Question 1

Voluntary exchange

Accepted Answer

A)  will eliminate scarcity. 
B)  is a nonprice rationing device. 
C)  is trading so that the consumer and producers are better off. 
D)  never involves transactions costs. 
A)  will eliminate scarcity. 
B)  is a nonprice rationing device. 
C)  is trading so that the consumer and producers are better off. 
D)  never involves transactions costs.

Question 2

The effect of legislation establishing a minimum wage above the market clearing wage is

Accepted Answer

A)  unemployment. 
B)  a shortage of labor. 
C)  higher wages for all workers. 
D)  a shift of the demand for labor curve. 
A)  unemployment. 
B)  a shortage of labor. 
C)  higher wages for all workers. 
D)  a shift of the demand for labor curve.

Question 3

In a price system, changes in prices

Accepted Answer

A)  make it difficult for the system to function well. 
B)  imply that people have made mistakes in the past. 
C)  signal to everyone in the system what goods are relatively more or less scarce. 
D)  signal to policy makers what goods should and should not be taxed more. 
A)  make it difficult for the system to function well. 
B)  imply that people have made mistakes in the past. 
C)  signal to everyone in the system what goods are relatively more or less scarce. 
D)  signal to policy makers what goods should and should not be taxed more.

Question 4

-Refer to the above figure for the corn market. The government wants to set an effective price support in the corn market. To be effective the price should be set

Accepted Answer

A)  below   . 
B)  at   . 
C)  at   . 
D)  at   . 
A)  below   . 
B)  at   . 
C)  at   . 
D)  at   .

Question 5

Under rent controls,

Accepted Answer

A)  there is a shortage of rental units. 
B)  the quantity supplied of rental units is greater than it would be under freely competitive markets. 
C)  there is less government involvement in rental markets overall because there is a better supply of low-income housing. 
D)  all renters are better off than under freely competitive markets. 
A)  there is a shortage of rental units. 
B)  the quantity supplied of rental units is greater than it would be under freely competitive markets. 
C)  there is less government involvement in rental markets overall because there is a better supply of low-income housing. 
D)  all renters are better off than under freely competitive markets.

Question 6

When the government sets a price floor which is above the equilibrium price,

Accepted Answer

A)  a surplus will develop. 
B)  a shortage will develop. 
C)  the equilibrium price will be maintained. 
D)  a price ceiling will follow. 
A)  a surplus will develop. 
B)  a shortage will develop. 
C)  the equilibrium price will be maintained. 
D)  a price ceiling will follow.

Question 7

The way we know what commodities are relatively scarce or abundant is through

Accepted Answer

A)  transaction costs. 
B)  prices. 
C)  price ceilings. 
D)  price floors. 
A)  transaction costs. 
B)  prices. 
C)  price ceilings. 
D)  price floors.

Question 8

Rent controls are an example of a

Accepted Answer

A)  price floor. 
B)  price ceiling. 
C)  price floor for the consumer and a price ceiling for the producer. 
D)  nonprice rationing device. 
A)  price floor. 
B)  price ceiling. 
C)  price floor for the consumer and a price ceiling for the producer. 
D)  nonprice rationing device.

Question 9

Which of these would NOT be considered a middleman in a market?

Accepted Answer

A)  A produce wholesaler 
B)  An apple farmer 
C)  A smartphone retailer 
D)  A fruit distributor 
A)  A produce wholesaler 
B)  An apple farmer 
C)  A smartphone retailer 
D)  A fruit distributor

Question 10

-Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve remains at DA. Which of the following is true?

Accepted Answer

A)  Only quantity supplied has increased. 
B)  Only quantity demanded has decreased. 
C)  Supply has increased. 
D)  Supply has decreased. 
A)  Only quantity supplied has increased. 
B)  Only quantity demanded has decreased. 
C)  Supply has increased. 
D)  Supply has decreased.

Question 11

Nonprice rationing devices are required

Accepted Answer

A)  because the price system does not allocate resources efficiently. 
B)  when there are price floors but not when there are price ceilings. 
C)  so that prices will go back to equilibrium. 
D)  to allocate goods when there is a price ceiling. 
A)  because the price system does not allocate resources efficiently. 
B)  when there are price floors but not when there are price ceilings. 
C)  so that prices will go back to equilibrium. 
D)  to allocate goods when there is a price ceiling.

Question 12

Which one of the following could account for an increase in the market clearing price of iPads?

Accepted Answer

A)  a decrease in demand for iPads 
B)  an increase in supply of iPads 
C)  an increase in supply along with a decrease in demand 
D)  an increase in demand along with a decrease in supply 
A)  a decrease in demand for iPads 
B)  an increase in supply of iPads 
C)  an increase in supply along with a decrease in demand 
D)  an increase in demand along with a decrease in supply

Question 13

The textbook suggests that rent controls

Accepted Answer

A)  actually contribute to the housing boom in an area where they are applied. 
B)  actually contribute to the housing shortage in the area where they are applied. 
C)  are used in a government kickback scheme. 
D)  have no effect on the local housing market. 
A)  actually contribute to the housing boom in an area where they are applied. 
B)  actually contribute to the housing shortage in the area where they are applied. 
C)  are used in a government kickback scheme. 
D)  have no effect on the local housing market.

Question 14

If price increases and the quantity purchased increases, we know that

Accepted Answer

A)  supply increased. 
B)  supply decreased. 
C)  demand increased. 
D)  demand decreased. 
A)  supply increased. 
B)  supply decreased. 
C)  demand increased. 
D)  demand decreased.

Question 15

Describe the market process that should occur if the price of a product is below its equilibrium price; now describe what would occur if the price is above its equilibrium price, assuming no market interference.

Accepted Answer

If price is below its equilibrium price,

Question 16

-Refer to the above figure. If a price floor of $3 was set,

Accepted Answer

A)  the quantity sold would be 80 units. 
B)  there would be a surplus of 40 units. 
C)  there would be a shortage of 40 units. 
D)  there would be a shortage of 20 units. 
A)  the quantity sold would be 80 units. 
B)  there would be a surplus of 40 units. 
C)  there would be a shortage of 40 units. 
D)  there would be a shortage of 20 units.

Question 17

Producer surplus is

Accepted Answer

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

Question 18

The effect of a legal minimum wage set above the equilibrium wage rate is

Accepted Answer

A)  an excess quantity of labor demanded. 
B)  an excess quantity of labor supplied. 
C)  an increase in the quantity of labor demanded. 
D)  a decrease in quantity of labor supplied. 
A)  an excess quantity of labor demanded. 
B)  an excess quantity of labor supplied. 
C)  an increase in the quantity of labor demanded. 
D)  a decrease in quantity of labor supplied.

Question 19

-Refer to the above figure. A price ceiling of $20 results in

Accepted Answer

A)  a shortage of 100 units. 
B)  a shortage of 200 units. 
C)  a surplus of 100 units. 
D)  a surplus of 200 units. 
A)  a shortage of 100 units. 
B)  a shortage of 200 units. 
C)  a surplus of 100 units. 
D)  a surplus of 200 units.

Question 20

Rent controls primarily benefit

Accepted Answer

A)  property owners. 
B)  people looking for rental units. 
C)  builders. 
D)  people who already occupy rental units. 
A)  property owners. 
B)  people looking for rental units. 
C)  builders. 
D)  people who already occupy rental units.

Exam 4: Extensions of Demand and Supply Analysis

Voluntary exchange

The effect of legislation establishing a minimum wage above the market clearing wage is

In a price system, changes in prices

-Refer to the above figure for the corn market. The government wants to set an effective price support in the corn market. To be effective the price should be set

Under rent controls,

When the government sets a price floor which is above the equilibrium price,

The way we know what commodities are relatively scarce or abundant is through

Rent controls are an example of a

Which of these would NOT be considered a middleman in a market?

-Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve remains at DA. Which of the following is true?

Nonprice rationing devices are required

Which one of the following could account for an increase in the market clearing price of iPads?

The textbook suggests that rent controls

If price increases and the quantity purchased increases, we know that

Describe the market process that should occur if the price of a product is below its equilibrium price; now describe what would occur if the price is above its equilibrium price, assuming no market interference.

-Refer to the above figure. If a price floor of $3 was set,

Producer surplus is

The effect of a legal minimum wage set above the equilibrium wage rate is

-Refer to the above figure. A price ceiling of $20 results in

Rent controls primarily benefit

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 remains at D_A. Which of the following is true?