Question 1

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 2

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 3

Suppose Brad Pitts 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 4

Your local grocery store reduces transaction costs to the consumer

Accepted Answer

A)  by reducing the consumer's need to travel from food producer to food producer (or manufacturer to manufacturer) to purchase the food staples that the consumer desires. 
B)  by providing a system that directs funds from lenders to borrowers. 
C)  by providing a system of justice to enforce contracts. 
D)  All of the above are correct. 
A)  by reducing the consumer's need to travel from food producer to food producer (or manufacturer to manufacturer) to purchase the food staples that the consumer desires. 
B)  by providing a system that directs funds from lenders to borrowers. 
C)  by providing a system of justice to enforce contracts. 
D)  All of the above are correct.

Question 5

The prices of certain goods, such as ice and gasoline, often increase after a natural disaster such as a hurricane. The economic explanation for this observation is that

Accepted Answer

A)  people panic in disaster situations. 
B)  disasters bring out the worst in people. 
C)  the disaster temporarily reduces the supply of the goods and increases the demand for the goods. 
D)  the disaster temporarily reduces the supply of the goods and reduces the demand for the goods. 
A)  people panic in disaster situations. 
B)  disasters bring out the worst in people. 
C)  the disaster temporarily reduces the supply of the goods and increases the demand for the goods. 
D)  the disaster temporarily reduces the supply of the goods and reduces the demand for the goods.

Question 6

The price of labor in the agricultural industry has just increased. For agricultural products, 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 7

In the United States, the wage floor legislated by government below which it is generally illegal to pay workers is known as

Accepted Answer

A)  the minimum wage. 
B)  the wage ceiling. 
C)  the employment gap. 
D)  the going wage. 
A)  the minimum wage. 
B)  the wage ceiling. 
C)  the employment gap. 
D)  the going wage.

Question 8

When import quotas are imposed by a government,

Accepted Answer

A)  the domestic producers always lower the prices of their products to ensure that their products are sold. 
B)  the government is trying to discourage consumers from buying foreign-made goods. 
C)  the supply of the product on the domestic market increases. 
D)  the price ceiling for the product has to be lowered. 
A)  the domestic producers always lower the prices of their products to ensure that their products are sold. 
B)  the government is trying to discourage consumers from buying foreign-made goods. 
C)  the supply of the product on the domestic market increases. 
D)  the price ceiling for the product has to be lowered.

Question 9

Suppose a price ceiling is set above the equilibrium price. Now suppose that policy makers decide to raise the price ceiling. This increase in the price ceiling will cause which of the following to occur?

Accepted Answer

A)  The surplus in the market will increase. 
B)  The surplus in the market will decrease. 
C)  The shortage in the market will increase. 
D)  None of the above. 
A)  The surplus in the market will increase. 
B)  The surplus in the market will decrease. 
C)  The shortage in the market will increase. 
D)  None of the above.

Question 10

In a world of scarcity, there has to be some way to ration the available resources. According to economists, the most efficient use of available resources occurs when rationing occurs via

Accepted Answer

A)  queuing. 
B)  lotteries. 
C)  political power. 
D)  the price system. 
A)  queuing. 
B)  lotteries. 
C)  political power. 
D)  the price system.

Question 11

-Refer to the above figure. A price ceiling has been set at   , and a black market has opened. The equilibrium black market quantity will be

Accepted Answer

A)  below   
B)  above   
C)  between   and   
D)    
A)  below   
B)  above   
C)  between   and   
D)

Question 12

An import quota

Accepted Answer

A)  is a price ceiling imposed on an imported good. 
B)  is a price floor imposed on an imported good. 
C)  is a supply restriction limiting the quantity of a good that can be imported. 
D)  is a legislative requirement stating that firms which import some of their merchandise must hire a certain number of immigrant workers. 
A)  is a price ceiling imposed on an imported good. 
B)  is a price floor imposed on an imported good. 
C)  is a supply restriction limiting the quantity of a good that can be imported. 
D)  is a legislative requirement stating that firms which import some of their merchandise must hire a certain number of immigrant workers.

Question 13

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 14

Economists assume that when there is a change in supply and/or demand, the market clearing price returns to the equilibrium

Accepted Answer

A)  quickly. 
B)  slowly. 
C)  after a protracted negotiation process. 
D)  after an adjustment period. 
A)  quickly. 
B)  slowly. 
C)  after a protracted negotiation process. 
D)  after an adjustment period.

Question 15

Suppose that consumer income decreases and that hamburger is an inferior good. Which of the following will occur in the market for hamburger?

Accepted Answer

A)  Market clearing price will rise, and equilibrium quantity will rise. 
B)  Market clearing price will fall, and equilibrium quantity will fall. 
C)  Market clearing price will rise, and equilibrium quantity will fall. 
D)  Market clearing price will fall, and equilibrium quantity will rise. 
A)  Market clearing price will rise, and equilibrium quantity will rise. 
B)  Market clearing price will fall, and equilibrium quantity will fall. 
C)  Market clearing price will rise, and equilibrium quantity will fall. 
D)  Market clearing price will fall, and equilibrium quantity will rise.

Question 16

In a market, the rationing function of prices results in

Accepted Answer

A)  long queues or waiting lines. 
B)  a price ceiling. 
C)  equilibrium. 
D)  a shortage or surplus. 
A)  long queues or waiting lines. 
B)  a price ceiling. 
C)  equilibrium. 
D)  a shortage or surplus.

Question 17

Queuing is a way to ration goods

Accepted Answer

A)  on a first-come, first-serve basis. 
B)  through prices. 
C)  through the use of political power. 
D)  through markets. 
A)  on a first-come, first-serve basis. 
B)  through prices. 
C)  through the use of political power. 
D)  through markets.

Question 18

Instituting a rent control program will most likely lead to

Accepted Answer

A)  a shortage of rental units. 
B)  overly elaborate and expensive construction. 
C)  an efficient allocation of existing units among consumers. 
D)  an excess quantity supplied of rental units. 
A)  a shortage of rental units. 
B)  overly elaborate and expensive construction. 
C)  an efficient allocation of existing units among consumers. 
D)  an excess quantity supplied of rental units.

Question 19

If an excess quantity of labor demanded exists in a free market, there is a tendency for

Accepted Answer

A)  quantity supplied to rise. 
B)  the wage rate to fall. 
C)  quantity demanded to fall. 
D)  the wage rate to rise. 
A)  quantity supplied to rise. 
B)  the wage rate to fall. 
C)  quantity demanded to fall. 
D)  the wage rate to rise.

Question 20

Which group of individuals most likely benefits from rent controls?

Accepted Answer

A)  the unemployed who fail to obtain rental housing 
B)  low-income wage earners who fail to obtain rental housing 
C)  single parent families without savings or other financial assets who fail to obtain rental housing 
D)  upper-income professionals who rent apartments at the price ceiling rate 
A)  the unemployed who fail to obtain rental housing 
B)  low-income wage earners who fail to obtain rental housing 
C)  single parent families without savings or other financial assets who fail to obtain rental housing 
D)  upper-income professionals who rent apartments at the price ceiling rate

Exam 4: Extensions of Demand and Supply Analysis

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

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?

Suppose Brad Pitts 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,

Your local grocery store reduces transaction costs to the consumer

The prices of certain goods, such as ice and gasoline, often increase after a natural disaster such as a hurricane. The economic explanation for this observation is that

The price of labor in the agricultural industry has just increased. For agricultural products, this will lead to

In the United States, the wage floor legislated by government below which it is generally illegal to pay workers is known as

When import quotas are imposed by a government,

Suppose a price ceiling is set above the equilibrium price. Now suppose that policy makers decide to raise the price ceiling. This increase in the price ceiling will cause which of the following to occur?

In a world of scarcity, there has to be some way to ration the available resources. According to economists, the most efficient use of available resources occurs when rationing occurs via

-Refer to the above figure. A price ceiling has been set at , and a black market has opened. The equilibrium black market quantity will be

An import quota

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

Economists assume that when there is a change in supply and/or demand, the market clearing price returns to the equilibrium

Suppose that consumer income decreases and that hamburger is an inferior good. Which of the following will occur in the market for hamburger?

In a market, the rationing function of prices results in

Queuing is a way to ration goods

Instituting a rent control program will most likely lead to

If an excess quantity of labor demanded exists in a free market, there is a tendency for

Which group of individuals most likely benefits from rent controls?

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

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