Question 1

Refer to the graph shown. Without government intervention, market forces would result in:

Accepted Answer

A)  800 labor hours demanded, 800 labor hours supplied, and a wage rate of $6.50 per hour. 
B)  500 labor hours demanded, 900 labor hours supplied, and a wage rate of $7.25 per hour. 
C)  1,200 labor hours demanded, 500 labor hours supplied, and a wage rate of $4.50 per hour. 
D)  500 labor hours demanded, 500 labor hours supplied, and a wage rate of $7.25 per hour. 
A)  800 labor hours demanded, 800 labor hours supplied, and a wage rate of $6.50 per hour. 
B)  500 labor hours demanded, 900 labor hours supplied, and a wage rate of $7.25 per hour. 
C)  1,200 labor hours demanded, 500 labor hours supplied, and a wage rate of $4.50 per hour. 
D)  500 labor hours demanded, 500 labor hours supplied, and a wage rate of $7.25 per hour. A

Question 2

Helped by desktop publishing, the number of vintage baseball card forgeries has flooded the market for vintage baseball cards. Dealers left the market for fear of purchasing a phony. What was the effect on the market for vintage baseball cards assuming phonies could not be detected?

Accepted Answer

A)  Demand shifted to the left, supply did not change, price declined, and quantity traded declined. 
B)  Supply shifted to the right, demand did not change, price declined, and quantity traded rose. 
C)  Supply shifted to the right, demand shifted to the left, and price rose. 
D)  Supply shifted to the right, demand shifted to the left, and price declined. 
A)  Demand shifted to the left, supply did not change, price declined, and quantity traded declined. 
B)  Supply shifted to the right, demand did not change, price declined, and quantity traded rose. 
C)  Supply shifted to the right, demand shifted to the left, and price rose. 
D)  Supply shifted to the right, demand shifted to the left, and price declined. D

Question 3

Refer to the graph shown. If buyers must pay $5, quantity demanded will equal:

Accepted Answer

A)  2.5. 
B)  50. 
C)  75. 
D)  100. 
A)  2.5. 
B)  50. 
C)  75. 
D)  100. C

Question 4

The minimum wage is an example of a price floor.

Accepted Answer

A) True 
 B)False

Question 5

New York City has been experiencing a housing emergency for quite some time. Apartments are difficult to come by. In fact, the vacancy rate has been below 5 percent since World War II. The most likely cause of the housing emergency is:

Accepted Answer

A)  a price floor on rent higher than equilibrium price. 
B)  a price ceiling on rent lower than equilibrium price. 
C)  too high incomes in New York City. 
D)  a lack of a rationing mechanism to distribute existing apartments. 
A)  a price floor on rent higher than equilibrium price. 
B)  a price ceiling on rent lower than equilibrium price. 
C)  too high incomes in New York City. 
D)  a lack of a rationing mechanism to distribute existing apartments.

Question 6

A number of states have a minimum wage that is higher than the federal minimum. In those states that impose such a minimum wage, it is more likely that the minimum wage acts as a binding:

Accepted Answer

A)  price floor, causing excess supply in the market. 
B)  price floor, causing excess demand in the market. 
C)  price ceiling, causing excess supply in the market. 
D)  price ceiling, causing excess demand in the market. 
A)  price floor, causing excess supply in the market. 
B)  price floor, causing excess demand in the market. 
C)  price ceiling, causing excess supply in the market. 
D)  price ceiling, causing excess demand in the market.

Question 7

A Wall Street Journal headline reads: "Cigar Shortage Draws New Brands into Market." The shortage resulted from a renewed interest in smoking cigars. What best describes facts behind the headline?

Accepted Answer

A)  Supply has shifted to the right. Price has fallen somewhat, but not enough to equilibrate supply and demand. 
B)  Demand has shifted to the right. Price has risen somewhat, increasing quantity supplied, but not enough to equal quantity demanded. 
C)  Demand has shifted to the right and price has risen to equilibrate supply and demand. 
D)  Supply has shifted to the left. Price has risen somewhat, but not enough to equilibrate supply and demand. 
A)  Supply has shifted to the right. Price has fallen somewhat, but not enough to equilibrate supply and demand. 
B)  Demand has shifted to the right. Price has risen somewhat, increasing quantity supplied, but not enough to equal quantity demanded. 
C)  Demand has shifted to the right and price has risen to equilibrate supply and demand. 
D)  Supply has shifted to the left. Price has risen somewhat, but not enough to equilibrate supply and demand.

Question 8

Suppose that initially, the equations for demand and supply are Qd = 48 − 4P and Qs = 4P − 16, respectively. If the quantity supplied decreases by 4 at every price (so that the supply curve shifts to the left), the equilibrium price will change from:

Accepted Answer

A)  $8 to $7.50. 
B)  $8 to $8.50. 
C)  $8.50 to $7.50. 
D)  $7.50 to $8.50. 
A)  $8 to $7.50. 
B)  $8 to $8.50. 
C)  $8.50 to $7.50. 
D)  $7.50 to $8.50.

Question 9

An increase in price and an indeterminate change in quantity are consistent with a:

Accepted Answer

A)  leftward shift in demand and no shift in supply. 
B)  leftward shift in supply and no shift in demand. 
C)  rightward shift in supply and a leftward shift in demand. 
D)  leftward shift in supply and a rightward shift in demand. 
A)  leftward shift in demand and no shift in supply. 
B)  leftward shift in supply and no shift in demand. 
C)  rightward shift in supply and a leftward shift in demand. 
D)  leftward shift in supply and a rightward shift in demand.

Question 10

Taxi medallions were issued in New York City to:

Accepted Answer

A)  help commuters afford transportation. 
B)  increase the wages of taxi drivers. 
C)  help new immigrants find jobs. 
D)  raise revenue for the city. 
A)  help commuters afford transportation. 
B)  increase the wages of taxi drivers. 
C)  help new immigrants find jobs. 
D)  raise revenue for the city.

Question 11

Suppose a scientific report states that fish contain dangerously high levels of mercury (toxic to humans). At the same time, the price of diesel fuel, used by fishermen to fuel their boats, falls. What is the effect on the market for fish?

Accepted Answer

A)  A decrease in demand and a fall in price and quantity sold 
B)  A decrease in demand and supply; price and quantity sold falls 
C)  A decrease in demand and an increase in supply; price falls but the change in quantity is ambiguous 
D)  A decrease in demand and supply; price and quantity sold rises 
A)  A decrease in demand and a fall in price and quantity sold 
B)  A decrease in demand and supply; price and quantity sold falls 
C)  A decrease in demand and an increase in supply; price falls but the change in quantity is ambiguous 
D)  A decrease in demand and supply; price and quantity sold rises

Question 12

Refer to the following graphs.   A recent report indicates that the device known as the right heart catheter used to diagnose heart conditions poses more risks than previously thought. The effect of the report on the market for right heart catheters is best shown by which of the graphs?

Accepted Answer

A)  I 
B)  II 
C)  III 
D)  IV 
A)  I 
B)  II 
C)  III 
D)  IV

Question 13

When a country imposes a tariff:

Accepted Answer

A)  the domestic price of the imported good falls. 
B)  domestic consumption of the imported good falls. 
C)  domestic production of the good falls. 
D)  domestic production of the good is unchanged. 
A)  the domestic price of the imported good falls. 
B)  domestic consumption of the imported good falls. 
C)  domestic production of the good falls. 
D)  domestic production of the good is unchanged.

Question 14

A decrease in price and an indeterminate change in quantity are consistent with a:

Accepted Answer

A)  leftward shift in demand and no shift in supply. 
B)  leftward shift in supply and no shift in demand. 
C)  rightward shift in supply and a leftward shift in demand. 
D)  leftward shift in supply and a rightward shift in demand. 
A)  leftward shift in demand and no shift in supply. 
B)  leftward shift in supply and no shift in demand. 
C)  rightward shift in supply and a leftward shift in demand. 
D)  leftward shift in supply and a rightward shift in demand.

Question 15

Trade sanctions imposed on Iraq that limited Iraq's production of oil after the 1990 Gulf War on the oil market are best shown graphically with a price ceiling below equilibrium price.

Accepted Answer

A) True 
 B)False

Question 16

The invention of a machine that increases milk production is discovered. If farmers were to decry the effect of this new technology on the price of milk and lobby government to set the price of milk at the price before the invention, what would be the result?

Accepted Answer

A)  Excess demand for milk 
B)  Excess supply of milk 
C)  Neither a shortage nor a surplus of milk 
D)  A decline in the price of milk 
A)  Excess demand for milk 
B)  Excess supply of milk 
C)  Neither a shortage nor a surplus of milk 
D)  A decline in the price of milk

Question 17

An increase in the Federal minimum wage, assuming the minimum is higher than equilibrium wage and that all other things remain constant, will:

Accepted Answer

A)  reduce the number of unemployed. 
B)  increase the number of unemployed. 
C)  shift the supply of labor to the right. 
D)  shift the demand of labor to the right. 
A)  reduce the number of unemployed. 
B)  increase the number of unemployed. 
C)  shift the supply of labor to the right. 
D)  shift the demand of labor to the right.

Question 18

The effect of successful compliance with recycling regulation by homeowners on the market for recycled paper along with a concurrent rise in demand for products made with recycled paper is best shown by a shift to the right in the supply of and demand for recyclable paper and a certain drop in its price.

Accepted Answer

A) True 
 B)False

Question 19

When gasoline prices rose in the early 2000s, the demand for SUVs fell. An economist would predict that SUV prices would decline or at least not rise as quickly.

Accepted Answer

A) True 
 B)False

Question 20

What events most likely explain the following Wall Street Journal headline, "Cities Couldn't Give Away Their Trash; Now They Get Top Dollar"?

Accepted Answer

A)  Quantity supplied initially exceeded quantity demanded, but a subsequent increase in the demand for trash not only eliminated the surplus, but led to a rise in the price of trash. 
B)  Supply initially exceeded demand, but a subsequent increase in the quantity of trash demanded not only eliminated the surplus, but led to a rise in the price of trash. 
C)  Quantity supplied initially exceeded quantity demanded, but a subsequent increase in the supply of trash not only eliminated the surplus, but led to a rise in the price of trash. 
D)  Supply initially exceeded demand, but a subsequent increase in the quantity of trash supplied not only eliminated the surplus, but led to a rise in the price of trash. 
A)  Quantity supplied initially exceeded quantity demanded, but a subsequent increase in the demand for trash not only eliminated the surplus, but led to a rise in the price of trash. 
B)  Supply initially exceeded demand, but a subsequent increase in the quantity of trash demanded not only eliminated the surplus, but led to a rise in the price of trash. 
C)  Quantity supplied initially exceeded quantity demanded, but a subsequent increase in the supply of trash not only eliminated the surplus, but led to a rise in the price of trash. 
D)  Supply initially exceeded demand, but a subsequent increase in the quantity of trash supplied not only eliminated the surplus, but led to a rise in the price of trash.

Exam 5: Using Supply and Demand

Refer to the graph shown. Without government intervention, market forces would result in:

Helped by desktop publishing, the number of vintage baseball card forgeries has flooded the market for vintage baseball cards. Dealers left the market for fear of purchasing a phony. What was the effect on the market for vintage baseball cards assuming phonies could not be detected?

Refer to the graph shown. If buyers must pay $5, quantity demanded will equal:

The minimum wage is an example of a price floor.

New York City has been experiencing a housing emergency for quite some time. Apartments are difficult to come by. In fact, the vacancy rate has been below 5 percent since World War II. The most likely cause of the housing emergency is:

A number of states have a minimum wage that is higher than the federal minimum. In those states that impose such a minimum wage, it is more likely that the minimum wage acts as a binding:

A Wall Street Journal headline reads: "Cigar Shortage Draws New Brands into Market." The shortage resulted from a renewed interest in smoking cigars. What best describes facts behind the headline?

Suppose that initially, the equations for demand and supply are Qd = 48 − 4P and Qs = 4P − 16, respectively. If the quantity supplied decreases by 4 at every price (so that the supply curve shifts to the left), the equilibrium price will change from:

An increase in price and an indeterminate change in quantity are consistent with a:

Taxi medallions were issued in New York City to:

Suppose a scientific report states that fish contain dangerously high levels of mercury (toxic to humans). At the same time, the price of diesel fuel, used by fishermen to fuel their boats, falls. What is the effect on the market for fish?

Refer to the following graphs. A recent report indicates that the device known as the right heart catheter used to diagnose heart conditions poses more risks than previously thought. The effect of the report on the market for right heart catheters is best shown by which of the graphs?

When a country imposes a tariff:

A decrease in price and an indeterminate change in quantity are consistent with a:

Trade sanctions imposed on Iraq that limited Iraq's production of oil after the 1990 Gulf War on the oil market are best shown graphically with a price ceiling below equilibrium price.

The invention of a machine that increases milk production is discovered. If farmers were to decry the effect of this new technology on the price of milk and lobby government to set the price of milk at the price before the invention, what would be the result?

An increase in the Federal minimum wage, assuming the minimum is higher than equilibrium wage and that all other things remain constant, will:

When gasoline prices rose in the early 2000s, the demand for SUVs fell. An economist would predict that SUV prices would decline or at least not rise as quickly.

What events most likely explain the following Wall Street Journal headline, "Cities Couldn't Give Away Their Trash; Now They Get Top Dollar"?

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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