Question 1

A decrease in demand and a decrease in supply will lead to

Accepted Answer

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

Question 2

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 3

Suppose the market clearing price is $1.25 and the price ceiling is $1.50. The price that prevails in the market will be

Accepted Answer

A)  $1.50. 
B)  $1.25. 
C)  less than $1.25. 
D)  more than $1.50. 
A)  $1.50. 
B)  $1.25. 
C)  less than $1.25. 
D)  more than $1.50.

Question 4

In the United States, government-imposed price supports are most often associated with

Accepted Answer

A)  agricultural products. 
B)  industrial products. 
C)  consumer electronics. 
D)  commercial building products. 
A)  agricultural products. 
B)  industrial products. 
C)  consumer electronics. 
D)  commercial building products.

Question 5

-Refer to the above figure. A price support set at   will

Accepted Answer

A)  lead to a surplus of   minus   . 
B)  lead to a shortage of   minus   . 
C)  lead to an equilibrium quantity of   . 
D)  be ineffective. 
A)  lead to a surplus of   minus   . 
B)  lead to a shortage of   minus   . 
C)  lead to an equilibrium quantity of   . 
D)  be ineffective.

Question 6

Price controls may be thought of as

Accepted Answer

A)  a restraint on the rationing function of prices. 
B)  useful tools that promote production. 
C)  necessary in market economies. 
D)  the freeing-up of free market forces. 
A)  a restraint on the rationing function of prices. 
B)  useful tools that promote production. 
C)  necessary in market economies. 
D)  the freeing-up of free market forces.

Question 7

After an increase in the demand for construction workers, the market will attain its new long-run equilibrium faster if

Accepted Answer

A)  wages are flexible. 
B)  wages are inflexible, forcing new people to enter the market. 
C)  unions restrict the number of new construction workers. 
D)  people ignore the shortage in the short run. 
A)  wages are flexible. 
B)  wages are inflexible, forcing new people to enter the market. 
C)  unions restrict the number of new construction workers. 
D)  people ignore the shortage in the short run.

Question 8

In the housing market, rents serve the purpose of

Accepted Answer

A)  making landlords rich. 
B)  rationing the availability of existing housing. 
C)  providing an entry by the government into the housing market. 
D)  increasing tax collections by the community. 
A)  making landlords rich. 
B)  rationing the availability of existing housing. 
C)  providing an entry by the government into the housing market. 
D)  increasing tax collections by the community.

Question 9

Holding supply constant, an increase in demand leads to

Accepted Answer

A)  lower prices and higher quantity supplied. 
B)  lower prices and lower quantity supplied. 
C)  higher prices and higher quantity supplied. 
D)  higher prices and lower quantity supplied. 
A)  lower prices and higher quantity supplied. 
B)  lower prices and lower quantity supplied. 
C)  higher prices and higher quantity supplied. 
D)  higher prices and lower quantity supplied.

Question 10

In the United States, the minimum wage is defined as

Accepted Answer

A)  the wage that the youngest job entrant into the job market makes. 
B)  the lowest wage that a corporation should pay a worker if the corporation wants to ensure that its employees are well trained. 
C)  the lowest hourly wage rate a firm may legally pay its workers, as legislated by the U.S. government. 
D)  the wage ceiling above which a firm no longer must pay its employees additional benefits. 
A)  the wage that the youngest job entrant into the job market makes. 
B)  the lowest wage that a corporation should pay a worker if the corporation wants to ensure that its employees are well trained. 
C)  the lowest hourly wage rate a firm may legally pay its workers, as legislated by the U.S. government. 
D)  the wage ceiling above which a firm no longer must pay its employees additional benefits.

Question 11

Which of the following statements about a price system is true? I. Prices ration goods and services.
II) Prices indicate relative scarcity.

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 12

Suppose the market clearing price for gasoline is $4.75 per gallon. Now suppose that policy makers pass a law requiring that the maximum price that can be charged is $3.75 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 13

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 14

Using a graph, show a market equilibrium. Suppose the costs of inputs increase. How is this shown on the graph? Explain what is happening in the market.

Accepted Answer

@#IMG-DLM& In the graph, the original equilibrium

Question 15

More farmers have recently entered the corn industry. In addition there has been a technological advancement in the fertilizer industry providing corn farmers with a cheaper and a more effective fertilizer. In the market for corn, the effects 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 16

In September 2005, destruction to U.S. gasoline refineries was caused by back-to-back storms along the U.S. Gulf Coast-Hurricane Katrina and Hurricane Rita. In one week, the average price of a gallon of gasoline in the United States increased by about 40 cents. Which of the following best explains why these events pushed up the price of gasoline?

Accepted Answer

A)  The demand curve for gasoline shifted to the left along the supply curve for gasoline. 
B)  The supply curve for gasoline shifted to the left along the demand curve for gasoline. 
C)  The demand curve for gasoline shifted to the right along the supply curve for gasoline. 
D)  The supply curve for gasoline shifted to the right along the demand curve for gasoline. 
A)  The demand curve for gasoline shifted to the left along the supply curve for gasoline. 
B)  The supply curve for gasoline shifted to the left along the demand curve for gasoline. 
C)  The demand curve for gasoline shifted to the right along the supply curve for gasoline. 
D)  The supply curve for gasoline shifted to the right along the demand curve for gasoline.

Question 17

Which of the following statement is false?

Accepted Answer

A)  Only the price system can be used to ration goods. 
B)  Random assignment can be a method of rationing. 
C)  Coupons can be used to ration goods. 
D)  Queuing can be used for rationing. 
A)  Only the price system can be used to ration goods. 
B)  Random assignment can be a method of rationing. 
C)  Coupons can be used to ration goods. 
D)  Queuing can be used for rationing.

Question 18

Suppose that the current equilibrium price of gasoline is $5.50 per gallon and that the government passes a law that requires the price to be no more than $5 per gallon. What will be the effects?

Accepted Answer

The fall in price from $5.50 to $5.00 ca

Question 19

There has recently been an increase in the price of dairy products used in the production of ice cream. High temperatures have also induced people to consume more ice cream. In the market for ice cream, the effects these changes will have on 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 20

The price of milk increases. Which of the following is NOT part of the likely chain of events that follows from this price change?

Accepted Answer

A)  Some milk consumers reduce their consumption of milk. 
B)  Milk producers increase their production of milk. 
C)  The producers of feed for dairy cows increase production. 
D)  The manufacturers of milking machines lay off some workers. 
A)  Some milk consumers reduce their consumption of milk. 
B)  Milk producers increase their production of milk. 
C)  The producers of feed for dairy cows increase production. 
D)  The manufacturers of milking machines lay off some workers.

Exam 4: Extensions of Demand and Supply Analysis

A decrease in demand and a decrease in supply will lead to

Price floors

Suppose the market clearing price is $1.25 and the price ceiling is $1.50. The price that prevails in the market will be

In the United States, government-imposed price supports are most often associated with

-Refer to the above figure. A price support set at will

Price controls may be thought of as

After an increase in the demand for construction workers, the market will attain its new long-run equilibrium faster if

In the housing market, rents serve the purpose of

Holding supply constant, an increase in demand leads to

In the United States, the minimum wage is defined as

Which of the following statements about a price system is true? I. Prices ration goods and services. II) Prices indicate relative scarcity.

Suppose the market clearing price for gasoline is $4.75 per gallon. Now suppose that policy makers pass a law requiring that the maximum price that can be charged is $3.75 per gallon. Such a situation is an example of

Government-imposed quantity restrictions

Using a graph, show a market equilibrium. Suppose the costs of inputs increase. How is this shown on the graph? Explain what is happening in the market.

Which of the following statement is false?

Suppose that the current equilibrium price of gasoline is $5.50 per gallon and that the government passes a law that requires the price to be no more than $5 per gallon. What will be the effects?

There has recently been an increase in the price of dairy products used in the production of ice cream. High temperatures have also induced people to consume more ice cream. In the market for ice cream, the effects these changes will have on equilibrium price and quantity are:

The price of milk increases. Which of the following is NOT part of the likely chain of events that follows from this price change?

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