Question 1

If the government created a surplus of an agricultural product due to price supports, how might they dispose of this surplus?

Accepted Answer

A)  give it away to a foreign country 
B)  purchase it and store it away 
C)  have the farmer destroy the crop 
D)  Any of these answers might be a successful tool in disposing of agricultural surpluses. 
A)  give it away to a foreign country 
B)  purchase it and store it away 
C)  have the farmer destroy the crop 
D)  Any of these answers might be a successful tool in disposing of agricultural surpluses.

Question 2

A price floor represents

Accepted Answer

A)  a maximum price that can be legally charged for a product or service. 
B)  a minimum price that can be legally charged for a good or service. 
C)  a lottery imposed upon producers by the government. 
D)  a first come, first served mechanism for controlling prices. 
A)  a maximum price that can be legally charged for a product or service. 
B)  a minimum price that can be legally charged for a good or service. 
C)  a lottery imposed upon producers by the government. 
D)  a first come, first served mechanism for controlling prices.

Question 3

Chocolate has just been found to increase your expected life span by 5 years if you eat it every day. In the market for chocolate, this information 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 4

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 5

Government intervention in agriculture usually involves

Accepted Answer

A)  price ceilings in order to keep food prices low. 
B)  price ceilings in order to subsidize U.S. exports. 
C)  price supports in order to keep farm incomes high. 
D)  price supports in order to keep agricultural imports low. 
A)  price ceilings in order to keep food prices low. 
B)  price ceilings in order to subsidize U.S. exports. 
C)  price supports in order to keep farm incomes high. 
D)  price supports in order to keep agricultural imports low.

Question 6

Buyers and sellers receive signals from markets

Accepted Answer

A)  by listening to the TV news programs. 
B)  through the price system. 
C)  from the gossip columns in the newspapers. 
D)  from their friends and acquaintances. 
A)  by listening to the TV news programs. 
B)  through the price system. 
C)  from the gossip columns in the newspapers. 
D)  from their friends and acquaintances.

Question 7

Which one of the following statements is true?

Accepted Answer

A)  An effective price ceiling results in a surplus of the good. 
B)  An effective price floor results in a shortage of the good. 
C)  When the market clearing price of a good is the equilibrium, then everyone can afford it. 
D)  The market clearing price of a good reflects its relative scarcity. 
A)  An effective price ceiling results in a surplus of the good. 
B)  An effective price floor results in a shortage of the good. 
C)  When the market clearing price of a good is the equilibrium, then everyone can afford it. 
D)  The market clearing price of a good reflects its relative scarcity.

Question 8

Suppose a hurricane causes a great deal of destruction in Florida. After the hurricane, it takes much longer than usual for the reconstruction to take place. A possible explanation for this is

Accepted Answer

A)  greed by suppliers of construction materials increased. 
B)  government prevented price gouging during the reconstruction period. 
C)  prices of construction materials fell in the Midwest. 
D)  environmental restrictions on lumbering in the Pacific Northwest were relaxed. 
A)  greed by suppliers of construction materials increased. 
B)  government prevented price gouging during the reconstruction period. 
C)  prices of construction materials fell in the Midwest. 
D)  environmental restrictions on lumbering in the Pacific Northwest were relaxed.

Question 9

-Refer to the above figure. A price control has been set which has led to a surplus. This means that a

Accepted Answer

A)  price ceiling has been set at   . 
B)  price floor has been set at   . 
C)  price ceiling has been set at   . 
D)  price floor has been set at   . 
A)  price ceiling has been set at   . 
B)  price floor has been set at   . 
C)  price ceiling has been set at   . 
D)  price floor has been set at   .

Question 10

When prices are used as a rationing device, goods that are relatively more scarce than they used to be will have

Accepted Answer

A)  greater demand. 
B)  lower excess demands. 
C)  higher prices. 
D)  long queues. 
A)  greater demand. 
B)  lower excess demands. 
C)  higher prices. 
D)  long queues.

Question 11

A long line at the campus bookstore at the beginning of the term is an example of

Accepted Answer

A)  price rationing. 
B)  an ineffective price ceiling. 
C)  a non-price rationing device. 
D)  an ineffective price floor. 
A)  price rationing. 
B)  an ineffective price ceiling. 
C)  a non-price rationing device. 
D)  an ineffective price floor.

Question 12

An effective rent control will

Accepted Answer

A)  lead to a surplus of housing units. 
B)  keep rents below the competitive market level. 
C)  keep rents above the competitive market level. 
D)  be set at the price where quantity supplied equals quantity demanded. 
A)  lead to a surplus of housing units. 
B)  keep rents below the competitive market level. 
C)  keep rents above the competitive market level. 
D)  be set at the price where quantity supplied equals quantity demanded.

Question 13

Which of the following is one of the functions of rental prices?

Accepted Answer

A)  To redistribute income from landlords to renters 
B)  To redistribute income from renters to landlords 
C)  To signal to the local government when taxes on rental units should be increased 
D)  To ration the use of existing housing for current consumers 
A)  To redistribute income from landlords to renters 
B)  To redistribute income from renters to landlords 
C)  To signal to the local government when taxes on rental units should be increased 
D)  To ration the use of existing housing for current consumers

Question 14

Which of the following are ways to ration goods and services?

Accepted Answer

A)  price 
B)  physical force 
C)  political power 
D)  All of the above are correct. 
A)  price 
B)  physical force 
C)  political power 
D)  All of the above are correct.

Question 15

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 16

-Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve shifts from DA to DB. Which of the following is true about the results of the shifts in the supply and demand curves?

Accepted Answer

A)  The equilibrium price increases while the equilibrium quantity remains unchanged. 
B)  Both the equilibrium price and equilibrium quantity increase. 
C)  The equilibrium price remains unchanged while the equilibrium quantity increases. 
D)  Both the equilibrium price and equilibrium quantity remain unchanged. 
A)  The equilibrium price increases while the equilibrium quantity remains unchanged. 
B)  Both the equilibrium price and equilibrium quantity increase. 
C)  The equilibrium price remains unchanged while the equilibrium quantity increases. 
D)  Both the equilibrium price and equilibrium quantity remain unchanged.

Question 17

We cannot predict the effect on the market clearing price, but know that the equilibrium quantity will increase when

Accepted Answer

A)  supply increases and demand decreases. 
B)  supply and demand for a product simultaneously decrease. 
C)  supply and demand for a product simultaneously increase. 
D)  supply decreases and demand increases. 
A)  supply increases and demand decreases. 
B)  supply and demand for a product simultaneously decrease. 
C)  supply and demand for a product simultaneously increase. 
D)  supply decreases and demand increases.

Question 18

When supply increases and at the same time demand decreases, we

Accepted Answer

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

Question 19

An effective government imposed price ceiling will result

Accepted Answer

A)  in a surplus on the market. 
B)  in a shortage on the market. 
C)  in additional revenue for the government. 
D)  in prices for the product falling in the future. 
A)  in a surplus on the market. 
B)  in a shortage on the market. 
C)  in additional revenue for the government. 
D)  in prices for the product falling in the future.

Question 20

In recent years, the price of smartphones has fallen, while the quantity exchanged of smartphones has risen. We can conclude that this is most likely a result of

Accepted Answer

A)  a decrease in supply while demand remained constant. 
B)  an increase in demand while supply remained constant. 
C)  an increase in demand that exceeded an increase in supply. 
D)  an increase in supply that exceeded an increase in demand. 
A)  a decrease in supply while demand remained constant. 
B)  an increase in demand while supply remained constant. 
C)  an increase in demand that exceeded an increase in supply. 
D)  an increase in supply that exceeded an increase in demand.

Exam 4: Extensions of Demand and Supply Analysis

If the government created a surplus of an agricultural product due to price supports, how might they dispose of this surplus?

A price floor represents

Chocolate has just been found to increase your expected life span by 5 years if you eat it every day. In the market for chocolate, this information will lead to

The adverse effects of rent controls include

Government intervention in agriculture usually involves

Buyers and sellers receive signals from markets

Which one of the following statements is true?

Suppose a hurricane causes a great deal of destruction in Florida. After the hurricane, it takes much longer than usual for the reconstruction to take place. A possible explanation for this is

-Refer to the above figure. A price control has been set which has led to a surplus. This means that a

When prices are used as a rationing device, goods that are relatively more scarce than they used to be will have

A long line at the campus bookstore at the beginning of the term is an example of

An effective rent control will

Which of the following is one of the functions of rental prices?

Which of the following are ways to ration goods and services?

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

-Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve shifts from DA to DB. Which of the following is true about the results of the shifts in the supply and demand curves?

We cannot predict the effect on the market clearing price, but know that the equilibrium quantity will increase when

When supply increases and at the same time demand decreases, we

An effective government imposed price ceiling will result

In recent years, the price of smartphones has fallen, while the quantity exchanged of smartphones has risen. We can conclude that this is most likely a result of

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

-Refer to the above figure. Suppose that the supply curve shifts from S_A to S_B while the demand curve shifts from D_Ato D_B. Which of the following is true about the results of the shifts in the supply and demand curves?