Question 1

Price floors

Accepted Answer

A) provide free market incentives for producers. 
B) create surpluses by setting the price above equilibrium. 
C) create shortages by setting the price above equilibrium. 
D) are used by advocates of the free market. 
A) provide free market incentives for producers. 
B) create surpluses by setting the price above equilibrium. 
C) create shortages by setting the price above equilibrium. 
D) are used by advocates of the free market.

Question 2

Suppose Brad Pitt 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 3

Which of the following must occur as a result of ceilings on apartment rents that are set below market clearing rental rates?

Accepted Answer

A) Property owners respond to the ceilings by increasing maintenance and repairs. 
B) Property owners respond to the ceilings by constructing new apartment buildings. 
C) There is a decrease in the quantity of apartments that prospective tenants wish to rent. 
D) There is a decrease in the quantity of apartments that property owners offer for rent. 
A) Property owners respond to the ceilings by increasing maintenance and repairs. 
B) Property owners respond to the ceilings by constructing new apartment buildings. 
C) There is a decrease in the quantity of apartments that prospective tenants wish to rent. 
D) There is a decrease in the quantity of apartments that property owners offer for rent.

Question 4

A black market may occur when

Accepted Answer

A) the government imposes a price floor below the market clearing price. 
B) the government imposes a price ceiling below the market clearing price. 
C) the government imposes a price ceiling above the market clearing price. 
D) the government does not impose either a price ceiling or a price floor. 
A) the government imposes a price floor below the market clearing price. 
B) the government imposes a price ceiling below the market clearing price. 
C) the government imposes a price ceiling above the market clearing price. 
D) the government does not impose either a price ceiling or a price floor.

Question 5

The price rationing mechanism of a freely functioning market leads to the most efficient use of resources because

Accepted Answer

A) all gains from mutually beneficial trade are captured. 
B) the Federal Trade Commission regulates the market. 
C) of the rise of the legislative apparatus that supports trade. 
D) the Justice Department monitors market activities. 
A) all gains from mutually beneficial trade are captured. 
B) the Federal Trade Commission regulates the market. 
C) of the rise of the legislative apparatus that supports trade. 
D) the Justice Department monitors market activities.

Question 6

-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 7

Rent control is an example of

Accepted Answer

A) a price floor. 
B) a price ceiling. 
C) the rationing function of prices not working. 
D) the government increasing the demand for certain products. 
A) a price floor. 
B) a price ceiling. 
C) the rationing function of prices not working. 
D) the government increasing the demand for certain products.

Question 8

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

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 9

-The effect of legislation establishing a minimum wage above the market clearing wage is

Accepted Answer

A) unemployment. 
B) a shortage of labor. 
C) higher wages for all workers. 
D) a shift of the demand for labor curve. 
A) unemployment. 
B) a shortage of labor. 
C) higher wages for all workers. 
D) a shift of the demand for labor curve.

Question 10

Suppose the market clearing price for gasoline is $3.75 per gallon. Now suppose that policy makers pass a law requiring that the maximum price that can be charged is $2.75 per gallon. Such a situation is an example of

Accepted Answer

A) a price control that will lead to a surplus of gasoline on the market. 
B) a price floor that will lead to a shortage of gasoline on the market. 
C) a price ceiling that will lead to a shortage of gasoline on the market. 
D) a price floor that will lead to a surplus of gasoline on the market. 
A) a price control that will lead to a surplus of gasoline on the market. 
B) a price floor that will lead to a shortage of gasoline on the market. 
C) a price ceiling that will lead to a shortage of gasoline on the market. 
D) a price floor that will lead to a surplus of gasoline on the market.

Question 11

Following adjustments to a new equilibrium in a market, the market clearing price remains unchanged, but the equilibrium quantity 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 12

Government-imposed quantity restrictions

Accepted Answer

A) generate a higher price for the good than would prevail under freely competitive markets. 
B) generate a lower price for the good than would prevail under freely competitive markets. 
C) does not affect the price of the good because quantity restrictions always ban sale of the good completely. 
D) can cause prices to either be higher or lower, but always cause excess quantities supplied to develop. 
A) generate a higher price for the good than would prevail under freely competitive markets. 
B) generate a lower price for the good than would prevail under freely competitive markets. 
C) does not affect the price of the good because quantity restrictions always ban sale of the good completely. 
D) can cause prices to either be higher or lower, but always cause excess quantities supplied to develop.

Question 13

For which situation would we expect the adjustment speed to be the fastest?

Accepted Answer

A) The demand for surgeons increases. 
B) A large increase in birth rates leads to an increase in elementary school teachers. 
C) The demand for movie videos increases. 
D) The demand for office space in downtown Chicago increases. 
A) The demand for surgeons increases. 
B) A large increase in birth rates leads to an increase in elementary school teachers. 
C) The demand for movie videos increases. 
D) The demand for office space in downtown Chicago increases.

Question 14

Price ceilings set below the equilibrium price cause

Accepted Answer

A) shortages. 
B) surpluses. 
C) a new market equilibrium. 
D) a greater number of exchanges. 
A) shortages. 
B) surpluses. 
C) a new market equilibrium. 
D) a greater number of exchanges.

Question 15

In the labor market, adjustments to changes in supply and demand

Accepted Answer

A) usually occur instantly. 
B) usually take time to occur. 
C) do not apply, since the labor market does not respond to supply and demand forces. 
D) do not apply, since wages in the labor market always go up. 
A) usually occur instantly. 
B) usually take time to occur. 
C) do not apply, since the labor market does not respond to supply and demand forces. 
D) do not apply, since wages in the labor market always go up.

Question 16

Suppose there is a simultaneous increase in the demand for wheat and increase in the supply of wheat. Which of the following will occur as a result of these simultaneous events?

Accepted Answer

A) Both the market clearing price and equilibrium quantity will rise. 
B) The market clearing price will fall, but the equilibrium quantity will rise. 
C) The market clearing price may rise, fall, or stay the same, but the equilibrium quantity will rise. 
D) The market clearing price will fall, but the equilibrium quantity may rise, fall, or stay the same. 
A) Both the market clearing price and equilibrium quantity will rise. 
B) The market clearing price will fall, but the equilibrium quantity will rise. 
C) The market clearing price may rise, fall, or stay the same, but the equilibrium quantity will rise. 
D) The market clearing price will fall, but the equilibrium quantity may rise, fall, or stay the same.

Question 17

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 18

Suppose that the market for coffee is in equilibrium at a price of $9.50 per pound and a monthly quantity of 20 million pounds. News of a drought in Brazil arrives so that people know that the supply of coffee months from now will be sharply reduced. What, if anything, will happen in the coffee market now?
 Explain.

Accepted Answer

The expectations of reduced su

Price floors

Suppose Brad Pitt 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

Which of the following must occur as a result of ceilings on apartment rents that are set below market clearing rental rates?

A black market may occur when

The price rationing mechanism of a freely functioning market leads to the most efficient use of resources because

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

Rent control is an example of

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

-The effect of legislation establishing a minimum wage above the market clearing wage is

Suppose the market clearing price for gasoline is $3.75 per gallon. Now suppose that policy makers pass a law requiring that the maximum price that can be charged is $2.75 per gallon. Such a situation is an example of

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

Government-imposed quantity restrictions

For which situation would we expect the adjustment speed to be the fastest?

Price ceilings set below the equilibrium price cause

In the labor market, adjustments to changes in supply and demand

Suppose there is a simultaneous increase in the demand for wheat and increase in the supply of wheat. Which of the following will occur as a result of these simultaneous events?

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

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

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Exam 4: Extensions of Demand and Supply Analysis

Price floors

Suppose Brad Pitt 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

Which of the following must occur as a result of ceilings on apartment rents that are set below market clearing rental rates?

A black market may occur when

The price rationing mechanism of a freely functioning market leads to the most efficient use of resources because

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

Rent control is an example of

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

-The effect of legislation establishing a minimum wage above the market clearing wage is

Suppose the market clearing price for gasoline is $3.75 per gallon. Now suppose that policy makers pass a law requiring that the maximum price that can be charged is $2.75 per gallon. Such a situation is an example of

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

Government-imposed quantity restrictions

For which situation would we expect the adjustment speed to be the fastest?

Price ceilings set below the equilibrium price cause

In the labor market, adjustments to changes in supply and demand

Suppose there is a simultaneous increase in the demand for wheat and increase in the supply of wheat. Which of the following will occur as a result of these simultaneous events?

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

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

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