Question 1

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 2

What is a price floor? What happens to the relationship between quantity demanded and supplied with an effective price floor?

Accepted Answer

A price floor is a government-

Question 3

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 4

A tariff is:

Accepted Answer

A) a tax that government places on imported goods. 
B) a quantity limitation placed on imports 
C) an all-out restriction on imports. 
D) a government-imposed procedural rule limiting imports. 
A) a tax that government places on imported goods. 
B) a quantity limitation placed on imports 
C) an all-out restriction on imports. 
D) a government-imposed procedural rule limiting imports.

Question 5

Refer to the following graph.   Suppose this graph represents the market for cheese. In order to keep the price of cheese at Pf, government must:

Accepted Answer

A) devise a mechanism to ration cheese to consumers. 
B) cause the supply of cheese to increase. 
C) cause the demand for cheese to decrease. 
D) prevent the excess supply from reaching the market. 
A) devise a mechanism to ration cheese to consumers. 
B) cause the supply of cheese to increase. 
C) cause the demand for cheese to decrease. 
D) prevent the excess supply from reaching the market.

Question 6

Refer to the graph shown that depicts a third-party payer market for prescription drugs. What happens to total expenditures in this market if a $2 co-pay is established compared to a free-market equilibrium?

Accepted Answer

A) Expenditures rise to $240 
B) Expenditures rise to $270 
C) Expenditures fall by $120 
D) Expenditures remain at $120 
A) Expenditures rise to $240 
B) Expenditures rise to $270 
C) Expenditures fall by $120 
D) Expenditures remain at $120

Question 7

In 1990 the UN placed trade sanctions on Iraqi oil. In 1996, Iraq was allowed limited export of oil to make war reparations. What was the predicted effect of the two events on equilibrium price and quantity of oil?

Accepted Answer

A) The price fell initially, then rose (failing to return to its former low level); quantity fell and then rose 
B) The price fell initially, then rose (failing to return to its former low level); quantity rose and then fell 
C) The price rose initially, then fell (failing to regain its former losses); quantity fell and then rose 
D) The price rose initially, then fell (failing to regain its former losses); quantity rose, then fell 
A) The price fell initially, then rose (failing to return to its former low level); quantity fell and then rose 
B) The price fell initially, then rose (failing to return to its former low level); quantity rose and then fell 
C) The price rose initially, then fell (failing to regain its former losses); quantity fell and then rose 
D) The price rose initially, then fell (failing to regain its former losses); quantity rose, then fell

Question 8

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

Accepted Answer

The diagram:
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Question 9

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 10

A decrease in quantity and price is consistent with a:

Accepted Answer

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

Question 11

When computer manufacturers overcame the enormous 13,000 Chinese character barrier by creating a workable keyboard through voice and handwriting recognition, PCs became more accessible to the Chinese. What was the predicted effect of the events on equilibrium price and quantity of PCs sold in China?

Accepted Answer

A) The price and quantity fell. 
B) The price fell and quantity rose. 
C) The price rose and quantity fell. 
D) The price and quantity rose. 
A) The price and quantity fell. 
B) The price fell and quantity rose. 
C) The price rose and quantity fell. 
D) The price and quantity rose.

Question 12

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 13

Refer to the following graphs.   Floods in the U.S. Midwest reduce the U.S. corn crop. Which graph depicts the effect of the floods on the U.S. corn market?

Accepted Answer

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

Question 14

Americans over the age of 65 are covered by Medicare.For them,the medical market is a third-payer market.What is a third-party payer market? How does total quantity of medical services provided in a third-payer market,such as Medicare,compare to a market in which the purchaser of medical services pays the full cost? How does price of medical services provided in a third-part payer market,such as Medicare,compare to the price in a market in which the purchaser of medical services pays the full cost? If third-payer markets,such as Medicare,benefit buyers by providing a greater quantity of services and sellers by yielding a higher price,who is hurt by such a payments system?

Accepted Answer

A third-party payer market is a market i

Question 15

Suppose that there is a renewed interest in eating caviar at the same time that the supply of Russian caviar shrinks. What would be the most likely effect of these events on the price and quantity of caviar sold?

Accepted Answer

A) Price rose and quantity sold fell. 
B) Price rose and the effect on the quantity of caviar sold is ambiguous. 
C) Price fell and the effect on the quantity of caviar sold is ambiguous. 
D) Price fell and quantity sold rise. 
A) Price rose and quantity sold fell. 
B) Price rose and the effect on the quantity of caviar sold is ambiguous. 
C) Price fell and the effect on the quantity of caviar sold is ambiguous. 
D) Price fell and quantity sold rise.

Question 16

Which price ceiling will cause the greatest excess demand?

Accepted Answer

A) $1 
B) $2 
C) $3 
D) $4 
A) $1 
B) $2 
C) $3 
D) $4

Question 17

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 18

The U.S. Postal Service printed 150,000 sheets of a stamp depicting Bill Pickett, but recalled them when the USPS realized the image on the stamp was Bill's brother, Ben, instead. They were unable to recall 183 sheets that had already been sold. The effect of this recall was to:

Accepted Answer

A) drastically reduce the demand for the stamps, causing their equilibrium price to fall. 
B) have no effect on either supply of or demand for the Bill Pickett stamps because there is no market for them. 
C) drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to rise. 
D) drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to fall. 
A) drastically reduce the demand for the stamps, causing their equilibrium price to fall. 
B) have no effect on either supply of or demand for the Bill Pickett stamps because there is no market for them. 
C) drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to rise. 
D) drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to fall.

Question 19

Which of the following pairs of equations describes the supply and demand curves given in the accompanying demand and supply tables? $$\begin{array} { | c | c | c | } 
\hline \text { Price } & \text { Quantity Supplied } & \text { Quantity Demanded } \
\hline \$ 20 & 0 & 40 \
\hline \$ 25 & 10 & 40 \
\hline \$ 30 & 20 & 40 \
\hline \$ 35 & 30 & 40 \
\hline \$ 40 & 40 & 40 \
\hline \$ 45 & 50 & 40 \
\hline
\end{array}$$

Accepted Answer

A) Qs = P - 40; Qd = 40P, respectively 
B) Qs = P - 20; Qd = 40, respectively 
C) Qs = 2P - 40; Qd = 40, respectively 
D) cannot be determined 
A) Qs = P - 40; Qd = 40P, respectively 
B) Qs = P - 20; Qd = 40, respectively 
C) Qs = 2P - 40; Qd = 40, respectively 
D) cannot be determined

Question 20

Refer to the graph shown. If government establishes a minimum wage at $7.25 per hour:

Accepted Answer

A) employers will be unable to find enough qualified applicants to fill the available positions. 
B) the number of job seekers will exceed the number of job vacancies, resulting in some unemployment. 
C) employers will be forced to hire 900 workers, resulting in reduced profits. 
D) there will be a shortage in this labor market. 
A) employers will be unable to find enough qualified applicants to fill the available positions. 
B) the number of job seekers will exceed the number of job vacancies, resulting in some unemployment. 
C) employers will be forced to hire 900 workers, resulting in reduced profits. 
D) there will be a shortage in this labor market.

Exam 5: Using Supply and Demand

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

What is a price floor? What happens to the relationship between quantity demanded and supplied with an effective price floor?

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

A tariff is:

Refer to the following graph. Suppose this graph represents the market for cheese. In order to keep the price of cheese at Pf, government must:

Refer to the graph shown that depicts a third-party payer market for prescription drugs. What happens to total expenditures in this market if a $2 co-pay is established compared to a free-market equilibrium?

In 1990 the UN placed trade sanctions on Iraqi oil. In 1996, Iraq was allowed limited export of oil to make war reparations. What was the predicted effect of the two events on equilibrium price and quantity of oil?

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

An effective price ceiling is best defined as a price:

A decrease in quantity and price is consistent with a:

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

Refer to the following graphs. Floods in the U.S. Midwest reduce the U.S. corn crop. Which graph depicts the effect of the floods on the U.S. corn market?

Suppose that there is a renewed interest in eating caviar at the same time that the supply of Russian caviar shrinks. What would be the most likely effect of these events on the price and quantity of caviar sold?

Which price ceiling will cause the greatest excess demand?

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?

The U.S. Postal Service printed 150,000 sheets of a stamp depicting Bill Pickett, but recalled them when the USPS realized the image on the stamp was Bill's brother, Ben, instead. They were unable to recall 183 sheets that had already been sold. The effect of this recall was to:

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 \ 20 0 40 \ 25 10 40 \ 30 20 40 \ 35 30 40 \ 40 40 40 \ 45 50 40

Refer to the graph shown. If government establishes a minimum wage at $7.25 per hour:

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

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Perfect Competition

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Who Gets What the Distribution of Income

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

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Deficits and Debt: the Austerity Debate

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