Question 1

Agriculture price supports that establish a price floor at which agricultural products may be purchased that exceeds the market clearing price

Accepted Answer

A)  create a shortage of agricultural products. 
B)  result in the quantity of these products supplied exceeding the quantity demanded at the floor price. 
C)  benefit taxpayers, who receive subsidies from producers that the price support program forces to sell to the government at an artificially established price. 
D)  benefit consumers, who are willing and able to purchase more agricultural products at the floor price. 
A)  create a shortage of agricultural products. 
B)  result in the quantity of these products supplied exceeding the quantity demanded at the floor price. 
C)  benefit taxpayers, who receive subsidies from producers that the price support program forces to sell to the government at an artificially established price. 
D)  benefit consumers, who are willing and able to purchase more agricultural products at the floor price.

Question 2

The signals in markets are determined

Accepted Answer

A)  by supply and demand. 
B)  for all goods by the government through the use of price controls. 
C)  in an unfair manner that ends up hurting the poor. 
D)  by nonprice rationing devices. 
A)  by supply and demand. 
B)  for all goods by the government through the use of price controls. 
C)  in an unfair manner that ends up hurting the poor. 
D)  by nonprice rationing devices.

Question 3

An unexpected import restriction imposed on mangoes by the USDA

Accepted Answer

A)  will reduce the price of mangoes in the United States. 
B)  will increase the price of mangoes in the United States. 
C)  will discourage American producers of mangoes. 
D)  will reduce the price of mango juice in the United States. 
A)  will reduce the price of mangoes in the United States. 
B)  will increase the price of mangoes in the United States. 
C)  will discourage American producers of mangoes. 
D)  will reduce the price of mango juice in the United States.

Question 4

When the government restricts the quantity of a good to zero

Accepted Answer

A)  an underground market develops. 
B)  there is none of the good available anywhere. 
C)  people's demand for the product evaporates. 
D)  producers stop all production. 
A)  an underground market develops. 
B)  there is none of the good available anywhere. 
C)  people's demand for the product evaporates. 
D)  producers stop all production.

Question 5

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 6

The supply of eggs comes from chickens. The price of eggs will decrease if

Accepted Answer

A)  the supply of chickens decreases. 
B)  the supply of eggs decreases. 
C)  the price of chickens increases. 
D)  the demand for eggs decreases. 
A)  the supply of chickens decreases. 
B)  the supply of eggs decreases. 
C)  the price of chickens increases. 
D)  the demand for eggs decreases.

Question 7

In the automobile industry, workers have just negotiated a new contract giving workers a large raise. There has also been an increase in the number of licensed drivers who are in the market for a new car. In the market for new automobiles, the effects that these changes will have on the equilibrium price and quantity are:

Accepted Answer

A)  price will increase, and quantity will decrease. 
B)  price will increase, and the effect on quantity is indeterminate. 
C)  price will decrease, and quantity will increase. 
D)  price will decrease, and the effect on quantity is indeterminate. 
A)  price will increase, and quantity will decrease. 
B)  price will increase, and the effect on quantity is indeterminate. 
C)  price will decrease, and quantity will increase. 
D)  price will decrease, and the effect on quantity is indeterminate.

Question 8

All of the following are examples of nonprice rationing devices EXCEPT

Accepted Answer

A)  price controls. 
B)  queues. 
C)  black markets. 
D)  waiting lists. 
A)  price controls. 
B)  queues. 
C)  black markets. 
D)  waiting lists.

Question 9

Who gains and who loses from rent controls?

Accepted Answer

Those who gain are people who live in an

Question 10

For a given market demand curve, if the market clearing price decreases, then the amount of consumer surplus will

Accepted Answer

A)  decrease. 
B)  increase. 
C)  become negative. 
D)  none of the above due to insufficient information 
A)  decrease. 
B)  increase. 
C)  become negative. 
D)  none of the above due to insufficient information

Question 11

Suppose that the market for coffee is in equilibrium at a price of $1.50 per pound and a monthly quantity of 20 million pounds. News of a freeze 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

Question 12

Suppose the equilibrium quantity of ethanol has decreased. Which of the following could have caused this change?

Accepted Answer

A)  a decrease in demand 
B)  an increase in supply 
C)  an increase in quantity demanded 
D)  an increase in quantity supplied 
A)  a decrease in demand 
B)  an increase in supply 
C)  an increase in quantity demanded 
D)  an increase in quantity supplied

Question 13

Rent controls often have adverse effects, including

Accepted Answer

A)  too much housing in a community. 
B)  deterioration in the quality of existing rental units. 
C)  too much construction of new rental units in the community. 
D)  income transfers from the poor to landlords. 
A)  too much housing in a community. 
B)  deterioration in the quality of existing rental units. 
C)  too much construction of new rental units in the community. 
D)  income transfers from the poor to landlords.

Question 14

A price floor above the market clearing price typically results in I. an excess quantity supplied
II) a shortage
III) an excess quantity demand

Accepted Answer

A)  I only 
B)  II only 
C)  III only 
D)  II and III only 
A)  I only 
B)  II only 
C)  III only 
D)  II and III only

Question 15

-In the above figure, a shortage could be caused by a government price ceiling set at

Accepted Answer

A)  $1.00. 
B)  $2.00. 
C)  $2.50. 
D)  $3.00. 
A)  $1.00. 
B)  $2.00. 
C)  $2.50. 
D)  $3.00.

Question 16

In order to be effective, a price floor

Accepted Answer

A)  must be set below equilibrium price. 
B)  must be set above equilibrium price. 
C)  must be set at equilibrium price. 
D)  must be a zero price. 
A)  must be set below equilibrium price. 
B)  must be set above equilibrium price. 
C)  must be set at equilibrium price. 
D)  must be a zero price.

Question 17

If Niki is willing to pay up to $5 for an ice-cream bar but she actually pays $2 for it. The consumer surplus of the ice-cream bar for Niki

Accepted Answer

A)  is $2. 
B)  is $3. 
C)  is $7. 
D)  cannot be determined without information about the market structure. 
A)  is $2. 
B)  is $3. 
C)  is $7. 
D)  cannot be determined without information about the market structure.

Question 18

List prices on new cars do not change very often, so

Accepted Answer

A)  the real price of cars is very inflexible. 
B)  the prices of new cars can only be flexible if there are changes in the cost of materials. 
C)  price flexibility is not an important feature in the auto market. 
D)  price flexibility shows up primarily through the negotiations between buyers and sellers. 
A)  the real price of cars is very inflexible. 
B)  the prices of new cars can only be flexible if there are changes in the cost of materials. 
C)  price flexibility is not an important feature in the auto market. 
D)  price flexibility shows up primarily through the negotiations between buyers and sellers.

Question 19

An increase in demand and a decrease in supply will lead to an

Accepted Answer

A)  unambiguous increases in both price and quantity. 
B)  unambiguous decreases in both price and quantity. 
C)  an unambiguous increase in quantity, but the effect on price is indeterminate. 
D)  an unambiguous increase in price, but the effect on quantity is indeterminate. 
A)  unambiguous increases in both price and quantity. 
B)  unambiguous decreases in both price and quantity. 
C)  an unambiguous increase in quantity, but the effect on price is indeterminate. 
D)  an unambiguous increase in price, but the effect on quantity is indeterminate.

Question 20

The U.S. government imposes import quotas on many agricultural products, especially products that receive price supports. Offer an economic explanation for this.

Accepted Answer

If the price supports generate a price i

Exam 4: Extensions of Demand and Supply Analysis

Agriculture price supports that establish a price floor at which agricultural products may be purchased that exceeds the market clearing price

The signals in markets are determined

An unexpected import restriction imposed on mangoes by the USDA

When the government restricts the quantity of a good to zero

Price ceilings are adopted in most cases because

The supply of eggs comes from chickens. The price of eggs will decrease if

All of the following are examples of nonprice rationing devices EXCEPT

Who gains and who loses from rent controls?

For a given market demand curve, if the market clearing price decreases, then the amount of consumer surplus will

Suppose the equilibrium quantity of ethanol has decreased. Which of the following could have caused this change?

Rent controls often have adverse effects, including

A price floor above the market clearing price typically results in I. an excess quantity supplied II) a shortage III) an excess quantity demand

-In the above figure, a shortage could be caused by a government price ceiling set at

In order to be effective, a price floor

If Niki is willing to pay up to $5 for an ice-cream bar but she actually pays $2 for it. The consumer surplus of the ice-cream bar for Niki

List prices on new cars do not change very often, so

An increase in demand and a decrease in supply will lead to an

The U.S. government imposes import quotas on many agricultural products, especially products that receive price supports. Offer an economic explanation 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

Measuring the Economys Performance

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

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

Filters