Question 1

Jake is an excellent barber. However, all customers who come to him for a haircut must buy a bottle of shampoo. This type of arrangement is known as

Accepted Answer

A) a tie-in sale. 
B) a sweetheart deal. 
C) an exclusive contract. 
D) a cross subsidy. 
A) a tie-in sale. 
B) a sweetheart deal. 
C) an exclusive contract. 
D) a cross subsidy. A

Question 2

In 1973 and 1979, the U.S. federal government imposed price ceilings on gasoline which resulted in surpluses of gasoline.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following is false ?

Accepted Answer

A) When the U.S. government imposed price ceilings on gasoline, the result was a surplus of gasoline. 
B) When the U.S. government imposed price ceilings on gasoline, the result was a shortage of gasoline. 
C) If a price ceiling is imposed below the equilibrium price in a given market, the result is a shortage in that market. 
D) First-come-first-served is a commonly used rationing device. 
A) When the U.S. government imposed price ceilings on gasoline, the result was a surplus of gasoline. 
B) When the U.S. government imposed price ceilings on gasoline, the result was a shortage of gasoline. 
C) If a price ceiling is imposed below the equilibrium price in a given market, the result is a shortage in that market. 
D) First-come-first-served is a commonly used rationing device. A

Question 4

Exhibit 4-1  
Refer to Exhibit 4-1. The number of units bought and sold at the price ceiling is

Accepted Answer

A) 75. 
B) 125. 
C) 175. 
D) 100. 
A) 75. 
B) 125. 
C) 175. 
D) 100.

Question 5

Explain why it is important to differentiate between the "number of unskilled workers" and the "number of unskilled labor hours" when evaluating the impact on the market for unskilled labor of an increase in minimum wage.

Accepted Answer

If the minimum wage is imposed above the

Question 6

Exhibit 4-3  
Refer to Exhibit 4-3. If price P2 is a price ceiling, then

Accepted Answer

A) there is a shortage in the market for good X. 
B) the highest price that can legally be charged in this market is P3. 
C) the price at which exchange legally takes place in the market for good X is P2. 
D) the quantity exchanged is less than the quantity demanded. 
A) there is a shortage in the market for good X. 
B) the highest price that can legally be charged in this market is P3. 
C) the price at which exchange legally takes place in the market for good X is P2. 
D) the quantity exchanged is less than the quantity demanded.

Question 7

List and describe the two major jobs performed by price.

Accepted Answer

Prices serve as: (1)a rationing device a

Question 8

Exhibit 4-8  
Refer to Exhibit 4-8.  Suppose that wheat producers  lobby the government for a price floor and receive one.  This price floor is set at PF.  What has happened to the consumers' surplus as a result of the imposition of the price floor?

Accepted Answer

A) consumers' surplus has gone down by (area 2 + 4) 
B) consumers' surplus has risen by (area 2 + 4) 
C) consumers' surplus has gone down by (area 3 - area 5) 
D) consumers' surplus has risen by (area 2 + 3) 
A) consumers' surplus has gone down by (area 2 + 4) 
B) consumers' surplus has risen by (area 2 + 4) 
C) consumers' surplus has gone down by (area 3 - area 5) 
D) consumers' surplus has risen by (area 2 + 3)

Question 9

At the minimum wage (set above the equilibrium wage),

Accepted Answer

A) all individuals who end up working are paid less than if they were paid the equilibrium wage. 
B) none of the workers will lose there jobs or find themselves working fewer hours. 
C) none of the individuals who end up working are paid more than if they were paid the equilibrium wage. 
D) there will be fewer people working (or fewer labor hours demanded)than at the equilibrium wage. 
A) all individuals who end up working are paid less than if they were paid the equilibrium wage. 
B) none of the workers will lose there jobs or find themselves working fewer hours. 
C) none of the individuals who end up working are paid more than if they were paid the equilibrium wage. 
D) there will be fewer people working (or fewer labor hours demanded)than at the equilibrium wage.

Question 10

Exhibit 4-5
 
Refer to Exhibit 4-5. Suppose the government imposes a price ceiling at P = $0 for transplanted kidneys. The result will be a

Accepted Answer

A) shortage of kidneys equal to (Q3 - Q1). 
B) surplus of kidneys equal to (Q3 - Q1). 
C) shortage of kidneys equal to (Q2 - Q1). 
D) surplus of kidneys equal to (Q2 - Q1). 
A) shortage of kidneys equal to (Q3 - Q1). 
B) surplus of kidneys equal to (Q3 - Q1). 
C) shortage of kidneys equal to (Q2 - Q1). 
D) surplus of kidneys equal to (Q2 - Q1).

Question 11

In order for a price floor to have an impact on a market it must be set below the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 12

A rationing device is needed because scarcity exists.

Accepted Answer

A) True 
 B)False

Question 13

When the price of a good rises, the price is transmitting information indicating that the good has become relatively

Accepted Answer

A) scarcer. 
B) less scarce. 
C) more plentiful in supply. 
D) more readily available. 
A) scarcer. 
B) less scarce. 
C) more plentiful in supply. 
D) more readily available.

Question 14

Exhibit 4-5
 
Refer to Exhibit 4-5. If a free market were allowed in the transplanted kidney market, then the equilibrium price would be P2. The number of kidneys transplanted would increase by _________ compared to the number transplanted at a price ceiling of P= $0.

Accepted Answer

A) (Q3 - Q1) 
B) (Q3 - Q2) 
C) (Q2 - Q1) 
D) Q2 
A) (Q3 - Q1) 
B) (Q3 - Q2) 
C) (Q2 - Q1) 
D) Q2

Question 15

Exhibit 4-1  
Refer to Exhibit 4-1. Suppose the good shown is being sold at the $6 price ceiling. At a quantity of 75 units, what is the maximum per-unit price buyers would be willing to pay for a good "tied" to the good shown in the exhibit?

Accepted Answer

A) $10 
B) $8 
C) $6 
D) $4 
A) $10 
B) $8 
C) $6 
D) $4

Question 16

Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound.  If the price of butter rises to $3.90 and the price of margarine rises to $2.20, then the absolute price of butter has _______________ and the relative price of butter has _______________.

Accepted Answer

A) risen; fallen 
B) fallen; risen 
C) risen; risen 
D) fallen; fallen 
A) risen; fallen 
B) fallen; risen 
C) risen; risen 
D) fallen; fallen

Question 17

Exhibit 4-8  
Refer to Exhibit 4-8.  If the wheat market is in competitive equilibrium, the consumers' surplus will equal

Accepted Answer

A) area 1 + 2 + 3 
B) area 1 + 2 + 4 
C) area 3 + 5 
D) area 1 + 2 + 3 + 4 + 5 
E) area 6 
A) area 1 + 2 + 3 
B) area 1 + 2 + 4 
C) area 3 + 5 
D) area 1 + 2 + 3 + 4 + 5 
E) area 6

Question 18

There is currently a price ceiling in the market for transplanted kidneys, which has helped to create a shortage of transplanted kidneys.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the government sets a price floor that is above the equilibrium price for a given good. It can be said that at the price floor,

Accepted Answer

A) although sellers are selling all of the product that they desire at this price, the consumers are not able to buy all that they desire. 
B) although consumers are purchasing all of the product that they desire at this price, the sellers are not selling all that they desire. 
C) both sellers and buyers are satisfied with the quantity that is being exchanged. 
D) both sellers and buyers are exchanging the equilibrium quantity of this good. 
A) although sellers are selling all of the product that they desire at this price, the consumers are not able to buy all that they desire. 
B) although consumers are purchasing all of the product that they desire at this price, the sellers are not selling all that they desire. 
C) both sellers and buyers are satisfied with the quantity that is being exchanged. 
D) both sellers and buyers are exchanging the equilibrium quantity of this good.

Question 20

Situation 4-1 During the winter of 1973-74, a general system of wage and price controls (including a price ceiling on gasoline)was in force in the United States. At the beginning of 1974, some oil-producing countries imposed an oil embargo (a legal prohibition on commerce)on the West. In the spring of 1974, price controls were abolished.
Refer to Situation 4-1. Before the oil embargo, the price ceiling on gasoline had no noticeable effect on the market. What is the most likely explanation for this?

Accepted Answer

A) The equilibrium price of gasoline was probably below the price ceiling. 
B) The demand curve for gasoline in the 1970s was vertical. 
C) The supply curve for gasoline in the 1970s was vertical. 
D) The equilibrium price of gasoline was probably above the price ceiling. 
A) The equilibrium price of gasoline was probably below the price ceiling. 
B) The demand curve for gasoline in the 1970s was vertical. 
C) The supply curve for gasoline in the 1970s was vertical. 
D) The equilibrium price of gasoline was probably above the price ceiling.

Exam 4: Prices: Free, Controlled, and Relative

Jake is an excellent barber. However, all customers who come to him for a haircut must buy a bottle of shampoo. This type of arrangement is known as

In 1973 and 1979, the U.S. federal government imposed price ceilings on gasoline which resulted in surpluses of gasoline.

Which of the following is false ?

Exhibit 4-1 Refer to Exhibit 4-1. The number of units bought and sold at the price ceiling is

Explain why it is important to differentiate between the "number of unskilled workers" and the "number of unskilled labor hours" when evaluating the impact on the market for unskilled labor of an increase in minimum wage.

Exhibit 4-3 Refer to Exhibit 4-3. If price P2 is a price ceiling, then

List and describe the two major jobs performed by price.

Exhibit 4-8 Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What has happened to the consumers' surplus as a result of the imposition of the price floor?

At the minimum wage (set above the equilibrium wage),

Exhibit 4-5 Refer to Exhibit 4-5. Suppose the government imposes a price ceiling at P = $0 for transplanted kidneys. The result will be a

In order for a price floor to have an impact on a market it must be set below the equilibrium price.

A rationing device is needed because scarcity exists.

When the price of a good rises, the price is transmitting information indicating that the good has become relatively

Exhibit 4-5 Refer to Exhibit 4-5. If a free market were allowed in the transplanted kidney market, then the equilibrium price would be P2. The number of kidneys transplanted would increase by _________ compared to the number transplanted at a price ceiling of P= $0.

Exhibit 4-1 Refer to Exhibit 4-1. Suppose the good shown is being sold at the $6 price ceiling. At a quantity of 75 units, what is the maximum per-unit price buyers would be willing to pay for a good "tied" to the good shown in the exhibit?

Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound. If the price of butter rises to $3.90 and the price of margarine rises to $2.20, then the absolute price of butter has _______________ and the relative price of butter has _______________.

Exhibit 4-8 Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium, the consumers' surplus will equal

There is currently a price ceiling in the market for transplanted kidneys, which has helped to create a shortage of transplanted kidneys.

Suppose the government sets a price floor that is above the equilibrium price for a given good. It can be said that at the price floor,

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Supply, Demand, and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages, Union, and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Filters

Exhibit 4-3 Refer to Exhibit 4-3. If price P₂ is a price ceiling, then

Exhibit 4-8 Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What has happened to the consumers' surplus as a result of the imposition of the price floor?

Exhibit 4-5 Refer to Exhibit 4-5. If a free market were allowed in the transplanted kidney market, then the equilibrium price would be P₂. The number of kidneys transplanted would increase by _________ compared to the number transplanted at a price ceiling of P= $0.

Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound. If the price of butter rises to $3.90 and the price of margarine rises to $2.20, then the absolute price of butter has _ and the relative price of butter has _.