Question 1

As a result of establishing a legal minimum wage above the market clearing wage,

Accepted Answer

A) there will be a shortage of workers. 
B) firms will hire fewer workers. 
C) firms will hire more workers. 
D) fewer workers will want to work. 
A) there will be a shortage of workers. 
B) firms will hire fewer workers. 
C) firms will hire more workers. 
D) fewer workers will want to work.

Question 2

If supply and demand both simultaneously increase,

Accepted Answer

A) the market clearing price definitely rises, and the equilibrium quantity definitely falls. 
B) the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. 
C) the market clearing price definitely falls ,and the effect on the equilibrium quantity is indeterminate. 
D) the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely rises. 
A) the market clearing price definitely rises, and the equilibrium quantity definitely falls. 
B) the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. 
C) the market clearing price definitely falls ,and the effect on the equilibrium quantity is indeterminate. 
D) the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely rises.

Question 3

When a government increases an effective price ceiling for a product

Accepted Answer

A) the shortage in the market will be reduced. 
B) the shortage in the market will be increased. 
C) the surplus in the market will be reduced. 
D) the surplus in the market will increase. 
A) the shortage in the market will be reduced. 
B) the shortage in the market will be increased. 
C) the surplus in the market will be reduced. 
D) the surplus in the market will increase.

Question 4

What has been the market outcome of government-enforced price floors for agricultural products?

Accepted Answer

A) Not enough food has been produced. 
B) Farmers have been made worse off. 
C) A shortage of agricultural products has resulted. 
D) A surplus of agricultural products has resulted. 
A) Not enough food has been produced. 
B) Farmers have been made worse off. 
C) A shortage of agricultural products has resulted. 
D) A surplus of agricultural products has resulted.

Question 5

Rationing through the price system

Accepted Answer

A) leads to an inefficient use of available resources. 
B) leads to high prices. 
C) works only with government interference. 
D) leads to an efficient use of available resources. 
A) leads to an inefficient use of available resources. 
B) leads to high prices. 
C) works only with government interference. 
D) leads to an efficient use of available resources.

Question 6

-Suppose that 20,000 tickets were sold at $120 for an NBA game at Madison Square Garden in New York. The game was sold out and some fans could not get tickets. This suggests that

Accepted Answer

A) selling price was below equilibrium price. 
B) selling price was above equilibrium price. 
C) selling price was at equilibrium. 
D) the game was advertised too heavily. 
A) selling price was below equilibrium price. 
B) selling price was above equilibrium price. 
C) selling price was at equilibrium. 
D) the game was advertised too heavily.

Question 7

If one day it was discovered that lime juice caused cancer, which of the following would likely result?

Accepted Answer

A) The supply curve for lime juice would shift to the right. 
B) The supply curve for lime juice would shift to the left. 
C) The demand curve for lime juice would shift to the right. 
D) The demand curve for lime juice would shift to the left. 
A) The supply curve for lime juice would shift to the right. 
B) The supply curve for lime juice would shift to the left. 
C) The demand curve for lime juice would shift to the right. 
D) The demand curve for lime juice would shift to the left.

Question 8

-In the above figure, a shortage could be caused by a government price ceiling set at

Accepted Answer

A) $1.00. 
B) $2.00. 
C) $2.50. 
D) $3.00. 
A) $1.00. 
B) $2.00. 
C) $2.50. 
D) $3.00.

Question 9

A price floor that is set above market equilibrium will cause

Accepted Answer

A) an excess quantity demanded. 
B) a shortage. 
C) a surplus. 
D) queuing on the part of consumers. 
A) an excess quantity demanded. 
B) a shortage. 
C) a surplus. 
D) queuing on the part of consumers.

Question 10

An increase in demand and a decrease in supply will lead to an

Accepted Answer

A) unambiguous increases in both price and quantity. 
B) unambiguous decreases in both price and quantity. 
C) an unambiguous increase in quantity, but the effect on price is indeterminate. 
D) an unambiguous increase in price, but the effect on quantity is indeterminate. 
A) unambiguous increases in both price and quantity. 
B) unambiguous decreases in both price and quantity. 
C) an unambiguous increase in quantity, but the effect on price is indeterminate. 
D) an unambiguous increase in price, but the effect on quantity is indeterminate.

Question 11

Which of the following is most likely to generate a surplus?

Accepted Answer

A) A price floor 
B) A price ceiling 
C) An illegal market 
D) All of these 
A) A price floor 
B) A price ceiling 
C) An illegal market 
D) All of these

Question 12

If price increases and the quantity purchased increases, we know that

Accepted Answer

A) supply increased. 
B) supply decreased. 
C) demand increased. 
D) demand decreased. 
A) supply increased. 
B) supply decreased. 
C) demand increased. 
D) demand decreased.

Question 13

Rent control is an example of

Accepted Answer

A) a price floor. 
B) a price ceiling. 
C) the rationing function of prices not working. 
D) the government increasing the demand for certain products. 
A) a price floor. 
B) a price ceiling. 
C) the rationing function of prices not working. 
D) the government increasing the demand for certain products.

Question 14

Prices in a market economy perform a rationing function because they reflect

Accepted Answer

A) the demand of all buyers in the market. 
B) the extent to which the goods are necessities. 
C) the strength of the supply curve. 
D) the relative scarcity of the goods. 
A) the demand of all buyers in the market. 
B) the extent to which the goods are necessities. 
C) the strength of the supply curve. 
D) the relative scarcity of the goods.

Question 15

In which of the following situations will market clearing price decrease and the equilibrium quantity increase?

Accepted Answer

A) an increase in demand with no change in supply 
B) an increase in supply with no change in demand 
C) a decrease in supply with no change in demand 
D) a decrease in demand with no change in supply 
A) an increase in demand with no change in supply 
B) an increase in supply with no change in demand 
C) a decrease in supply with no change in demand 
D) a decrease in demand with no change in supply

Question 16

-Government imposed price controls often lead to

Accepted Answer

A) illegal trades of the good. 
B) the most efficient use of resources. 
C) the equilibrium solution in terms of price and quantity. 
D) maximization of profits. 
A) illegal trades of the good. 
B) the most efficient use of resources. 
C) the equilibrium solution in terms of price and quantity. 
D) maximization of profits.

Question 17

If both supply and demand simultaneously decrease,

Accepted Answer

A) the market clearing price definitely rises, and the equilibrium quantity definitely falls. 
B) the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. 
C) the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate. 
D) the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely falls. 
A) the market clearing price definitely rises, and the equilibrium quantity definitely falls. 
B) the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. 
C) the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate. 
D) the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely falls.

Question 18

Agriculture price supports that establish a price floor at which agricultural products may be purchased that exceeds the market clearing price

Accepted Answer

A) create a shortage of agricultural products. 
B) result in the quantity of these products supplied exceeding the quantity demanded at the floor price. 
C) benefit taxpayers, who receive subsidies from producers that the price support program forces to sell to the government at an artificially established price. 
D) benefit consumers, who are willing and able to purchase more agricultural products at the floor price. 
A) create a shortage of agricultural products. 
B) result in the quantity of these products supplied exceeding the quantity demanded at the floor price. 
C) benefit taxpayers, who receive subsidies from producers that the price support program forces to sell to the government at an artificially established price. 
D) benefit consumers, who are willing and able to purchase more agricultural products at the floor price.

Question 19

What will happen when there is a rightward shift in the demand curve?

Accepted Answer

A) The product price will instantaneously adjust downward. 
B) Product prices do not change in this situation. 
C) Producers will decrease the product price. 
D) A new, higher price is not instantaneously achieved, but the price will rise over time. 
A) The product price will instantaneously adjust downward. 
B) Product prices do not change in this situation. 
C) Producers will decrease the product price. 
D) A new, higher price is not instantaneously achieved, but the price will rise over time.

Question 20

All of the following are examples of nonprice rationing devices EXCEPT

Accepted Answer

A) price controls. 
B) queues. 
C) black markets. 
D) waiting lists. 
A) price controls. 
B) queues. 
C) black markets. 
D) waiting lists.

Exam 4: Extensions of Demand and Supply Analysis

As a result of establishing a legal minimum wage above the market clearing wage,

If supply and demand both simultaneously increase,

When a government increases an effective price ceiling for a product

What has been the market outcome of government-enforced price floors for agricultural products?

Rationing through the price system

-Suppose that 20,000 tickets were sold at $120 for an NBA game at Madison Square Garden in New York. The game was sold out and some fans could not get tickets. This suggests that

If one day it was discovered that lime juice caused cancer, which of the following would likely result?

-In the above figure, a shortage could be caused by a government price ceiling set at

A price floor that is set above market equilibrium will cause

An increase in demand and a decrease in supply will lead to an

Which of the following is most likely to generate a surplus?

If price increases and the quantity purchased increases, we know that

Rent control is an example of

Prices in a market economy perform a rationing function because they reflect

In which of the following situations will market clearing price decrease and the equilibrium quantity increase?

-Government imposed price controls often lead to

If both supply and demand simultaneously decrease,

Agriculture price supports that establish a price floor at which agricultural products may be purchased that exceeds the market clearing price

What will happen when there is a rightward shift in the demand curve?

All of the following are examples of nonprice rationing devices EXCEPT

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

Filters