Question 1

The price system features

Accepted Answer

A) exchanges made in currency only. 
B) voluntary exchange that makes both the consumer and producer better off. 
C) exchanges made only on a barter basis. 
D) an exchange in which consumer is made better off and the producer is made worse off. 
A) exchanges made in currency only. 
B) voluntary exchange that makes both the consumer and producer better off. 
C) exchanges made only on a barter basis. 
D) an exchange in which consumer is made better off and the producer is made worse off.

Question 2

We cannot predict the effect on the equilibrium quantity, but know that the market clearing price will increase when

Accepted Answer

A) supply decreases and at the same time demand increases. 
B) supply increases and demand increases simultaneously. 
C) supply and demand decreases simultaneously. 
D) supply and demand increases simultaneously. 
A) supply decreases and at the same time demand increases. 
B) supply increases and demand increases simultaneously. 
C) supply and demand decreases simultaneously. 
D) supply and demand increases simultaneously.

Question 3

If the demand for a product remains the same and the supply falls,

Accepted Answer

A) the market clearing price will fall and the equilibrium quantity will rise. 
B) the market clearing price will rise and the equilibrium quantity will fall. 
C) both the market clearing price and the equilibrium quantity will fall. 
D) both the market clearing price and the equilibrium quantity will rise. 
A) the market clearing price will fall and the equilibrium quantity will rise. 
B) the market clearing price will rise and the equilibrium quantity will fall. 
C) both the market clearing price and the equilibrium quantity will fall. 
D) both the market clearing price and the equilibrium quantity will rise.

Question 4

Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?

Accepted Answer

A) An increase in demand pushes up the market clearing price of roses. 
B) People buying the roses are irrational. 
C) Roses are not subject to the law of demand. 
D) Florists know that there are no substitutes for roses, so they take advantage of consumers on Valentine's Day. 
A) An increase in demand pushes up the market clearing price of roses. 
B) People buying the roses are irrational. 
C) Roses are not subject to the law of demand. 
D) Florists know that there are no substitutes for roses, so they take advantage of consumers on Valentine's Day.

Question 5

-A black market may occur when

Accepted Answer

A) the government imposes a price floor below the market clearing price. 
B) the government imposes a price ceiling below the market clearing price. 
C) the government imposes a price ceiling above the market clearing price. 
D) the government does not impose either a price ceiling or a price floor. 
A) the government imposes a price floor below the market clearing price. 
B) the government imposes a price ceiling below the market clearing price. 
C) the government imposes a price ceiling above the market clearing price. 
D) the government does not impose either a price ceiling or a price floor.

Question 6

Government-imposed quantity restrictions

Accepted Answer

A) generate a higher price for the good than would prevail under freely competitive markets. 
B) generate a lower price for the good than would prevail under freely competitive markets. 
C) does not affect the price of the good because quantity restrictions always ban sale of the good completely. 
D) can cause prices to either be higher or lower, but always cause excess quantities supplied to develop. 
A) generate a higher price for the good than would prevail under freely competitive markets. 
B) generate a lower price for the good than would prevail under freely competitive markets. 
C) does not affect the price of the good because quantity restrictions always ban sale of the good completely. 
D) can cause prices to either be higher or lower, but always cause excess quantities supplied to develop.

Question 7

A reduction in the minimum wage will tend to cause which of the following?

Accepted Answer

A) a reduction in poverty 
B) an increase in the number of workers employed 
C) an increase in the quantity supplied of labor 
D) a reduction in the quantity demanded of labor 
A) a reduction in poverty 
B) an increase in the number of workers employed 
C) an increase in the quantity supplied of labor 
D) a reduction in the quantity demanded of labor

Question 8

-Refer to the above figure. A shortage occurs if the government imposes

Accepted Answer

A) a price floor at $60. 
B) a price floor at $20. 
C) a price ceiling at $60. 
D) a price ceiling at $20. 
A) a price floor at $60. 
B) a price floor at $20. 
C) a price ceiling at $60. 
D) a price ceiling at $20.

Question 9

The signals in markets are determined

Accepted Answer

A) by supply and demand. 
B) for all goods by the government through the use of price controls. 
C) in an unfair manner that ends up hurting the poor. 
D) by nonprice rationing devices. 
A) by supply and demand. 
B) for all goods by the government through the use of price controls. 
C) in an unfair manner that ends up hurting the poor. 
D) by nonprice rationing devices.

Question 10

When consumers would have been willing to pay higher prices at various quantities consumed than the market clearing price, the differences are called

Accepted Answer

A) consumer surplus. 
B) monopoly profits. 
C) opportunity cost. 
D) deadweight loss. 
A) consumer surplus. 
B) monopoly profits. 
C) opportunity cost. 
D) deadweight loss.

Question 11

-Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as

Accepted Answer

A) a price floor. 
B) a price ceiling. 
C) an equilibrium price. 
D) a just price. 
A) a price floor. 
B) a price ceiling. 
C) an equilibrium price. 
D) a just price.

Question 12

If the demand for a product rises and the supply stays the same

Accepted Answer

A) the market clearing price will fall and the equilibrium quantity will rise. 
B) the market clearing price will rise and the equilibrium quantity will fall. 
C) both the market clearing price and the equilibrium quantity will fall. 
D) both the market clearing price and the equilibrium quantity will rise. 
A) the market clearing price will fall and the equilibrium quantity will rise. 
B) the market clearing price will rise and the equilibrium quantity will fall. 
C) both the market clearing price and the equilibrium quantity will fall. 
D) both the market clearing price and the equilibrium quantity will rise.

Question 13

In recent years, the price of smartphones has fallen, while the quantity exchanged of smartphones has risen. We can conclude that this is most likely a result of

Accepted Answer

A) a decrease in supply while demand remained constant. 
B) an increase in demand while supply remained constant. 
C) an increase in demand that exceeded an increase in supply. 
D) an increase in supply that exceeded an increase in demand. 
A) a decrease in supply while demand remained constant. 
B) an increase in demand while supply remained constant. 
C) an increase in demand that exceeded an increase in supply. 
D) an increase in supply that exceeded an increase in demand.

Question 14

Describe the market process that should occur if the price of a product is below its equilibrium price; now describe what would occur if the price is above its equilibrium price, assuming no market interference.

Accepted Answer

If price is below its equilibrium price,

Question 15

Holding supply constant, a reduction in demand leads to

Accepted Answer

A) lower prices and higher quantity supplied. 
B) lower prices and lower quantity supplied. 
C) higher prices and higher quantity supplied. 
D) higher prices and lower quantity supplied. 
A) lower prices and higher quantity supplied. 
B) lower prices and lower quantity supplied. 
C) higher prices and higher quantity supplied. 
D) higher prices and lower quantity supplied.

Question 16

-Other things being equal, suppose that the demand for wheat in constant quality units increases. The increase in demand will cause

Accepted Answer

A) a surplus of wheat. 
B) a higher equilibrium price and higher equilibrium quantity of wheat. 
C) fall in the market clearing price of corn, a substitute for wheat. 
D) a higher equilibrium quantity, but a lower equilibrium price of wheat. 
A) a surplus of wheat. 
B) a higher equilibrium price and higher equilibrium quantity of wheat. 
C) fall in the market clearing price of corn, a substitute for wheat. 
D) a higher equilibrium quantity, but a lower equilibrium price of wheat.

Question 17

-In a situation in which rationing is by queues, the total price of the rationed good is

Accepted Answer

A) equal to the funds paid for the good. 
B) less than the funds paid for the good. 
C) equal to the funds paid for the good plus the opportunity cost of the time spent waiting. 
D) equal to the funds paid for the good less the opportunity cost of the time spent waiting. 
A) equal to the funds paid for the good. 
B) less than the funds paid for the good. 
C) equal to the funds paid for the good plus the opportunity cost of the time spent waiting. 
D) equal to the funds paid for the good less the opportunity cost of the time spent waiting.

Question 18

Which of the following statements is NOT true about exchanges in the market system?

Accepted Answer

A) In voluntary exchange both parties are better off because of the exchange. 
B) Exchanges occur only in situations of barter where the market price is irrelevant. 
C) Prices indicate what is relatively abundant and what is relatively scarce. 
D) Transaction costs in exchanges include the cost of enforcing a contract as well as the costs of information. 
A) In voluntary exchange both parties are better off because of the exchange. 
B) Exchanges occur only in situations of barter where the market price is irrelevant. 
C) Prices indicate what is relatively abundant and what is relatively scarce. 
D) Transaction costs in exchanges include the cost of enforcing a contract as well as the costs of information.

Question 19

The total amount of consumer surplus and producer surplus is at its maximum when

Accepted Answer

A) consumers and producers are allowed to trade at the market clearing price. 
B) the government imposes a price floor that is higher than the market clearing price. 
C) the government imposes a price ceiling that is lower than the market clearing price. 
D) free market exchanges do not exist. 
A) consumers and producers are allowed to trade at the market clearing price. 
B) the government imposes a price floor that is higher than the market clearing price. 
C) the government imposes a price ceiling that is lower than the market clearing price. 
D) free market exchanges do not exist.

Question 20

If the government imposed a price ceiling on gasoline above this good's current market clearing price, there would be

Accepted Answer

A) a shortage of gasoline. at the ceiling price. 
B) a surplus of gasoline at the ceiling price. 
C) an increase in the price of gasoline. 
D) no change in the price of gasoline. 
A) a shortage of gasoline. at the ceiling price. 
B) a surplus of gasoline at the ceiling price. 
C) an increase in the price of gasoline. 
D) no change in the price of gasoline.

Exam 4: Extensions of Demand and Supply Analysis

The price system features

We cannot predict the effect on the equilibrium quantity, but know that the market clearing price will increase when

If the demand for a product remains the same and the supply falls,

Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?

-A black market may occur when

Government-imposed quantity restrictions

A reduction in the minimum wage will tend to cause which of the following?

-Refer to the above figure. A shortage occurs if the government imposes

The signals in markets are determined

When consumers would have been willing to pay higher prices at various quantities consumed than the market clearing price, the differences are called

-Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as

If the demand for a product rises and the supply stays the same

In recent years, the price of smartphones has fallen, while the quantity exchanged of smartphones has risen. We can conclude that this is most likely a result of

Describe the market process that should occur if the price of a product is below its equilibrium price; now describe what would occur if the price is above its equilibrium price, assuming no market interference.

Holding supply constant, a reduction in demand leads to

-Other things being equal, suppose that the demand for wheat in constant quality units increases. The increase in demand will cause

-In a situation in which rationing is by queues, the total price of the rationed good is

Which of the following statements is NOT true about exchanges in the market system?

The total amount of consumer surplus and producer surplus is at its maximum when

If the government imposed a price ceiling on gasoline above this good's current market clearing price, there would be

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Public Spending and Public Choice

Funding the Public Sector

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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