Question 1

What are the effects of an increase in the minimum wage? Who would be most affected?

Accepted Answer

An increase in the minimum wage induces

Question 2

Governments may intervene in private markets through

Accepted Answer

A)  rationing by political power. 
B)  price floors. 
C)  price ceilings. 
D)  all of the above. 
A)  rationing by political power. 
B)  price floors. 
C)  price ceilings. 
D)  all of the above.

Question 3

If a price floor is set below the current market clearing price, then

Accepted Answer

A)  a surplus must immediately occur. 
B)  a shortage must immediately occur. 
C)  there will be incentives for black markets to develop. 
D)  quantity demanded will remain equal to quantity supplied at the current market clearing price. 
A)  a surplus must immediately occur. 
B)  a shortage must immediately occur. 
C)  there will be incentives for black markets to develop. 
D)  quantity demanded will remain equal to quantity supplied at the current market clearing price.

Question 4

A price ceiling is

Accepted Answer

A)  the lowest price a seller can charge without losing all of its customers. 
B)  a legal minimum price below which a good or service cannot be sold. 
C)  a legal price above which a good or service cannot be sold. 
D)  a nonprice rationing device. 
A)  the lowest price a seller can charge without losing all of its customers. 
B)  a legal minimum price below which a good or service cannot be sold. 
C)  a legal price above which a good or service cannot be sold. 
D)  a nonprice rationing device.

Question 5

According to the text, during World War II rationing was conducted in the U.S. through the use of

Accepted Answer

A)  queuing. 
B)  lotteries. 
C)  coupons. 
D)  sharing. 
A)  queuing. 
B)  lotteries. 
C)  coupons. 
D)  sharing.

Question 6

Hospitals announce that there are not enough nurses available to keep them fully staffed. Economically speaking, what does this announcement mean?

Accepted Answer

A)  The market wage for trained nurses is currently above the equilibrium wage. 
B)  There is currently a surplus of nurses in this market. 
C)  The market wage for nurses will eventually rise to the market clearing wage. 
D)  The market will adjust very rapidly to correct this imbalance because anyone can be a nurse without any training. 
A)  The market wage for trained nurses is currently above the equilibrium wage. 
B)  There is currently a surplus of nurses in this market. 
C)  The market wage for nurses will eventually rise to the market clearing wage. 
D)  The market will adjust very rapidly to correct this imbalance because anyone can be a nurse without any training.

Question 7

A newspaper headline asserts: "Rising Demand Pushes Up Housing Prices." This headline

Accepted Answer

A)  incorrectly implies that the demand for housing can change, whereas in fact only the quantity of housing demanded can change. 
B)  incorrectly implies that the price of housing will rise when demand increases. 
C)  incorrectly implies that more housing will be demanded at higher prices. 
D)  correctly implies that an increase in demand will increase the market clearing price. 
A)  incorrectly implies that the demand for housing can change, whereas in fact only the quantity of housing demanded can change. 
B)  incorrectly implies that the price of housing will rise when demand increases. 
C)  incorrectly implies that more housing will be demanded at higher prices. 
D)  correctly implies that an increase in demand will increase the market clearing price.

Question 8

-Refer to the above figure. Suppose the demand curve shifts from DA to DB, while the supply curve remains at SA. Which of the following statements is FALSE?

Accepted Answer

A)  There has been an increase in demand. 
B)  Supply has increased. 
C)  More consumers in the market might have caused the demand curve to shift. 
D)  The new equilibrium price is P2, and the new equilibrium quantity is F. 
A)  There has been an increase in demand. 
B)  Supply has increased. 
C)  More consumers in the market might have caused the demand curve to shift. 
D)  The new equilibrium price is P2, and the new equilibrium quantity is F.

Question 9

In which of the following situations will both market clearing price and the equilibrium quantity increase?

Accepted Answer

A)  an increase in demand with no change in supply 
B)  an increase in supply with no change in demand 
C)  a decrease in supply with no change in demand 
D)  a decrease in demand with no change in supply 
A)  an increase in demand with no change in supply 
B)  an increase in supply with no change in demand 
C)  a decrease in supply with no change in demand 
D)  a decrease in demand with no change in supply

Question 10

All of the following result from price floors in agriculture EXCEPT

Accepted Answer

A)  surpluses of agricultural products that have price floors. 
B)  higher prices to consumers for agricultural products that have price floors. 
C)  lower prices to consumers for agricultural products that have price floors. 
D)  governmental bureaucracy. 
A)  surpluses of agricultural products that have price floors. 
B)  higher prices to consumers for agricultural products that have price floors. 
C)  lower prices to consumers for agricultural products that have price floors. 
D)  governmental bureaucracy.

Question 11

Minimum wages are examples of

Accepted Answer

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

Question 12

An effective price ceiling occurs when

Accepted Answer

A)  the government sets a maximum price for a good above the equilibrium price. 
B)  the government sets a minimum price for a good above the equilibrium price. 
C)  the government sets a minimum price for a good below the equilibrium price. 
D)  the government sets a maximum price for a good below the equilibrium price. 
A)  the government sets a maximum price for a good above the equilibrium price. 
B)  the government sets a minimum price for a good above the equilibrium price. 
C)  the government sets a minimum price for a good below the equilibrium price. 
D)  the government sets a maximum price for a good below the equilibrium price.

Question 13

What would happen in the market for rental housing in your community if the local government legally mandated rents that were below the market clearing price?

Accepted Answer

A)  There would be a surplus of rental housing. 
B)  There would be a shortage of rental housing. 
C)  The demand for rental housing would increase. 
D)  The supply of rental housing would decrease. 
A)  There would be a surplus of rental housing. 
B)  There would be a shortage of rental housing. 
C)  The demand for rental housing would increase. 
D)  The supply of rental housing would decrease.

Question 14

Suppose that 20,000 tickets were sold at $120 for an NBA game at Madison Square Garden in New York. The game was sold out and some fans could not get tickets. This suggests that

Accepted Answer

A)  selling price was below equilibrium price. 
B)  selling price was above equilibrium price. 
C)  selling price was at equilibrium. 
D)  the game was advertised too heavily. 
A)  selling price was below equilibrium price. 
B)  selling price was above equilibrium price. 
C)  selling price was at equilibrium. 
D)  the game was advertised too heavily.

Question 15

The gains from trade within a price system is

Accepted Answer

A)  the sum of consumer surplus and producer surplus. 
B)  consumer surplus less producer surplus. 
C)  consumer surplus divided by producer surplus. 
D)  consumer surplus multiplied by producer surplus. 
A)  the sum of consumer surplus and producer surplus. 
B)  consumer surplus less producer surplus. 
C)  consumer surplus divided by producer surplus. 
D)  consumer surplus multiplied by producer surplus.

Question 16

In the market for domestic avocados, what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?

Accepted Answer

A)  The market clearing price would rise, and the equilibrium quantity would rise. 
B)  The market clearing price would fall, and the equilibrium quantity would rise. 
C)  The market clearing price would rise, and the equilibrium quantity would fall. 
D)  The market clearing price would fall, and the equilibrium quantity would fall. 
A)  The market clearing price would rise, and the equilibrium quantity would rise. 
B)  The market clearing price would fall, and the equilibrium quantity would rise. 
C)  The market clearing price would rise, and the equilibrium quantity would fall. 
D)  The market clearing price would fall, and the equilibrium quantity would fall.

Question 17

-According to the above figure, if the government imposes a minimum wage equal to Wm, the effect will be

Accepted Answer

A)  a reduction in employment from Qe to Qm. 
B)  an increase in employment from Qe to Qm. 
C)  a decrease in labor supplied, from C to E. 
D)  an increase in labor supplied, from A to E. 
A)  a reduction in employment from Qe to Qm. 
B)  an increase in employment from Qe to Qm. 
C)  a decrease in labor supplied, from C to E. 
D)  an increase in labor supplied, from A to E.

Question 18

Suppose you are told that the equilibrium price of gasoline has increased, while the equilibrium quantity of gasoline has fallen. You are also told that either the demand changed or supply changed, but not both. Which of the following must have occurred?

Accepted Answer

A)  Demand increased. 
B)  Demand decreased. 
C)  Supply increased. 
D)  Supply decreased. 
A)  Demand increased. 
B)  Demand decreased. 
C)  Supply increased. 
D)  Supply decreased.

Question 19

During the Winter Olympics in Vancouver, some residents rented rooms to visitors. This behavior

Accepted Answer

A)  helped reduce the shortage of hotel rooms caused by the high demand during the Olympics. 
B)  reduced the demand for tickets to the Olympics since many local residents left town while they rented out space in their homes. 
C)  hurt the hotel market in Vancouver in the long run because new hotels that should have been built were not built for the Olympics. 
D)  raised the demand for hotel rooms in Vancouver and should have been prevented by the city of Vancouver. 
A)  helped reduce the shortage of hotel rooms caused by the high demand during the Olympics. 
B)  reduced the demand for tickets to the Olympics since many local residents left town while they rented out space in their homes. 
C)  hurt the hotel market in Vancouver in the long run because new hotels that should have been built were not built for the Olympics. 
D)  raised the demand for hotel rooms in Vancouver and should have been prevented by the city of Vancouver.

Question 20

A price ceiling below the market clearing price results in I. excess quantity demand
II) excess quantity supplied
III) entry of new producers

Accepted Answer

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

Exam 4: Extensions of Demand and Supply Analysis

What are the effects of an increase in the minimum wage? Who would be most affected?

Governments may intervene in private markets through

If a price floor is set below the current market clearing price, then

A price ceiling is

According to the text, during World War II rationing was conducted in the U.S. through the use of

Hospitals announce that there are not enough nurses available to keep them fully staffed. Economically speaking, what does this announcement mean?

A newspaper headline asserts: "Rising Demand Pushes Up Housing Prices." This headline

-Refer to the above figure. Suppose the demand curve shifts from DA to DB, while the supply curve remains at SA. Which of the following statements is FALSE?

In which of the following situations will both market clearing price and the equilibrium quantity increase?

All of the following result from price floors in agriculture EXCEPT

Minimum wages are examples of

An effective price ceiling occurs when

What would happen in the market for rental housing in your community if the local government legally mandated rents that were below the market clearing price?

Suppose that 20,000 tickets were sold at $120 for an NBA game at Madison Square Garden in New York. The game was sold out and some fans could not get tickets. This suggests that

The gains from trade within a price system is

In the market for domestic avocados, what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?

-According to the above figure, if the government imposes a minimum wage equal to Wm, the effect will be

Suppose you are told that the equilibrium price of gasoline has increased, while the equilibrium quantity of gasoline has fallen. You are also told that either the demand changed or supply changed, but not both. Which of the following must have occurred?

During the Winter Olympics in Vancouver, some residents rented rooms to visitors. This behavior

A price ceiling below the market clearing price results in I. excess quantity demand II) excess quantity supplied III) entry of new producers

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 the demand curve shifts from D_A to D_B, while the supply curve remains at S_A. Which of the following statements is FALSE?

-According to the above figure, if the government imposes a minimum wage equal to W_m, the effect will be