Question 1

An example of a quantity restriction is

Accepted Answer

A) the minimum wage. 
B) an import quota. 
C) rent controls. 
D) price supports in agriculture. 
A) the minimum wage. 
B) an import quota. 
C) rent controls. 
D) price supports in agriculture. B

Question 2

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. C

Question 3

Price controls often generate

Accepted Answer

A) more efficient markets. 
B) black markets. 
C) rapid adjustment to market-clearing prices. 
D) greater price flexibility. 
A) more efficient markets. 
B) black markets. 
C) rapid adjustment to market-clearing prices. 
D) greater price flexibility. B

Question 4

A supply restriction on imported goods,such as the government's restriction of imported oil for many years,is referred to as

Accepted Answer

A) an export quota. 
B) an import quota. 
C) a price floor. 
D) a price ceiling. 
A) an export quota. 
B) an import quota. 
C) a price floor. 
D) a price ceiling.

Question 5

All of the following are examples of nonprice rationing devices EXCEPT

Accepted Answer

A) price controls. 
B) queues. 
C) black markets. 
D) waiting lists. 
A) price controls. 
B) queues. 
C) black markets. 
D) waiting lists.

Question 6

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

Accepted Answer

A) an increase in demand and 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 and 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 7

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

Accepted Answer

A) supply decreases and at the same time demand increases. 
B) supply increases and demand increases simultaneously. 
C) supply and demand decreases simultaneously. 
D) supply and demand increases simultaneously. 
A) supply decreases and at the same time demand increases. 
B) supply increases and demand increases simultaneously. 
C) supply and demand decreases simultaneously. 
D) supply and demand increases simultaneously.

Question 8

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 9

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 10

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 11

An increase in supply,other things being equal,will cause which of the following to occur?

Accepted Answer

A) quantity supplied to decrease. 
B) quantity demanded to increase. 
C) a rightward shift in the demand curve as the price falls. 
D) a leftward shift in the demand curves as the price increases. 
A) quantity supplied to decrease. 
B) quantity demanded to increase. 
C) a rightward shift in the demand curve as the price falls. 
D) a leftward shift in the demand curves as the price increases.

Question 12

Your local grocery store reduces transaction costs to the consumer

Accepted Answer

A) by reducing the consumer's need to travel from food producer to food producer (or manufacturer to manufacturer)to purchase the food staples that the consumer desires. 
B) by providing a system that directs funds from lenders to borrowers. 
C) by providing a system of justice to enforce contracts. 
D) All of the above are correct. 
A) by reducing the consumer's need to travel from food producer to food producer (or manufacturer to manufacturer)to purchase the food staples that the consumer desires. 
B) by providing a system that directs funds from lenders to borrowers. 
C) by providing a system of justice to enforce contracts. 
D) All of the above are correct.

Question 13

A minimum wage is an example of a

Accepted Answer

A) price ceiling. 
B) price floor. 
C) black market. 
D) market clearing price. 
A) price ceiling. 
B) price floor. 
C) black market. 
D) market clearing price.

Question 14

Price ceilings set below the equilibrium price cause

Accepted Answer

A) shortages. 
B) surpluses. 
C) a new market equilibrium. 
D) a greater number of exchanges. 
A) shortages. 
B) surpluses. 
C) a new market equilibrium. 
D) a greater number of exchanges.

Question 15

Suppose a price ceiling is set above the equilibrium price.Now suppose that policy makers decide to raise the price ceiling.This increase in the price ceiling will cause which of the following to occur?

Accepted Answer

A) The surplus in the market will increase. 
B) The surplus in the market will decrease. 
C) The shortage in the market will increase. 
D) None of the above. 
A) The surplus in the market will increase. 
B) The surplus in the market will decrease. 
C) The shortage in the market will increase. 
D) None of the above.

Question 16

Why does a sports car cost more than a mountain bike?

Accepted Answer

A) because sports car manufacturers are greedier than mountain bike manufacturers 
B) because sports cars are priced higher in order to make them attractive as status symbols 
C) because more scarce resources are required to produce a sports car than to produce a mountain bike 
D) because mountain bike manufacturers know that their customers have relatively low incomes 
A) because sports car manufacturers are greedier than mountain bike manufacturers 
B) because sports cars are priced higher in order to make them attractive as status symbols 
C) because more scarce resources are required to produce a sports car than to produce a mountain bike 
D) because mountain bike manufacturers know that their customers have relatively low incomes

Question 17

Other things being equal,a higher price induces

Accepted Answer

A) buyers to reduce the amount they want to buy and sellers to increase the amount they are willing to sell. 
B) buyers to increase the amount they want to buy and sellers to reduce the amount they are willing to sell. 
C) buyers to reduce the amount they want to buy and sellers to reduce the amount they are willing to sell. 
D) buyers to increase the amount they want to buy and sellers to increase the amount they are willing to sell. 
A) buyers to reduce the amount they want to buy and sellers to increase the amount they are willing to sell. 
B) buyers to increase the amount they want to buy and sellers to reduce the amount they are willing to sell. 
C) buyers to reduce the amount they want to buy and sellers to reduce the amount they are willing to sell. 
D) buyers to increase the amount they want to buy and sellers to increase the amount they are willing to sell.

Question 18

Suppose there is a simultaneous increase in demand and increase in supply.Given this information,we know with certainty that

Accepted Answer

A) both the equilibrium price and the equilibrium quantity will increase. 
B) the equilibrium price will increase,and the equilibrium quantity will increase. 
C) the equilibrium quantity will increase. 
D) the equilibrium price will increase. 
A) both the equilibrium price and the equilibrium quantity will increase. 
B) the equilibrium price will increase,and the equilibrium quantity will increase. 
C) the equilibrium quantity will increase. 
D) the equilibrium price will increase.

Question 19

Relative scarcities are indicated by

Accepted Answer

A) supply and demand being out of equilibrium. 
B) surpluses. 
C) excess demand and excess supply. 
D) relative prices. 
A) supply and demand being out of equilibrium. 
B) surpluses. 
C) excess demand and excess supply. 
D) relative prices.

Question 20

Suppose the price of crude oil used to produce gasoline rises significantly.At the same time,consumers purchase hybrid cars in great numbers.In the market for gasoline,demand shifts to the ________ and supply shifts to the ________.

Accepted Answer

A) left,left 
B) left,right 
C) right,left 
D) right,right 
A) left,left 
B) left,right 
C) right,left 
D) right,right

Exam 3: Extensions of Demand and Supply Analysis

An example of a quantity restriction is

Consumer surplus is

Price controls often generate

A supply restriction on imported goods,such as the government's restriction of imported oil for many years,is referred to as

All of the following are examples of nonprice rationing devices EXCEPT

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

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

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

Governments may intervene in private markets through

Government-imposed quantity restrictions

An increase in supply,other things being equal,will cause which of the following to occur?

Your local grocery store reduces transaction costs to the consumer

A minimum wage is an example of a

Price ceilings set below the equilibrium price cause

Suppose a price ceiling is set above the equilibrium price.Now suppose that policy makers decide to raise the price ceiling.This increase in the price ceiling will cause which of the following to occur?

Why does a sports car cost more than a mountain bike?

Other things being equal,a higher price induces

Suppose there is a simultaneous increase in demand and increase in supply.Given this information,we know with certainty that

Relative scarcities are indicated by

Suppose the price of crude oil used to produce gasoline rises significantly.At the same time,consumers purchase hybrid cars in great numbers.In the market for gasoline,demand shifts to the ________ and supply shifts to the ________.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Public Spending and Public Choice

Funding the Public Sector

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

Suppose the price of crude oil used to produce gasoline rises significantly.At the same time,consumers purchase hybrid cars in great numbers.In the market for gasoline,demand shifts to the and supply shifts to the .