Question 1

If the government imposes an excise tax on a good equal to $5 per unit and the demand curve for this good is vertical, the supply of this good will shift:

Accepted Answer

A) upward and the price will increase by $5. 
B) upward and the price will increase by less than $5. 
C) downward and the price will decrease by $5. 
D) downward and the price will decrease by less than $5. 
A) upward and the price will increase by $5. 
B) upward and the price will increase by less than $5. 
C) downward and the price will decrease by $5. 
D) downward and the price will decrease by less than $5.

Question 2

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 3

Refer to the graph shown that depicts a third-party payer market for prescription drugs. If the co-payment is $2 per pill, what will be the total market expenditures on prescription drugs?

Accepted Answer

A) $30 
B) $90 
C) $270 
D) $540 
A) $30 
B) $90 
C) $270 
D) $540

Question 4

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 5

When people heard that there was a shortage of specialty dolls, they wanted even more of them. Because of this effect the pressure on the price of these dolls increased. The price of the dolls remained the same however. Thus, the shortage of these dolls:

Accepted Answer

A) increased. 
B) decreased. 
C) did not change. 
D) may have increased or decreased. 
A) increased. 
B) decreased. 
C) did not change. 
D) may have increased or decreased.

Question 6

Which of the following pairs of equations describes the supply and demand curves given in the accompanying demand and supply tables? $$\begin{array} { | c | c | c | } 
\hline \text { Price } & \text { Quantity Supplied } & \text { Quantity Demanded } \
\hline \$ 0 & 0 & 3 \
\hline \$ 1 & 0 & 2 \
\hline \$ 2 & 1 & 1 \
\hline \$ 3 & 2 & 0 \
\hline \$ 4 & 3 & 0 \
\hline \$ 5 & 4 & 0 \
\hline
\end{array}$$

Accepted Answer

A) Qs = 1; Qd = 1 ? 3P, respectively 
B) Qs = P; Qd = 3 ? 3P, respectively 
C) Qs = P + 1; Qd = 3 ? P, respectively 
D) Qs = P ? 1; Qd = 3 ? P, respectively 
A) Qs = 1; Qd = 1 ? 3P, respectively 
B) Qs = P; Qd = 3 ? 3P, respectively 
C) Qs = P + 1; Qd = 3 ? P, respectively 
D) Qs = P ? 1; Qd = 3 ? P, respectively

Question 7

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 8

When the polio vaccine first became available in the United States, the government controlled the price with an effective price ceiling. Production of the vaccine was not sufficient to fill all orders and the government had to regulate its distribution. Had the vaccine been sold without government intervention, the shortage would have been eliminated by price:

Accepted Answer

A) falling, quantity demanded decreasing, and supply increasing. 
B) falling, demand decreasing, and supply increasing. 
C) rising, demand decreasing, and quantity supplied increasing. 
D) rising, quantity demanded decreasing, and quantity supplied increasing. 
A) falling, quantity demanded decreasing, and supply increasing. 
B) falling, demand decreasing, and supply increasing. 
C) rising, demand decreasing, and quantity supplied increasing. 
D) rising, quantity demanded decreasing, and quantity supplied increasing.

Question 9

More and more devices are being introduced into the market that perform tasks similar to that of PCs, such as tablets and smartphones. At the same time, the price of computer chips to make high-end PCs continues to fall. What is the effect of the events on equilibrium price and quantity of high-end PCs?

Accepted Answer

A) Price falls continuously as does quantity sold. 
B) Price rises then falls while quantity sold falls continuously. 
C) Price falls continuously while quantity falls initially but then rises, recouping earlier losses. 
D) Price falls continuously and quantity rises continuously. 
A) Price falls continuously as does quantity sold. 
B) Price rises then falls while quantity sold falls continuously. 
C) Price falls continuously while quantity falls initially but then rises, recouping earlier losses. 
D) Price falls continuously and quantity rises continuously.

Question 10

Refer to the graph shown that depicts a third-party payer market for prescription drugs. What is the cost of this program to the third-party if a $2 co-pay is established?

Accepted Answer

A) $270 
B) $240 
C) $180 
D) $120 
A) $270 
B) $240 
C) $180 
D) $120

Question 11

Suppose that the market labor supply and labor demand equations are given by Qs = 5W and Qd = 30 - 5W. If a minimum wage is set at $4.00 (W = 4), then:

Accepted Answer

A) 15 workers will be supplied and demanded. 
B) 20 workers will be supplied and demanded. 
C) 20 workers will be supplied, but only 10 workers will be demanded. 
D) 10 workers will be supplied, but 20 workers will be demanded. 
A) 15 workers will be supplied and demanded. 
B) 20 workers will be supplied and demanded. 
C) 20 workers will be supplied, but only 10 workers will be demanded. 
D) 10 workers will be supplied, but 20 workers will be demanded.

Question 12

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

Accepted Answer

A) leftward shift in demand and supply. 
B) rightward shift in supply and demand. 
C) rightward shift in supply, keeping demand constant. 
D) rightward shift in demand, keeping supply constant. 
A) leftward shift in demand and supply. 
B) rightward shift in supply and demand. 
C) rightward shift in supply, keeping demand constant. 
D) rightward shift in demand, keeping supply constant.

Question 13

After several years of slow economic growth, world demand for petroleum began to rise rapidly in the 1990s. Much of the increase in demand was met by additional supplies from sources outside OPEC. OPEC during this time was unable to restrain output among members in its effort to lift oil prices. What best describes these events?

Accepted Answer

A) The rise in demand shifted the demand for oil to the right. OPEC actions shifted the demand for oil back to the left. 
B) The rise in demand shifted the demand for oil to the right. As price rose, supply of oil also rose. 
C) The rise in demand shifted the demand for oil to the right. As price rose, quantity of oil supplied rose. 
D) The rise in demand reflects a movement down along the demand curve as supply shifted to the right when suppliers produced more oil. 
A) The rise in demand shifted the demand for oil to the right. OPEC actions shifted the demand for oil back to the left. 
B) The rise in demand shifted the demand for oil to the right. As price rose, supply of oil also rose. 
C) The rise in demand shifted the demand for oil to the right. As price rose, quantity of oil supplied rose. 
D) The rise in demand reflects a movement down along the demand curve as supply shifted to the right when suppliers produced more oil.

Question 14

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 15

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of an increase in demand on equilibrium price and quantity.What could cause this shift?

Accepted Answer

The diagram: @#IMG-DLM& The initial equilibrium is

Question 16

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 17

Refer to the following graph.   Which price will create the greatest shortage?

Accepted Answer

A) P0 
B) P1 
C) P2 
D) P3 
A) P0 
B) P1 
C) P2 
D) P3

Question 18

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 19

Refer to the following graph.   Demand and supply are initially D and S1, respectively. Which of the following best describes the effect of a $0.50 per pound tariff on Danish hams imported into the United States?

Accepted Answer

A) Supply shifts from S1 to S2; quantity sold rises to 100 thousand pounds and price paid by consumers declines to $1.75 a pound 
B) Neither supply nor demand shift, but price paid by consumers declines to $1.50 a pound while quantity sold remains at 80 thousand pounds 
C) Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.50 a pound 
D) Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.25 a pound 
A) Supply shifts from S1 to S2; quantity sold rises to 100 thousand pounds and price paid by consumers declines to $1.75 a pound 
B) Neither supply nor demand shift, but price paid by consumers declines to $1.50 a pound while quantity sold remains at 80 thousand pounds 
C) Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.50 a pound 
D) Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.25 a pound

Question 20

Refer to the following graph.   Which of the following pairs of equations describes the supply and demand curves?

Accepted Answer

A) Qs = 0.4P + 10; Qd =30 + P, respectively 
B) Qs = 0.4P + 10; Qd =30, respectively 
C) Qs = 2.5P − 25; P = 30 + P, respectively 
D) Qs = 2.5P − 25; P = 30, respectively 
A) Qs = 0.4P + 10; Qd =30 + P, respectively 
B) Qs = 0.4P + 10; Qd =30, respectively 
C) Qs = 2.5P − 25; P = 30 + P, respectively 
D) Qs = 2.5P − 25; P = 30, respectively

Exam 5: Using Supply and Demand

If the government imposes an excise tax on a good equal to $5 per unit and the demand curve for this good is vertical, the supply of this good will shift:

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?

Refer to the graph shown that depicts a third-party payer market for prescription drugs. If the co-payment is $2 per pill, what will be the total market expenditures on prescription drugs?

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?

When people heard that there was a shortage of specialty dolls, they wanted even more of them. Because of this effect the pressure on the price of these dolls increased. The price of the dolls remained the same however. Thus, the shortage of these dolls:

Which of the following pairs of equations describes the supply and demand curves given in the accompanying demand and supply tables? Price Quantity Supplied Quantity Demanded \ 0 0 3 \ 1 0 2 \ 2 1 1 \ 3 2 0 \ 4 3 0 \ 5 4 0

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?

Refer to the graph shown that depicts a third-party payer market for prescription drugs. What is the cost of this program to the third-party if a $2 co-pay is established?

Suppose that the market labor supply and labor demand equations are given by Qs = 5W and Qd = 30 - 5W. If a minimum wage is set at $4.00 (W = 4), then:

An increase in quantity and an indeterminate change in price 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.

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of an increase in demand on equilibrium price and quantity.What could cause this shift?

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

Refer to the following graph. Which price will create the greatest shortage?

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?

Refer to the following graph. Demand and supply are initially D and S1, respectively. Which of the following best describes the effect of a $0.50 per pound tariff on Danish hams imported into the United States?

Refer to the following graph. Which of the following pairs of equations describes the supply and demand curves?

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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters