Question 1

Of the following groups, who gains from rent controls?

Accepted Answer

A) Landlords 
B) Construction workers and their union leaders 
C) Poor people who have a hard time earning enough income to pay high rents 
D) High-income people who live in rent-controlled apartments 
A) Landlords 
B) Construction workers and their union leaders 
C) Poor people who have a hard time earning enough income to pay high rents 
D) High-income people who live in rent-controlled apartments

Question 2

A newspaper headline asserts: "Rising Demand Pushes Up Housing Prices." This headline

Accepted Answer

A) incorrectly implies that the demand for housing can change, whereas in fact only the quantity of housing demanded can change. 
B) incorrectly implies that the price of housing will rise when demand increases. 
C) incorrectly implies that more housing will be demanded at higher prices. 
D) correctly implies that an increase in demand will increase the market clearing price. 
A) incorrectly implies that the demand for housing can change, whereas in fact only the quantity of housing demanded can change. 
B) incorrectly implies that the price of housing will rise when demand increases. 
C) incorrectly implies that more housing will be demanded at higher prices. 
D) correctly implies that an increase in demand will increase the market clearing price.

Question 3

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

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 4

Producer surplus is

Accepted Answer

A) the total difference between the total amount that producers actually receive for an item and the total amount that they would have been willing to accept. 
B) the total difference between the total costs firms incur in producing an item and the utility consumers derive from purchasing the item. 
C) the total difference between the total amount that consumers are willing to pay for an item and the total amount that producers would like to receive. 
D) the total difference between the utility consumers derive from purchasing an item and the total costs firms incur in producing the item. 
A) the total difference between the total amount that producers actually receive for an item and the total amount that they would have been willing to accept. 
B) the total difference between the total costs firms incur in producing an item and the utility consumers derive from purchasing the item. 
C) the total difference between the total amount that consumers are willing to pay for an item and the total amount that producers would like to receive. 
D) the total difference between the utility consumers derive from purchasing an item and the total costs firms incur in producing the item.

Question 5

Which of the following is a main characteristic of exchanges in the market system?

Accepted Answer

A) Decisions to trade are based on individuals' self interest. 
B) Exchanges are highly regulated by the government. 
C) Sellers hire economists to determine the market clearing price. 
D) Exchanges are part of the legislative imperative. 
A) Decisions to trade are based on individuals' self interest. 
B) Exchanges are highly regulated by the government. 
C) Sellers hire economists to determine the market clearing price. 
D) Exchanges are part of the legislative imperative.

Question 6

The total gains from trade within a price system is

Accepted Answer

A) the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price. 
B) the area beneath the market supply curve and above the market clearing price plus the area above the market demand curve and beneath the market clearing price. 
C) the area beneath the market demand curve and above the market clearing price minus the area beneath the market supply curve and beneath the market clearing price. 
D) always equal to zero. 
A) the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price. 
B) the area beneath the market supply curve and above the market clearing price plus the area above the market demand curve and beneath the market clearing price. 
C) the area beneath the market demand curve and above the market clearing price minus the area beneath the market supply curve and beneath the market clearing price. 
D) always equal to zero.

Question 7

In which decade did the U.S. federal government first establish a system of agricultural price supports?

Accepted Answer

A) 1990s 
B) 1970s 
C) 1950s 
D) 1930s 
A) 1990s 
B) 1970s 
C) 1950s 
D) 1930s

Question 8

In the price system,

Accepted Answer

A) prices are set by government action. 
B) consumers alone set the price. 
C) producers alone set the price. 
D) prices are set by the interaction of supply and demand. 
A) prices are set by government action. 
B) consumers alone set the price. 
C) producers alone set the price. 
D) prices are set by the interaction of supply and demand.

Question 9

If the government imposes a price floor that is higher than the market clearing price, then

Accepted Answer

A) consumer surplus will increase while producer surplus will decrease. 
B) consumer surplus will decrease while producer surplus will increase. 
C) both consumer surplus and producer surplus will decrease. 
D) both consumer surplus and producer surplus will increase. 
A) consumer surplus will increase while producer surplus will decrease. 
B) consumer surplus will decrease while producer surplus will increase. 
C) both consumer surplus and producer surplus will decrease. 
D) both consumer surplus and producer surplus will increase.

Question 10

A long line at the campus bookstore at the beginning of the term is an example of

Accepted Answer

A) price rationing. 
B) an ineffective price ceiling. 
C) a non-price rationing device. 
D) an ineffective price floor. 
A) price rationing. 
B) an ineffective price ceiling. 
C) a non-price rationing device. 
D) an ineffective price floor.

Question 11

-Refer to the above figure. If the government imposes a price ceiling of $20,

Accepted Answer

A) the quantity of goods that will be traded is 100. 
B) the quantity of goods that will be traded is 200. 
C) the quantity of goods that will be traded is 150. 
D) the quantity of goods that will be traded is 0. 
A) the quantity of goods that will be traded is 100. 
B) the quantity of goods that will be traded is 200. 
C) the quantity of goods that will be traded is 150. 
D) the quantity of goods that will be traded is 0.

Question 12

Price ceilings are adopted in most cases because

Accepted Answer

A) the government views the current equilibrium price as too high for consumers. 
B) the government wants to create surpluses. 
C) the government favors a non-intervention policy. 
D) producers need incentives to produce more of the good or service. 
A) the government views the current equilibrium price as too high for consumers. 
B) the government wants to create surpluses. 
C) the government favors a non-intervention policy. 
D) producers need incentives to produce more of the good or service.

Question 13

Suppose the price of cheese rises. In the market for pizza, one would expect that

Accepted Answer

A) the supply of pizza would increase, and the price would fall. 
B) the demand for pizza would increase, and the price would increase. 
C) the demand for pizza would decrease, and price would fall. 
D) the supply of pizza would decrease, and price would rise. 
A) the supply of pizza would increase, and the price would fall. 
B) the demand for pizza would increase, and the price would increase. 
C) the demand for pizza would decrease, and price would fall. 
D) the supply of pizza would decrease, and price would rise.

Question 14

Assume that CDs are a normal good and that the price of stereo equipment falls while the labor costs of producing CDs increase. What will happen in the market for CDs?

Accepted Answer

Since stereo equipment is a complementar

Question 15

Following adjustments to a new equilibrium in a market, the equilibrium quantity remains unchanged, but the market clearing price is now lower. Which of the following could definitely have caused this outcome?

Accepted Answer

A) Demand and supply both increased. 
B) Demand and supply both decreased. 
C) Demand increased, and supply decreased. 
D) Demand decreased, and supply increased. 
A) Demand and supply both increased. 
B) Demand and supply both decreased. 
C) Demand increased, and supply decreased. 
D) Demand decreased, and supply increased.

Question 16

A severe drought has devastated cocoa plants, causing an increase in the price of chocolate. In the market for chocolate chip cookies,

Accepted Answer

A) a surplus will arise. 
B) supply has decreased and price has increased. 
C) quantity has decreased and price has decreased. 
D) quantity demanded has increased. 
A) a surplus will arise. 
B) supply has decreased and price has increased. 
C) quantity has decreased and price has decreased. 
D) quantity demanded has increased.

Question 17

-Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve shifts from DA to DB. Which of the following is true about the results of the shifts in the supply and demand curves?

Accepted Answer

A) The equilibrium price increases while the equilibrium quantity remains unchanged. 
B) Both the equilibrium price and equilibrium quantity increase. 
C) The equilibrium price remains unchanged while the equilibrium quantity increases. 
D) Both the equilibrium price and equilibrium quantity remain unchanged. 
A) The equilibrium price increases while the equilibrium quantity remains unchanged. 
B) Both the equilibrium price and equilibrium quantity increase. 
C) The equilibrium price remains unchanged while the equilibrium quantity increases. 
D) Both the equilibrium price and equilibrium quantity remain unchanged.

Question 18

In the market for domestic avocados, what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?

Accepted Answer

A) The market clearing price would rise, and the equilibrium quantity would rise. 
B) The market clearing price would fall, and the equilibrium quantity would rise. 
C) The market clearing price would rise, and the equilibrium quantity would fall. 
D) The market clearing price would fall, and the equilibrium quantity would fall. 
A) The market clearing price would rise, and the equilibrium quantity would rise. 
B) The market clearing price would fall, and the equilibrium quantity would rise. 
C) The market clearing price would rise, and the equilibrium quantity would fall. 
D) The market clearing price would fall, and the equilibrium quantity would fall.

Question 19

When the supply and/or demand curve shift, the new market clearing price is

Accepted Answer

A) reached instantaneously. 
B) reached only after the government intervenes in the market. 
C) reached after some period of adjustment. 
D) never reached. 
A) reached instantaneously. 
B) reached only after the government intervenes in the market. 
C) reached after some period of adjustment. 
D) never reached.

Question 20

Price ceilings often generate

Accepted Answer

A) market clearing prices. 
B) rapid increases in supply to meet the excess demand. 
C) equilibriums that utilize rationing by price. 
D) black markets. 
A) market clearing prices. 
B) rapid increases in supply to meet the excess demand. 
C) equilibriums that utilize rationing by price. 
D) black markets.

Exam 4: Extensions of Demand and Supply Analysis

Of the following groups, who gains from rent controls?

A newspaper headline asserts: "Rising Demand Pushes Up Housing Prices." This headline

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

Producer surplus is

Which of the following is a main characteristic of exchanges in the market system?

The total gains from trade within a price system is

In which decade did the U.S. federal government first establish a system of agricultural price supports?

In the price system,

If the government imposes a price floor that is higher than the market clearing price, then

A long line at the campus bookstore at the beginning of the term is an example of

-Refer to the above figure. If the government imposes a price ceiling of $20,

Price ceilings are adopted in most cases because

Suppose the price of cheese rises. In the market for pizza, one would expect that

Assume that CDs are a normal good and that the price of stereo equipment falls while the labor costs of producing CDs increase. What will happen in the market for CDs?

Following adjustments to a new equilibrium in a market, the equilibrium quantity remains unchanged, but the market clearing price is now lower. Which of the following could definitely have caused this outcome?

A severe drought has devastated cocoa plants, causing an increase in the price of chocolate. In the market for chocolate chip cookies,

-Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve shifts from DA to DB. Which of the following is true about the results of the shifts in the supply and demand curves?

In the market for domestic avocados, what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?

When the supply and/or demand curve shift, the new market clearing price is

Price ceilings often generate

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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