Question 1

A limit on the amount of strawberries that can be imported into the United States is an example of

Accepted Answer

A) the rationing function of prices protecting domestic strawberry farmers. 
B) a price floor set by the government. 
C) a price ceiling set by government. 
D) an import quota. 
A) the rationing function of prices protecting domestic strawberry farmers. 
B) a price floor set by the government. 
C) a price ceiling set by government. 
D) an import quota.

Question 2

-Refer to the above figure. If a price floor of $3 was set,

Accepted Answer

A) the quantity sold would be 80 units. 
B) there would be a surplus of 40 units. 
C) there would be a shortage of 40 units. 
D) there would be a shortage of 20 units. 
A) the quantity sold would be 80 units. 
B) there would be a surplus of 40 units. 
C) there would be a shortage of 40 units. 
D) there would be a shortage of 20 units.

Question 3

Why does a sports car cost more than a mountain bike?

Accepted Answer

A) because sports car manufacturers are greedier than mountain bike manufacturers 
B) because sports cars are priced higher in order to make them attractive as status symbols 
C) because more scarce resources are required to produce a sports car than to produce a mountain bike 
D) because mountain bike manufacturers know that their customers have relatively low incomes 
A) because sports car manufacturers are greedier than mountain bike manufacturers 
B) because sports cars are priced higher in order to make them attractive as status symbols 
C) because more scarce resources are required to produce a sports car than to produce a mountain bike 
D) because mountain bike manufacturers know that their customers have relatively low incomes

Question 4

What is the result of an agricultural support price established above the equilibrium price?

Accepted Answer

A) The market gravitates toward and remains in equilibrium. 
B) There will be excess quantity supplied of the product involved. 
C) There will be excess quantity demanded the product in this market. 
D) Since the support price is set above the equilibrium price, it will have no impact on the market price. 
A) The market gravitates toward and remains in equilibrium. 
B) There will be excess quantity supplied of the product involved. 
C) There will be excess quantity demanded the product in this market. 
D) Since the support price is set above the equilibrium price, it will have no impact on the market price.

Question 5

Total producer surplus in a market is measured as the

Accepted Answer

A) area bounded above the market clearing price and beneath the market demand curve. 
B) area bounded below the market clearing price and above the market supply curve. 
C) vertical distance from the horizontal (quantity)axis to the market clearing price. 
D) horizontal distance from the vertical (price)axis to the equilibrium quantity. 
A) area bounded above the market clearing price and beneath the market demand curve. 
B) area bounded below the market clearing price and above the market supply curve. 
C) vertical distance from the horizontal (quantity)axis to the market clearing price. 
D) horizontal distance from the vertical (price)axis to the equilibrium quantity.

Question 6

Nonprice rationing devices are required

Accepted Answer

A) because the price system does not allocate resources efficiently. 
B) when there are price floors but not when there are price ceilings. 
C) so that prices will go back to equilibrium. 
D) to allocate goods when there is a price ceiling. 
A) because the price system does not allocate resources efficiently. 
B) when there are price floors but not when there are price ceilings. 
C) so that prices will go back to equilibrium. 
D) to allocate goods when there is a price ceiling.

Question 7

In order to be effective, a price floor

Accepted Answer

A) must be set below equilibrium price. 
B) must be set above equilibrium price. 
C) must be set at equilibrium price. 
D) must be a zero price. 
A) must be set below equilibrium price. 
B) must be set above equilibrium price. 
C) must be set at equilibrium price. 
D) must be a zero price.

Question 8

Suppose the price of crude oil used to produce gasoline rises significantly. At the same time, consumers purchase hybrid cars in great numbers. In the market for gasoline, the market clearing price ________ and the equilibrium quantity ________.

Accepted Answer

A) definitely falls, is indeterminate 
B) is indeterminate, definitely falls 
C) definitely falls, definitely rises 
D) definitely rises, is indeterminate 
A) definitely falls, is indeterminate 
B) is indeterminate, definitely falls 
C) definitely falls, definitely rises 
D) definitely rises, is indeterminate

Question 9

-Assume that the initial demand and supply curves in the above figure are DA and SA, respectively. The initial equilibrium price and quantity are

Accepted Answer

A) P1 and E. 
B) P3 and F. 
C) P1 and G. 
D) P2 and F. 
A) P1 and E. 
B) P3 and F. 
C) P1 and G. 
D) P2 and F.

Question 10

If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve?

Accepted Answer

A) Supply increased. 
B) Demand decreased. 
C) Demand increased. 
D) Supply decreased. 
A) Supply increased. 
B) Demand decreased. 
C) Demand increased. 
D) Supply decreased.

Question 11

Suppose Brad Pitts and Angelina Jolie wear matching platinum jewelry in their new movie. After the movie is released, suppose that consumers increase their demand for the jewelry and at the same time manufacturers increase the supply of the jewelry. As a result,

Accepted Answer

A) the equilibrium quantity will increase, and there is an indeterminate change in the equilibrium price. 
B) the equilibrium quantity and price are both indeterminate. 
C) the equilibrium quantity will decrease, and the equilibrium price will increase. 
D) the equilibrium price and quantity will both decrease. 
A) the equilibrium quantity will increase, and there is an indeterminate change in the equilibrium price. 
B) the equilibrium quantity and price are both indeterminate. 
C) the equilibrium quantity will decrease, and the equilibrium price will increase. 
D) the equilibrium price and quantity will both decrease.

Question 12

All of the following are methods of rationing goods EXCEPT

Accepted Answer

A) political power. 
B) the profit motive. 
C) first come, first served. 
D) prices. 
A) political power. 
B) the profit motive. 
C) first come, first served. 
D) prices.

Question 13

When a market clearing price is determined,

Accepted Answer

A) the exchange between buyers and sellers is voluntary. 
B) the exchange between buyers and sellers is directed by outside factors such as the government. 
C) the exchange between buyers and sellers benefits only the buyers. 
D) the exchange between buyers and sellers benefits only the sellers. 
A) the exchange between buyers and sellers is voluntary. 
B) the exchange between buyers and sellers is directed by outside factors such as the government. 
C) the exchange between buyers and sellers benefits only the buyers. 
D) the exchange between buyers and sellers benefits only the sellers.

Question 14

Which of the following is an example of a price ceiling?

Accepted Answer

A) The minimum wage 
B) Agricultural price supports 
C) Rent controls 
D) None of the above is correct 
A) The minimum wage 
B) Agricultural price supports 
C) Rent controls 
D) None of the above is correct

Question 15

Many economists estimate that for every 10 % increase in relative minimum wage rates, there is a corresponding decrease in employment of those affected equal to

Accepted Answer

A) 5-10 %. 
B) 1-2 %. 
C) 10-20 %. 
D) 30-40 %. 
A) 5-10 %. 
B) 1-2 %. 
C) 10-20 %. 
D) 30-40 %.

Question 16

Which of the following is most likely to benefit from government established price floors in agriculture?

Accepted Answer

A) large farm owners and corporate farms 
B) small farmers 
C) cattle ranchers 
D) low income farmers 
A) large farm owners and corporate farms 
B) small farmers 
C) cattle ranchers 
D) low income farmers

Question 17

Suppose that an early frost damages the Florida orange crop. As a result, the price of California oranges increases. Ceteris paribus, which one of the following statements best explains this situation?

Accepted Answer

A) The supply of Florida oranges decreased, causing the supply of California oranges to increase, which resulted in a higher price. 
B) The supply of Florida oranges decreased, causing the supply of California oranges to decrease, which resulted in a higher price. 
C) The supply of Florida oranges decreased, causing their price to increase, and thus causing the demand for California oranges to increase. 
D) The demand for Florida oranges fell because of the freeze, and this led to a higher demand for California oranges. 
A) The supply of Florida oranges decreased, causing the supply of California oranges to increase, which resulted in a higher price. 
B) The supply of Florida oranges decreased, causing the supply of California oranges to decrease, which resulted in a higher price. 
C) The supply of Florida oranges decreased, causing their price to increase, and thus causing the demand for California oranges to increase. 
D) The demand for Florida oranges fell because of the freeze, and this led to a higher demand for California oranges.

Question 18

If the demand for a product falls 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 19

If demand increases while supply decreases, then the equilibrium price

Accepted Answer

A) always increases. 
B) always decreases. 
C) may increase, decrease, or stay the same. 
D) never changes. 
A) always increases. 
B) always decreases. 
C) may increase, decrease, or stay the same. 
D) never changes.

Question 20

People often complain about price gouging after a disaster such as a hurricane. Suppose the government successfully prevented price increases due to the disaster. We would expect

Accepted Answer

A) reconstruction to take longer because the quantity supplied of new materials would increase more slowly. 
B) reconstruction to take less time because the demand for materials would increase faster. 
C) reconstruction never to occur. 
D) reconstruction to take less time because the government could rebuild more quickly when people are not in the way. 
A) reconstruction to take longer because the quantity supplied of new materials would increase more slowly. 
B) reconstruction to take less time because the demand for materials would increase faster. 
C) reconstruction never to occur. 
D) reconstruction to take less time because the government could rebuild more quickly when people are not in the way.

Exam 4: Extensions of Demand and Supply Analysis

A limit on the amount of strawberries that can be imported into the United States is an example of

-Refer to the above figure. If a price floor of $3 was set,

Why does a sports car cost more than a mountain bike?

What is the result of an agricultural support price established above the equilibrium price?

Total producer surplus in a market is measured as the

Nonprice rationing devices are required

In order to be effective, a price floor

Suppose the price of crude oil used to produce gasoline rises significantly. At the same time, consumers purchase hybrid cars in great numbers. In the market for gasoline, the market clearing price ________ and the equilibrium quantity ________.

-Assume that the initial demand and supply curves in the above figure are DA and SA, respectively. The initial equilibrium price and quantity are

If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve?

Suppose Brad Pitts and Angelina Jolie wear matching platinum jewelry in their new movie. After the movie is released, suppose that consumers increase their demand for the jewelry and at the same time manufacturers increase the supply of the jewelry. As a result,

All of the following are methods of rationing goods EXCEPT

When a market clearing price is determined,

Which of the following is an example of a price ceiling?

Many economists estimate that for every 10 % increase in relative minimum wage rates, there is a corresponding decrease in employment of those affected equal to

Which of the following is most likely to benefit from government established price floors in agriculture?

Suppose that an early frost damages the Florida orange crop. As a result, the price of California oranges increases. Ceteris paribus, which one of the following statements best explains this situation?

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

If demand increases while supply decreases, then the equilibrium price

People often complain about price gouging after a disaster such as a hurricane. Suppose the government successfully prevented price increases due to the disaster. We would expect

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

Suppose the price of crude oil used to produce gasoline rises significantly. At the same time, consumers purchase hybrid cars in great numbers. In the market for gasoline, the market clearing price and the equilibrium quantity .