Question 1

When the government sets a maximum price that can be charged for a good or service, it creates

Accepted Answer

A) a price support. 
B) a price floor. 
C) a white market. 
D) a price ceiling. 
A) a price support. 
B) a price floor. 
C) a white market. 
D) a price ceiling.

Question 2

Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of the following to occur?

Accepted Answer

A) The shortage in the market will decrease. 
B) The shortage in the market will increase. 
C) The surplus in the market will decrease. 
D) The surplus in the market will increase. 
A) The shortage in the market will decrease. 
B) The shortage in the market will increase. 
C) The surplus in the market will decrease. 
D) The surplus in the market will increase.

Question 3

Price floors are designed to

Accepted Answer

A) establish a minimum allowable price. 
B) allow free market prices to be achieved. 
C) create shortages where none existed before. 
D) none of the above. 
A) establish a minimum allowable price. 
B) allow free market prices to be achieved. 
C) create shortages where none existed before. 
D) none of the above.

Question 4

Which of the following is an effect of a minimum wage law that establishes a ceiling wage below the current market clearing wage?

Accepted Answer

A) Surplus labor, or unemployment 
B) A decrease in the market clearing wage 
C) A decrease in the quantity of labor supplied 
D) An increase in the quantity of labor supplied 
A) Surplus labor, or unemployment 
B) A decrease in the market clearing wage 
C) A decrease in the quantity of labor supplied 
D) An increase in the quantity of labor supplied

Question 5

According to the text, during World War II rationing was conducted in the U.S. through the use of

Accepted Answer

A) queuing. 
B) lotteries. 
C) coupons. 
D) sharing. 
A) queuing. 
B) lotteries. 
C) coupons. 
D) sharing.

Question 6

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 7

Government policies such as price controls, rent controls, and quantity restrictions have the effect of

Accepted Answer

A) promoting the attainment of an unhindered market equilibrium. 
B) allowing quantity demanded to adjust to equality with aggregate supply. 
C) creating excess quantities demanded or excess quantities supplied. 
D) pushing prices to market clearing levels more rapidly than private market forces. 
A) promoting the attainment of an unhindered market equilibrium. 
B) allowing quantity demanded to adjust to equality with aggregate supply. 
C) creating excess quantities demanded or excess quantities supplied. 
D) pushing prices to market clearing levels more rapidly than private market forces.

Question 8

Which of the following is NOT a voluntary exchange?

Accepted Answer

A) Tom's car is stolen from in front of his house. 
B) Marie buys groceries. 
C) Scott pays $10,000 for tuition and fees this semester. 
D) Emily buys a $1,000 plane ticket to fly from New York to Dallas on short notice. 
A) Tom's car is stolen from in front of his house. 
B) Marie buys groceries. 
C) Scott pays $10,000 for tuition and fees this semester. 
D) Emily buys a $1,000 plane ticket to fly from New York to Dallas on short notice.

Question 9

People consume more fresh fruit in the summer than during the rest of the year, yet the prices of fresh fruit are lower in the summer than in other seasons. What accounts for this?

Accepted Answer

A) Fresh fruit is not subject to the law of supply. 
B) The supply of fresh fruit increases in the summer. 
C) Fresh fruit is an inferior good. 
D) Fresh fruit is not subject to the law of demand. 
A) Fresh fruit is not subject to the law of supply. 
B) The supply of fresh fruit increases in the summer. 
C) Fresh fruit is an inferior good. 
D) Fresh fruit is not subject to the law of demand.

Question 10

A price ceiling set below the market clearing price will tend to cause which of the following?

Accepted Answer

A) a surplus 
B) a shortage 
C) an increase in demand 
D) a reduction in supply 
A) a surplus 
B) a shortage 
C) an increase in demand 
D) a reduction in supply

Question 11

Which of the following is NOT a function of rental prices?

Accepted Answer

A) to stimulate the construction of new housing 
B) to ration the existing housing stock 
C) to provide housing to individuals below market value 
D) to allocate existing scarce housing among different people 
A) to stimulate the construction of new housing 
B) to ration the existing housing stock 
C) to provide housing to individuals below market value 
D) to allocate existing scarce housing among different people

Question 12

An increase in the minimum wage will tend to cause which of the following to occur?

Accepted Answer

A) an increase in the size of the surplus of labor 
B) a leftward shift in the demand for labor 
C) a rightward shift in the supply of labor 
D) a reduction in the unemployment rate 
A) an increase in the size of the surplus of labor 
B) a leftward shift in the demand for labor 
C) a rightward shift in the supply of labor 
D) a reduction in the unemployment rate

Question 13

A supply restriction on imported goods, such as the government's restriction of imported oil for many years, is referred to as

Accepted Answer

A) an export quota. 
B) an import quota. 
C) a price floor. 
D) a price ceiling. 
A) an export quota. 
B) an import quota. 
C) a price floor. 
D) a price ceiling.

Question 14

If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that the market clearing price ________ and the equilibrium quantity ________.

Accepted Answer

A) will fall, cannot be predicted 
B) will rise, cannot be predicted 
C) cannot be predicted, will fall 
D) cannot be predicted, will rise 
A) will fall, cannot be predicted 
B) will rise, cannot be predicted 
C) cannot be predicted, will fall 
D) cannot be predicted, will rise

Question 15

The gains from trade within a price system is

Accepted Answer

A) the sum of consumer surplus and producer surplus. 
B) consumer surplus less producer surplus. 
C) consumer surplus divided by producer surplus. 
D) consumer surplus multiplied by producer surplus. 
A) the sum of consumer surplus and producer surplus. 
B) consumer surplus less producer surplus. 
C) consumer surplus divided by producer surplus. 
D) consumer surplus multiplied by producer surplus.

Question 16

The adverse effects of rent controls include

Accepted Answer

A) keeping rental rates too high in a normal market. 
B) excessive construction of new rental housing. 
C) reduced incentive to construct new rental housing. 
D) increased incentives for people to purchase their own homes. 
A) keeping rental rates too high in a normal market. 
B) excessive construction of new rental housing. 
C) reduced incentive to construct new rental housing. 
D) increased incentives for people to purchase their own homes.

Question 17

Goods X and Y are complementary goods. A decrease in price of good X has occurred. In the market for good Y, this will lead to

Accepted Answer

A) an increase in price and a decrease in quantity. 
B) an increase in price and an increase in quantity. 
C) a decrease in price and a decrease in quantity. 
D) a decrease in price and an increase in quantity. 
A) an increase in price and a decrease in quantity. 
B) an increase in price and an increase in quantity. 
C) a decrease in price and a decrease in quantity. 
D) a decrease in price and an increase in quantity.

Question 18

When supply and demand for a product increase simultaneously, we

Accepted Answer

A) can predict that both the market clearing price and the equilibrium quantity will increase. 
B) can predict that both the market clearing price and the equilibrium quantity will decrease. 
C) cannot predict the market clearing price, but know that the equilibrium quantity will increase. 
D) cannot predict the change in either the equilibrium quantity or the market clearing price. 
A) can predict that both the market clearing price and the equilibrium quantity will increase. 
B) can predict that both the market clearing price and the equilibrium quantity will decrease. 
C) cannot predict the market clearing price, but know that the equilibrium quantity will increase. 
D) cannot predict the change in either the equilibrium quantity or the market clearing price.

Question 19

If both the demand for and the supply of computers are increasing, which of the following statements is TRUE?

Accepted Answer

A) The consumer should buy a computer now since the price will be higher in the future. 
B) The consumer should wait and buy a computer later since the price will be lower in the future. 
C) The price of a computer will be the same in the future as it is now. 
D) It is impossible to know, given only this information, whether the prices of computers will go up or down in the future. 
A) The consumer should buy a computer now since the price will be higher in the future. 
B) The consumer should wait and buy a computer later since the price will be lower in the future. 
C) The price of a computer will be the same in the future as it is now. 
D) It is impossible to know, given only this information, whether the prices of computers will go up or down in the future.

Question 20

Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?

Accepted Answer

A) An increase in demand pushes up the market clearing price of roses. 
B) People buying the roses are irrational. 
C) Roses are not subject to the law of demand. 
D) Florists know that there are no substitutes for roses, so they take advantage of consumers on Valentine's Day. 
A) An increase in demand pushes up the market clearing price of roses. 
B) People buying the roses are irrational. 
C) Roses are not subject to the law of demand. 
D) Florists know that there are no substitutes for roses, so they take advantage of consumers on Valentine's Day.

When the government sets a maximum price that can be charged for a good or service, it creates

Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of the following to occur?

Price floors are designed to

Which of the following is an effect of a minimum wage law that establishes a ceiling wage below the current market clearing wage?

According to the text, during World War II rationing was conducted in the U.S. through the use of

Total producer surplus in a market is measured as the

Government policies such as price controls, rent controls, and quantity restrictions have the effect of

Which of the following is NOT a voluntary exchange?

People consume more fresh fruit in the summer than during the rest of the year, yet the prices of fresh fruit are lower in the summer than in other seasons. What accounts for this?

A price ceiling set below the market clearing price will tend to cause which of the following?

Which of the following is NOT a function of rental prices?

An increase in the minimum wage will tend to cause which of the following to occur?

A supply restriction on imported goods, such as the government's restriction of imported oil for many years, is referred to as

If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that the market clearing price and the equilibrium quantity .

The gains from trade within a price system is

The adverse effects of rent controls include

Goods X and Y are complementary goods. A decrease in price of good X has occurred. In the market for good Y, this will lead to

When supply and demand for a product increase simultaneously, we

If both the demand for and the supply of computers are increasing, which of the following statements is TRUE?

Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 4: Extensions of Demand and Supply Analysis

When the government sets a maximum price that can be charged for a good or service, it creates

Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of the following to occur?

Price floors are designed to

Which of the following is an effect of a minimum wage law that establishes a ceiling wage below the current market clearing wage?

According to the text, during World War II rationing was conducted in the U.S. through the use of

Total producer surplus in a market is measured as the

Government policies such as price controls, rent controls, and quantity restrictions have the effect of

Which of the following is NOT a voluntary exchange?

People consume more fresh fruit in the summer than during the rest of the year, yet the prices of fresh fruit are lower in the summer than in other seasons. What accounts for this?

A price ceiling set below the market clearing price will tend to cause which of the following?

Which of the following is NOT a function of rental prices?

An increase in the minimum wage will tend to cause which of the following to occur?

A supply restriction on imported goods, such as the government's restriction of imported oil for many years, is referred to as

If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that the market clearing price ________ and the equilibrium quantity ________.

The gains from trade within a price system is

The adverse effects of rent controls include

Goods X and Y are complementary goods. A decrease in price of good X has occurred. In the market for good Y, this will lead to

When supply and demand for a product increase simultaneously, we

If both the demand for and the supply of computers are increasing, which of the following statements is TRUE?

Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that the market clearing price and the equilibrium quantity .