Question 1

When a hurricane destroys a significant portion of an apple crop:

Accepted Answer

A)  apple prices rise, and quantity sold rises. 
B)  apple prices decline, and quantity sold falls. 
C)  apple prices rise, and quantity sold falls. 
D)  apple prices decline, and quantity sold rises. 
A)  apple prices rise, and quantity sold rises. 
B)  apple prices decline, and quantity sold falls. 
C)  apple prices rise, and quantity sold falls. 
D)  apple prices decline, and quantity sold rises.

Question 2

Suppose that initially, supply is given by the equation Qs = 4P − 16. If, as a result of lower production costs, the quantity supplied increases by 4 at every price, the new supply equation would be:

Accepted Answer

A)  Qs = 8P − 16. 
B)  Qs = P − 16. 
C)  Qs = 4P − 20. 
D)  Qs = 4P − 12. 
A)  Qs = 8P − 16. 
B)  Qs = P − 16. 
C)  Qs = 4P − 20. 
D)  Qs = 4P − 12.

Question 3

In the late 1990s "mad cow" disease caused people to buy less beef. It also caused the EU to ban imported British beef and the British government to ban the sale of older cattle. What is the effect of the following on price and quantity of British beef sold worldwide?

Accepted Answer

A)  The price of British beef falls and quantity sold also falls 
B)  The price of British beef rises and quantity sold falls 
C)  The price of British beef falls initially, but regains some of its losses; quantity sold initially rises, then falls 
D)  The price of British beef falls initially, but regains some of its losses; quantity sold falls 
A)  The price of British beef falls and quantity sold also falls 
B)  The price of British beef rises and quantity sold falls 
C)  The price of British beef falls initially, but regains some of its losses; quantity sold initially rises, then falls 
D)  The price of British beef falls initially, but regains some of its losses; quantity sold falls

Question 4

European Union subsidizes its farmers. How do these subsidies make it difficult for farmers in developing economies to compete in the world farm market?

Accepted Answer

A)  The subsidies set a price ceiling for EU farm goods, keeping prices below the market equilibrium, and lowering the price developing country farmers can receive for their produce. 
B)  The subsidies shift the supply of EU farm goods to the right, lowering world prices of farm goods and the price developing country farmers can receive for their produce. 
C)  The subsidies function as a tariff, causing imports from developing countries to become artificially expensive, thus denying European consumers the benefits of cheap imported food 
D)  The subsidies create ethical problems for Europeans who want to buy farm products from developing countries since the subsidies are raising the price of developing country produce. 
A)  The subsidies set a price ceiling for EU farm goods, keeping prices below the market equilibrium, and lowering the price developing country farmers can receive for their produce. 
B)  The subsidies shift the supply of EU farm goods to the right, lowering world prices of farm goods and the price developing country farmers can receive for their produce. 
C)  The subsidies function as a tariff, causing imports from developing countries to become artificially expensive, thus denying European consumers the benefits of cheap imported food 
D)  The subsidies create ethical problems for Europeans who want to buy farm products from developing countries since the subsidies are raising the price of developing country produce.

Question 5

An increase in price and decrease 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 rightward shift in demand. 
D)  rightward shift in supply and a leftward 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 rightward shift in demand. 
D)  rightward shift in supply and a leftward shift in demand.

Question 6

Refer to the graph shown. Given the quantity restriction of QR, a reduction in demand will:

Accepted Answer

A)  raise equilibrium price. 
B)  raise equilibrium quantity. 
C)  have no impact on market price. 
D)  lower the market price. 
A)  raise equilibrium price. 
B)  raise equilibrium quantity. 
C)  have no impact on market price. 
D)  lower the market price.

Question 7

Refer to the table shown that depicts a third-party payer market. What is the cost of this program to the third-party if a $1 co-pay is established? $$\begin{array} { | c | c | c | } 
\hline \text { Price } & \text { Quantity Demanded } & \text { Quantity Supplied } \
\hline \$ 0 & 1,200 & 0 \
\hline \$ 1 & 600 & 150 \
\hline \$ 2 & 300 & 300 \
\hline \$ 3 & 0 & 450 \
\hline \$ 4 & 0 & 600 \
\hline \$ 5 & 0 & 750 \
\hline \$ 6 & 0 & 900 \
\hline \$ 7 & 0 & 1,050 \
\hline
\end{array}$$

Accepted Answer

A)  $0 
B)  $600 
C)  $1,800 
D)  $2,400 
A)  $0 
B)  $600 
C)  $1,800 
D)  $2,400

Question 8

The most likely impact of an effective price floor is:

Accepted Answer

A)  the supply curve will shift to the right. 
B)  the demand curve will shift to the left. 
C)  a surplus will develop. 
D)  a shortage will develop. 
A)  the supply curve will shift to the right. 
B)  the demand curve will shift to the left. 
C)  a surplus will develop. 
D)  a shortage will develop.

Question 9

Suppose that the market labor supply and labor demand equations are given by Qs = 5W and Qd = 30 − 5W. If the minimum wage were set at $6 an hour, how many people would not be able to find work?

Accepted Answer

A)  30 
B)  20 
C)  10 
D)  0 
A)  30 
B)  20 
C)  10 
D)  0

Question 10

U.S. baby boomers are beginning to retire and withdraw their savings for retirement. What effect should we expect this to have on equilibrium price and quantity of financial assets?

Accepted Answer

A)  Price rises and quantity also rises. 
B)  Price rises and quantity falls. 
C)  Price falls and quantity rises. 
D)  Price falls and quantity also falls. 
A)  Price rises and quantity also rises. 
B)  Price rises and quantity falls. 
C)  Price falls and quantity rises. 
D)  Price falls and quantity also falls.

Question 11

Refer to the graph shown. With a tariff on lumber imported from Canada of $6 per ton, the revenue the government would collect from the import of lumber would be:

Accepted Answer

A)  $0. 
B)  $3,600. 
C)  $4,200. 
D)  $4,800. 
A)  $0. 
B)  $3,600. 
C)  $4,200. 
D)  $4,800.

Question 12

Tariffs can be thought of as indirect:

Accepted Answer

A)  special taxes on domestic producers. 
B)  subsidies to domestic producers. 
C)  subsidies to foreign producers. 
D)  subsidies to domestic consumers. 
A)  special taxes on domestic producers. 
B)  subsidies to domestic producers. 
C)  subsidies to foreign producers. 
D)  subsidies to domestic consumers.

Question 13

The total demand for wheat in the U.S. is given by Qd = 1,750 − 130P. Domestic supply is given by, Qs = 1,000 + 170P. Price is measured in dollars/ton and quantity is measured in thousands of tons. The equilibrium price and quantity of wheat are:

Accepted Answer

A)  $4.78 a ton and 1,129 thousands of tons, respectively. 
B)  $4.78 a ton and 1,813 thousands of tons, respectively. 
C)  $2.50 a ton and 2,075 thousands of tons, respectively. 
D)  $2.50 a ton and 1,425 thousands of tons, respectively. 
A)  $4.78 a ton and 1,129 thousands of tons, respectively. 
B)  $4.78 a ton and 1,813 thousands of tons, respectively. 
C)  $2.50 a ton and 2,075 thousands of tons, respectively. 
D)  $2.50 a ton and 1,425 thousands of tons, respectively.

Question 14

Online music stores such as Apple's iTunes provide an alternative to buying CDs. The introduction of online music stores has shifted:

Accepted Answer

A)  the supply curve of CDs to the right. 
B)  the supply curve of CDs to the left. 
C)  the demand curve of CDs to the right. 
D)  the demand curve of CDs to the left. 
A)  the supply curve of CDs to the right. 
B)  the supply curve of CDs to the left. 
C)  the demand curve of CDs to the right. 
D)  the demand curve of CDs to the left.

Question 15

Consider a market for fish whose market demand and market supply for fish are specified as Qd = 300 − 2.5P and Qs = − 20 + 1.5P, respectively. The government decides to impose a price ceiling of $50 per ton. What would be the resulting market distortion?

Accepted Answer

A)  Shortage of 120 tons of fish 
B)  Shortage of 175 tons of fish 
C)  Surplus of 120 tons of fish 
D)  Surplus of 175 tons of fish 
A)  Shortage of 120 tons of fish 
B)  Shortage of 175 tons of fish 
C)  Surplus of 120 tons of fish 
D)  Surplus of 175 tons of fish

Question 16

Refer to the graph shown. If consumers have a $15 co-pay, total expenditure on the product by both the third party and the consumer will equal:

Accepted Answer

A)  $125. 
B)  $375. 
C)  $750. 
D)  $1,125. 
A)  $125. 
B)  $375. 
C)  $750. 
D)  $1,125.

Question 17

Consider a market for fish whose market demand and market supply for fish are specified as Qd = 300 − 2.5P and Qs = − 20 + 1.5P, respectively. The government decides to impose a price floor of $50 per ton. What would be the resulting market distortion?

Accepted Answer

A)  Shortage of 120 tons of fish 
B)  Shortage of 175 tons of fish 
C)  Surplus of 120 tons of fish 
D)  There would be no market distortion 
A)  Shortage of 120 tons of fish 
B)  Shortage of 175 tons of fish 
C)  Surplus of 120 tons of fish 
D)  There would be no market distortion

Question 18

An effective price ceiling is best defined as a price:

Accepted Answer

A)  imposed by government below equilibrium price. 
B)  imposed by government above equilibrium price. 
C)  higher than any consumer is willing to pay. 
D)  lower than any supplier is willing to sell. 
A)  imposed by government below equilibrium price. 
B)  imposed by government above equilibrium price. 
C)  higher than any consumer is willing to pay. 
D)  lower than any supplier is willing to sell.

Question 19

Which of the following would be the most likely effect of a 75 percent tax on punitive awards by juries?

Accepted Answer

A)  An increase in the number of lawsuits asking for punitive damages 
B)  A decrease in the number of cases settled out of court 
C)  An increase in the incentive for plaintiffs to pursue legal action against individuals or businesses who have caused injury due to gross negligence 
D)  An increase in pretrial settlements since plaintiffs are willing to accept lower settlement amounts that are not taxed 
A)  An increase in the number of lawsuits asking for punitive damages 
B)  A decrease in the number of cases settled out of court 
C)  An increase in the incentive for plaintiffs to pursue legal action against individuals or businesses who have caused injury due to gross negligence 
D)  An increase in pretrial settlements since plaintiffs are willing to accept lower settlement amounts that are not taxed

Question 20

Price ceilings and price floors:

Accepted Answer

A)  cause surpluses and shortages in markets respectively. 
B)  interfere with the allocation function of prices. 
C)  make the rationing function of markets more efficient. 
D)  cause demand and supply curves to shift thus having no effect on the rationing function of prices. 
A)  cause surpluses and shortages in markets respectively. 
B)  interfere with the allocation function of prices. 
C)  make the rationing function of markets more efficient. 
D)  cause demand and supply curves to shift thus having no effect on the rationing function of prices.

Exam 5: Using Supply and Demand

When a hurricane destroys a significant portion of an apple crop:

Suppose that initially, supply is given by the equation Qs = 4P − 16. If, as a result of lower production costs, the quantity supplied increases by 4 at every price, the new supply equation would be:

In the late 1990s "mad cow" disease caused people to buy less beef. It also caused the EU to ban imported British beef and the British government to ban the sale of older cattle. What is the effect of the following on price and quantity of British beef sold worldwide?

European Union subsidizes its farmers. How do these subsidies make it difficult for farmers in developing economies to compete in the world farm market?

An increase in price and decrease in quantity are consistent with a:

Refer to the graph shown. Given the quantity restriction of QR, a reduction in demand will:

Refer to the table shown that depicts a third-party payer market. What is the cost of this program to the third-party if a $1 co-pay is established? Price Quantity Demanded Quantity Supplied \ 0 1,200 0 \ 1 600 150 \ 2 300 300 \ 3 0 450 \ 4 0 600 \ 5 0 750 \ 6 0 900 \ 7 0 1,050

The most likely impact of an effective price floor is:

Suppose that the market labor supply and labor demand equations are given by Qs = 5W and Qd = 30 − 5W. If the minimum wage were set at $6 an hour, how many people would not be able to find work?

U.S. baby boomers are beginning to retire and withdraw their savings for retirement. What effect should we expect this to have on equilibrium price and quantity of financial assets?

Refer to the graph shown. With a tariff on lumber imported from Canada of $6 per ton, the revenue the government would collect from the import of lumber would be:

Tariffs can be thought of as indirect:

The total demand for wheat in the U.S. is given by Qd = 1,750 − 130P. Domestic supply is given by, Qs = 1,000 + 170P. Price is measured in dollars/ton and quantity is measured in thousands of tons. The equilibrium price and quantity of wheat are:

Online music stores such as Apple's iTunes provide an alternative to buying CDs. The introduction of online music stores has shifted:

Consider a market for fish whose market demand and market supply for fish are specified as Qd = 300 − 2.5P and Qs = − 20 + 1.5P, respectively. The government decides to impose a price ceiling of $50 per ton. What would be the resulting market distortion?

Refer to the graph shown. If consumers have a $15 co-pay, total expenditure on the product by both the third party and the consumer will equal:

Consider a market for fish whose market demand and market supply for fish are specified as Qd = 300 − 2.5P and Qs = − 20 + 1.5P, respectively. The government decides to impose a price floor of $50 per ton. What would be the resulting market distortion?

An effective price ceiling is best defined as a price:

Which of the following would be the most likely effect of a 75 percent tax on punitive awards by juries?

Price ceilings and price floors:

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

Filters

Refer to the graph shown. Given the quantity restriction of Q_R, a reduction in demand will: