Question 1

Price controls usually enhance efficiency in the allocation of resources.

Accepted Answer

A) True 
 B)False

Question 2

In early 1996, Congress proposed an agriculture bill that would gradually reduce price supports for many agricultural products.If the bill were to be approved, what would most likely happen to the number of families employed in agriculture?

Accepted Answer

A)  It would decrease, because agricultural prices would fall. 
B)  It would decrease, because agricultural prices would rise. 
C)  It would increase, because agricultural prices would fall. 
D)  It would increase, because agricultural prices would rise. 
A)  It would decrease, because agricultural prices would fall. 
B)  It would decrease, because agricultural prices would rise. 
C)  It would increase, because agricultural prices would fall. 
D)  It would increase, because agricultural prices would rise.

Question 3

The ____ the demand curve for a good, the ____ the change in equilibrium quantity after a shift of the supply curve.

Accepted Answer

A)  flatter; greater 
B)  flatter; smaller 
C)  farther from the origin at every output level; greater 
D)  farther from the origin at every output level; smaller 
A)  flatter; greater 
B)  flatter; smaller 
C)  farther from the origin at every output level; greater 
D)  farther from the origin at every output level; smaller

Question 4

Define equilibrium as it relates to markets.Describe the process by which a market reaches a new equilibrium.Include an appropriate diagram.

Accepted Answer

The diagram should look like Figure 4-3

Question 5

A price ceiling is only effective if it is above the market equilibrium.

Accepted Answer

A) True 
 B)False

Question 6

Studies at Cornell University revealed that chickens grow 2 percent larger when a red mitten is placed in their cage and Vivaldi is played in the coop.Resultant feed savings are estimated at $60 million a year.In the chicken market, the

Accepted Answer

A)  demand curve shifts to the right. 
B)  supply curve shifts to the right. 
C)  price will rise. 
D)  quantity sold will fall. 
A)  demand curve shifts to the right. 
B)  supply curve shifts to the right. 
C)  price will rise. 
D)  quantity sold will fall.

Question 7

Suppose demand can be described with the equation Q = 900 - 5P and supply with the equation Q = 100 + 5P.
a.Determine the equilibrium price and quantity.
b.Determine the surplus or shortage if the price were $100.

Accepted Answer

a.Equate the supply and demand as follow

Question 8

A change in the price of hamburgers will change the supply of hot dogs.

Accepted Answer

A) True 
 B)False

Question 9

Equilibrium price and quantity are determined by the intersection of the demand and supply curves.

Accepted Answer

A) True 
 B)False

Question 10

Price supports increase the supply of affordable milk for U.S.families.

Accepted Answer

A) True 
 B)False

Question 11

If both the supply and demand curves shift to the left, then we can conclude that there will be

Accepted Answer

A)  an increase in the equilibrium quantity sold. 
B)  a decrease in the equilibrium quantity sold. 
C)  an increase in the equilibrium price. 
D)  a decrease in the equilibrium price. 
A)  an increase in the equilibrium quantity sold. 
B)  a decrease in the equilibrium quantity sold. 
C)  an increase in the equilibrium price. 
D)  a decrease in the equilibrium price.

Question 12

Why do price ceilings tend to cause persistent imbalances in the market?

Accepted Answer

A)  Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B)  Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C)  Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D)  Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus. 
A)  Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B)  Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C)  Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D)  Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Question 13

Changes in consumer preference toward small, imported automobiles have shifted their demand curves downward and to the left.

Accepted Answer

A) True 
 B)False

Question 14

In an attempt to reduce poaching of elephant tusks for ivory, officials in Kenya burned illegally gathered ivory.Economists tend to point out that

Accepted Answer

A)  poaching can be reduced with price supports for ivory. 
B)  the supply of ivory has fallen, leading to an increase in price and reward for poaching. 
C)  burning ivory decreases demand, leading to lower prices and reward for poaching. 
D)  the demand for ivory is higher, leading to an increase in price and reward for poaching. 
E)  burning ivory raises demand, and controlled prices will lead to even greater poaching. 
A)  poaching can be reduced with price supports for ivory. 
B)  the supply of ivory has fallen, leading to an increase in price and reward for poaching. 
C)  burning ivory decreases demand, leading to lower prices and reward for poaching. 
D)  the demand for ivory is higher, leading to an increase in price and reward for poaching. 
E)  burning ivory raises demand, and controlled prices will lead to even greater poaching.

Question 15

Legal limits on prices will tend to cause misallocation of resources because

Accepted Answer

A)  production (or opportunity) cost no longer corresponds to market price. 
B)  people are unable to determine their preferences at the high or low price. 
C)  producers no longer have incentive to be profitable. 
D)  consumers no longer have incentive to spend their income efficiently. 
E)  All of the above are correct. 
A)  production (or opportunity) cost no longer corresponds to market price. 
B)  people are unable to determine their preferences at the high or low price. 
C)  producers no longer have incentive to be profitable. 
D)  consumers no longer have incentive to spend their income efficiently. 
E)  All of the above are correct.

Question 16

The cost of processors and memory has decreased dramatically in the past twenty-five years.As a result, we have seen

Accepted Answer

A)  an increase in demand. 
B)  an increase in supply. 
C)  a decrease in demand. 
D)  a decrease in supply. 
A)  an increase in demand. 
B)  an increase in supply. 
C)  a decrease in demand. 
D)  a decrease in supply.

Question 17

The slope of a demand curve is almost always

Accepted Answer

A)  positive, because when people buy more of a good the cost of producing it will rise. 
B)  positive, because the more money a person has, the more of a particular good will be bought. 
C)  negative, because when people buy more of a good the cost of producing it will fall. 
D)  negative, because with everything else equal, the same people will buy more of a good when its price is lower. 
E)  positive, because as the price rises, people want to sell more of the good. 
A)  positive, because when people buy more of a good the cost of producing it will rise. 
B)  positive, because the more money a person has, the more of a particular good will be bought. 
C)  negative, because when people buy more of a good the cost of producing it will fall. 
D)  negative, because with everything else equal, the same people will buy more of a good when its price is lower. 
E)  positive, because as the price rises, people want to sell more of the good.

Question 18

The Red Jacket Mountain View Inn in New Hampshire charges $159 per room in the winter ski season and $114 during the summer months.The number of rooms and operating costs are constant year round.These prices indicate

Accepted Answer

A)  rightward shifts in the demand curve in the summer. 
B)  a rightward shift in demand in the winter. 
C)  leftward shifts in the supply curve in the summer. 
D)  a leftward shift in demand in the winter. 
A)  rightward shifts in the demand curve in the summer. 
B)  a rightward shift in demand in the winter. 
C)  leftward shifts in the supply curve in the summer. 
D)  a leftward shift in demand in the winter.

Question 19

Figure 4-14
  
-Frustrated by the cost and ineffectiveness of the war on drugs, the U.S.government could consider "decriminalization" of the use and sale of cocaine.Critics contend that lower prices will expand drug use and that decriminalization will remove the stigma and danger from arrest associated with drug use, thus further increasing the demand and number of addicts.Which graph in Figure 4-14 best illustrates the critics' case?

Accepted Answer

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

Question 20

The law of increasing relative costs, depicted by the concavity of the production opportunities frontier, is most closely related to the

Accepted Answer

A)  downward slope of the demand curve. 
B)  upward slope of the demand curve. 
C)  downward slope of the supply curve. 
D)  upward slope of the supply curve. 
A)  downward slope of the demand curve. 
B)  upward slope of the demand curve. 
C)  downward slope of the supply curve. 
D)  upward slope of the supply curve.

Exam 4: Supply and Demand: An Initial Look

Price controls usually enhance efficiency in the allocation of resources.

In early 1996, Congress proposed an agriculture bill that would gradually reduce price supports for many agricultural products.If the bill were to be approved, what would most likely happen to the number of families employed in agriculture?

The ____ the demand curve for a good, the ____ the change in equilibrium quantity after a shift of the supply curve.

Define equilibrium as it relates to markets.Describe the process by which a market reaches a new equilibrium.Include an appropriate diagram.

A price ceiling is only effective if it is above the market equilibrium.

Studies at Cornell University revealed that chickens grow 2 percent larger when a red mitten is placed in their cage and Vivaldi is played in the coop.Resultant feed savings are estimated at $60 million a year.In the chicken market, the

Suppose demand can be described with the equation Q = 900 - 5P and supply with the equation Q = 100 + 5P. a.Determine the equilibrium price and quantity. b.Determine the surplus or shortage if the price were $100.

A change in the price of hamburgers will change the supply of hot dogs.

Equilibrium price and quantity are determined by the intersection of the demand and supply curves.

Price supports increase the supply of affordable milk for U.S.families.

If both the supply and demand curves shift to the left, then we can conclude that there will be

Why do price ceilings tend to cause persistent imbalances in the market?

Changes in consumer preference toward small, imported automobiles have shifted their demand curves downward and to the left.

In an attempt to reduce poaching of elephant tusks for ivory, officials in Kenya burned illegally gathered ivory.Economists tend to point out that

Legal limits on prices will tend to cause misallocation of resources because

The cost of processors and memory has decreased dramatically in the past twenty-five years.As a result, we have seen

The slope of a demand curve is almost always

The Red Jacket Mountain View Inn in New Hampshire charges $159 per room in the winter ski season and $114 during the summer months.The number of rooms and operating costs are constant year round.These prices indicate

The law of increasing relative costs, depicted by the concavity of the production opportunities frontier, is most closely related to the

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters

The the demand curve for a good, the the change in equilibrium quantity after a shift of the supply curve.