Question 1

What has been the market outcome of government-enforced price floors for agricultural products?

Accepted Answer

A)  Not enough food has been produced. 
B)  Farmers have been made worse off. 
C)  A shortage of agricultural products has resulted. 
D)  A surplus of agricultural products has resulted. 
A)  Not enough food has been produced. 
B)  Farmers have been made worse off. 
C)  A shortage of agricultural products has resulted. 
D)  A surplus of agricultural products has resulted.

Question 2

-Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as

Accepted Answer

A)  a price floor. 
B)  a price ceiling. 
C)  an equilibrium price. 
D)  a just price. 
A)  a price floor. 
B)  a price ceiling. 
C)  an equilibrium price. 
D)  a just price.

Question 3

Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?

Accepted Answer

A)  An increase in demand pushes up the market clearing price of roses. 
B)  People buying the roses are irrational. 
C)  Roses are not subject to the law of demand. 
D)  Florists know that there are no substitutes for roses, so they take advantage of consumers on Valentine's Day. 
A)  An increase in demand pushes up the market clearing price of roses. 
B)  People buying the roses are irrational. 
C)  Roses are not subject to the law of demand. 
D)  Florists know that there are no substitutes for roses, so they take advantage of consumers on Valentine's Day.

Question 4

-Refer to the above figure. A shortage occurs if the government imposes

Accepted Answer

A)  a price floor at $60. 
B)  a price floor at $20. 
C)  a price ceiling at $60. 
D)  a price ceiling at $20. 
A)  a price floor at $60. 
B)  a price floor at $20. 
C)  a price ceiling at $60. 
D)  a price ceiling at $20.

Question 5

As a result of establishing a legal minimum wage above the market clearing wage,

Accepted Answer

A)  there will be a shortage of workers. 
B)  firms will hire fewer workers. 
C)  firms will hire more workers. 
D)  fewer workers will want to work. 
A)  there will be a shortage of workers. 
B)  firms will hire fewer workers. 
C)  firms will hire more workers. 
D)  fewer workers will want to work.

Question 6

All of the following are methods of rationing goods EXCEPT

Accepted Answer

A)  political power. 
B)  the profit motive. 
C)  first come, first served. 
D)  prices. 
A)  political power. 
B)  the profit motive. 
C)  first come, first served. 
D)  prices.

Question 7

One result of the agriculture price supports cited in the text is that

Accepted Answer

A)  sometimes surplus food is given away. 
B)  food shortages result in most cases. 
C)  small farms receive most of the benefits. 
D)  none of the above. 
A)  sometimes surplus food is given away. 
B)  food shortages result in most cases. 
C)  small farms receive most of the benefits. 
D)  none of the above.

Question 8

What are transaction costs? What are some ways in which society reduces transaction costs?

Accepted Answer

Transaction costs are costs associated w

Question 9

Explain how agricultural price supports work and what the effects of the supports are.

Accepted Answer

Under agricultural price supports, the g

Question 10

Consumer surplus is

Accepted Answer

A)  the total difference between the total amount that consumers actually pay for an item and the total amount that they would have been willing to pay. 
B)  the total difference between the total costs firms incur in producing an item and the utility consumers derive from purchasing the item. 
C)  the total difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay. 
D)  the total difference between the utility consumers derive from purchasing an item and the total costs firms incur in producing the item. 
A)  the total difference between the total amount that consumers actually pay for an item and the total amount that they would have been willing to pay. 
B)  the total difference between the total costs firms incur in producing an item and the utility consumers derive from purchasing the item. 
C)  the total difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay. 
D)  the total difference between the utility consumers derive from purchasing an item and the total costs firms incur in producing the item.

Question 11

If supply increases and demand decreases,

Accepted Answer

A)  the market clearing price definitely rises, and the equilibrium quantity definitely falls. 
B)  the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. 
C)  the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate. 
D)  the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely falls. 
A)  the market clearing price definitely rises, and the equilibrium quantity definitely falls. 
B)  the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. 
C)  the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate. 
D)  the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely falls.

Question 12

If the government imposes a price ceiling that is lower than the market clearing price, then

Accepted Answer

A)  consumer surplus will increase while producer surplus will decrease. 
B)  consumer surplus will decrease while producer surplus will increase. 
C)  both consumer surplus and producer surplus will decrease. 
D)  both consumer surplus and producer surplus will increase. 
A)  consumer surplus will increase while producer surplus will decrease. 
B)  consumer surplus will decrease while producer surplus will increase. 
C)  both consumer surplus and producer surplus will decrease. 
D)  both consumer surplus and producer surplus will increase.

Question 13

A severe drought has devastated cocoa plants, causing an increase in the price of chocolate. In the market for chocolate chip cookies,

Accepted Answer

A)  a surplus will arise. 
B)  supply has decreased and price has increased. 
C)  quantity has decreased and price has decreased. 
D)  quantity demanded has increased. 
A)  a surplus will arise. 
B)  supply has decreased and price has increased. 
C)  quantity has decreased and price has decreased. 
D)  quantity demanded has increased.

Question 14

Since the minimum wage rate began it has typically stayed at about what percentage of the average manufacturing wage?

Accepted Answer

A)  10-20 % 
B)  20-30 % 
C)  40-50 % 
D)  75-80 % 
A)  10-20 % 
B)  20-30 % 
C)  40-50 % 
D)  75-80 %

Question 15

-Consider the above table. Assuming the government imposes a price ceiling on garbanzo beans of $4, what would be the likely result?

Accepted Answer

A)  a surplus of 2,000 garbanzo beans 
B)  a shortage of 2,000 garbanzo beans 
C)  no change, equilibrium would prevail 
D)  The quantity demanded of garbanzo beans would fall to zero. 
A)  a surplus of 2,000 garbanzo beans 
B)  a shortage of 2,000 garbanzo beans 
C)  no change, equilibrium would prevail 
D)  The quantity demanded of garbanzo beans would fall to zero.

Question 16

If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve?

Accepted Answer

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

Question 17

In a city that has rent control for apartments, there is

Accepted Answer

A)  less turnover of apartments. 
B)  a surplus of apartments available to rent. 
C)  a shortage of renters in the city. 
D)  neither a surplus nor a shortage of apartments. 
A)  less turnover of apartments. 
B)  a surplus of apartments available to rent. 
C)  a shortage of renters in the city. 
D)  neither a surplus nor a shortage of apartments.

Question 18

-Refer to the above figure. If the government imposes a price floor of $20,

Accepted Answer

A)  the quantity traded will be 150, and the price will be $20. 
B)  the quantity traded will be 100, and the price will be $20. 
C)  the quantity traded will be 200, and the price will be $20. 
D)  none of the above. 
A)  the quantity traded will be 150, and the price will be $20. 
B)  the quantity traded will be 100, and the price will be $20. 
C)  the quantity traded will be 200, and the price will be $20. 
D)  none of the above.

Question 19

Intermediaries, known as middlemen, specialize in

Accepted Answer

A)  reducing transaction costs. 
B)  negotiating high prices for sellers. 
C)  negotiating low prices for buyers. 
D)  encouraging consumers to buy goods on credit, rather than with cash. 
A)  reducing transaction costs. 
B)  negotiating high prices for sellers. 
C)  negotiating low prices for buyers. 
D)  encouraging consumers to buy goods on credit, rather than with cash.

Question 20

-Refer to the above figure. If the government set a price floor of $3.50 per gallon, there would be

Accepted Answer

A)  an excess quantity demanded equal to 100,000 gallons. 
B)  an excess quantity supplied equal to the distance BD. 
C)  an excess quantity supplied equal to the distance BF. 
D)  an excess quantity supplied equal to 100,000 gallons. 
A)  an excess quantity demanded equal to 100,000 gallons. 
B)  an excess quantity supplied equal to the distance BD. 
C)  an excess quantity supplied equal to the distance BF. 
D)  an excess quantity supplied equal to 100,000 gallons.

Exam 4: Extensions of Demand and Supply Analysis

What has been the market outcome of government-enforced price floors for agricultural products?

-Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as

Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?

-Refer to the above figure. A shortage occurs if the government imposes

As a result of establishing a legal minimum wage above the market clearing wage,

All of the following are methods of rationing goods EXCEPT

One result of the agriculture price supports cited in the text is that

What are transaction costs? What are some ways in which society reduces transaction costs?

Explain how agricultural price supports work and what the effects of the supports are.

Consumer surplus is

If supply increases and demand decreases,

If the government imposes a price ceiling that is lower than the market clearing price, then

A severe drought has devastated cocoa plants, causing an increase in the price of chocolate. In the market for chocolate chip cookies,

Since the minimum wage rate began it has typically stayed at about what percentage of the average manufacturing wage?

-Consider the above table. Assuming the government imposes a price ceiling on garbanzo beans of $4, what would be the likely result?

If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve?

In a city that has rent control for apartments, there is

-Refer to the above figure. If the government imposes a price floor of $20,

Intermediaries, known as middlemen, specialize in

-Refer to the above figure. If the government set a price floor of $3.50 per gallon, there would be

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