiplied by 10 000. 
A)  the number of snow tires that are produced in excess of the equilibrium quantity. 
B)  the net value that society as a whole receives by producing and consuming those 10 000 snow tires. 
C)  the net value to those consumers who purchased the 10 000 snow tires. 
D)  the profit earned by the producers of those 10 000 snow tires. 
E)  the price at which the tires are sold multiplied by 10 000.

Question 14

If an economist is conducting a partial- equilibrium analysis of the market for commuter jets, then he or she is

Accepted Answer

A)  assuming that changes in the prices of substitute goods will not affect the market for commuter jets. 
B)  assuming that the prices of all other goods are constant. 
C)  conducting an irresponsible analysis. 
D)  making an equivalent analysis to a general- equilibrium analysis, but for one market only. 
E)  accounting for the effects of changes in jet fuel prices in the market for commuter jets. 
A)  assuming that changes in the prices of substitute goods will not affect the market for commuter jets. 
B)  assuming that the prices of all other goods are constant. 
C)  conducting an irresponsible analysis. 
D)  making an equivalent analysis to a general- equilibrium analysis, but for one market only. 
E)  accounting for the effects of changes in jet fuel prices in the market for commuter jets.

FIGURE 5- 1 -Refer to Figure 5- 1. If the diagram applies to the labour market, and P3 represents a legislated minimum wage,

Partial- equilibrium analysis considers

A binding minimum wage established by the government

A legal price ceiling, if it is binding, is a

Which of the following statements best differentiates price ceilings and price floors?

A legally imposed upper limit on a price is called

The diagram below shows the market for apartments in a city. Assume that all apartments are identical. FIGURE 5- 4 -Refer to Figure 5- 4. The difference between supply curve S1 and supply curve S2 in this market for apartments is that

FIGURE 5- 5 -Refer to Figure 5- 5. At the market- clearing price and quantity of $30 per hour and 4000 hours of gardening services, we can say that

The price of a good or a service can be determined by free interaction of demand and supply or by a government price regulation. One important difference between these two price- determining methods is

If the equilibrium price for some product is $1000, a price ceiling of $1200 will result in

General- equilibrium analysis considers

If 10 000 snow tires are produced and purchased in the month of November, we can say that economic surplus is

If an economist is conducting a partial- equilibrium analysis of the market for commuter jets, then he or she is

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

FIGURE 5- 1 -Refer to Figure 5- 1. If the diagram applies to the labour market, and P3 represents a legislated minimum wage,

Partial- equilibrium analysis considers

A binding minimum wage established by the government

A legal price ceiling, if it is binding, is a

Which of the following statements best differentiates price ceilings and price floors?

A legally imposed upper limit on a price is called

The diagram below shows the market for apartments in a city. Assume that all apartments are identical. FIGURE 5- 4 -Refer to Figure 5- 4. The difference between supply curve S1 and supply curve S2 in this market for apartments is that

FIGURE 5- 5 -Refer to Figure 5- 5. At the market- clearing price and quantity of $30 per hour and 4000 hours of gardening services, we can say that

The price of a good or a service can be determined by free interaction of demand and supply or by a government price regulation. One important difference between these two price- determining methods is

If the equilibrium price for some product is $1000, a price ceiling of $1200 will result in

General- equilibrium analysis considers

If 10 000 snow tires are produced and purchased in the month of November, we can say that economic surplus is

If an economist is conducting a partial- equilibrium analysis of the market for commuter jets, then he or she is

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