Question 1

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 2

If a producer is willing to receive at least $5 for a pen that she manufactures but she actually receives $7 for it.The producer surplus of the pen for that producer is

Accepted Answer

A) $5. 
B) $2. 
C) $7. 
D) -$5. 
A) $5. 
B) $2. 
C) $7. 
D) -$5.

Question 3

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 4

Goods X and Y are complementary goods.A decrease in price of good X has occurred.In the market for good Y,this will lead to

Accepted Answer

A) an increase in price and a decrease in quantity. 
B) an increase in price and an increase in quantity. 
C) a decrease in price and a decrease in quantity. 
D) a decrease in price and an increase in quantity. 
A) an increase in price and a decrease in quantity. 
B) an increase in price and an increase in quantity. 
C) a decrease in price and a decrease in quantity. 
D) a decrease in price and an increase in quantity.

Question 5

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 6

-Refer to the above figure.Other things being equal,when the government imposes a price floor at P2,then we would expect

Accepted Answer

A) the quantity demanded is Q2. 
B) a surplus will occur. 
C) price to decline until an equilibrium is achieved at P0. 
D) consumers to bid against each other for goods and force the price even higher. 
A) the quantity demanded is Q2. 
B) a surplus will occur. 
C) price to decline until an equilibrium is achieved at P0. 
D) consumers to bid against each other for goods and force the price even higher.

Question 7

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

Accepted Answer

A) supply increases and demand decreases. 
B) supply and demand for a product simultaneously decrease. 
C) supply and demand for a product simultaneously increase. 
D) supply decreases and demand increases. 
A) supply increases and demand decreases. 
B) supply and demand for a product simultaneously decrease. 
C) supply and demand for a product simultaneously increase. 
D) supply decreases and demand increases.

Question 8

Following adjustments to a new equilibrium in a market,the equilibrium quantity remains unchanged,but the market clearing price is now lower.Which of the following could definitely have caused this outcome?

Accepted Answer

A) Demand and supply both increased. 
B) Demand and supply both decreased. 
C) Demand increased,and supply decreased. 
D) Demand decreased,and supply increased. 
A) Demand and supply both increased. 
B) Demand and supply both decreased. 
C) Demand increased,and supply decreased. 
D) Demand decreased,and supply increased.

Question 9

Which of the following is NOT a function of rental prices?

Accepted Answer

A) To stimulate the construction of new housing 
B) To ration the existing housing stock 
C) To provide housing to individuals below market value 
D) To allocate existing scarce housing among different people 
A) To stimulate the construction of new housing 
B) To ration the existing housing stock 
C) To provide housing to individuals below market value 
D) To allocate existing scarce housing among different people

Question 10

In a market system,how are the price signals established?

Accepted Answer

A) Consumer advocacy groups establish fair prices for items,and most firms follow these pricing guidelines because they don't want to anger their consumers. 
B) Industry associations establish an acceptable price range for each commodity sold within the industry,and member firms are obligated to abide by association guidelines. 
C) The forces underlying supply and demand interact to determine a market clearing price. 
D) Federal legislation establishes maximum prices for most goods,and state governments regulate the prices of any remaining items. 
A) Consumer advocacy groups establish fair prices for items,and most firms follow these pricing guidelines because they don't want to anger their consumers. 
B) Industry associations establish an acceptable price range for each commodity sold within the industry,and member firms are obligated to abide by association guidelines. 
C) The forces underlying supply and demand interact to determine a market clearing price. 
D) Federal legislation establishes maximum prices for most goods,and state governments regulate the prices of any remaining items.

Question 11

If the demand for a product remains the same and the supply falls,

Accepted Answer

A) the market clearing price will fall and the equilibrium quantity will rise. 
B) the market clearing price will rise and the equilibrium quantity will fall. 
C) both the market clearing price and the equilibrium quantity will fall. 
D) both the market clearing price and the equilibrium quantity will rise. 
A) the market clearing price will fall and the equilibrium quantity will rise. 
B) the market clearing price will rise and the equilibrium quantity will fall. 
C) both the market clearing price and the equilibrium quantity will fall. 
D) both the market clearing price and the equilibrium quantity will rise.

Question 12

-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 13

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 14

Suppose Brad Pitts and Angelina Jolie wear matching platinum jewelry in their new movie.After the movie is released,suppose that consumers increase their demand for the jewelry and at the same time manufacturers increase the supply of the jewelry.As a result,

Accepted Answer

A) the equilibrium quantity will increase,and there is an indeterminate change in the equilibrium price. 
B) the equilibrium quantity and price are both indeterminate. 
C) the equilibrium quantity will decrease,and the equilibrium price will increase. 
D) the equilibrium price and quantity will both decrease. 
A) the equilibrium quantity will increase,and there is an indeterminate change in the equilibrium price. 
B) the equilibrium quantity and price are both indeterminate. 
C) the equilibrium quantity will decrease,and the equilibrium price will increase. 
D) the equilibrium price and quantity will both decrease.

Question 15

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Price } \
\text { Per Phone }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { Per Month }
\end{array} & \begin{array} { r } 
\text { Quantity Supplied } \
\text { Per Month }
\end{array} \
\hline \$ 400 & 2,000 & 12,000 \
375 & 3,000 & 11,000 \
350 & 4,000 & 10,000 \
325 & 5,000 & 9,000 \
300 & 6,000 & 8,000 \
275 & 7,000 & 7,000 \
250 & 8,000 & 6,000 \
225 & 9,000 & 5,000 \
200 & 10,000 & 4,000
\end{array}$$
-Refer to the above table.Suppose the demand for smartphones rises because more people use the Internet with a smartphone.The new equilibrium price will be

Accepted Answer

A) $200. 
B) $275. 
C) more than $275. 
D) impossible to be determined given the information. 
A) $200. 
B) $275. 
C) more than $275. 
D) impossible to be determined given the information.

Question 16

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

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 17

People often complain about price gouging after a disaster such as a hurricane.Suppose the government successfully prevented price increases due to the disaster.We would expect

Accepted Answer

A) reconstruction to take longer because the quantity supplied of new materials would increase more slowly. 
B) reconstruction to take less time because the demand for materials would increase faster. 
C) reconstruction never to occur. 
D) reconstruction to take less time because the government could rebuild more quickly when people are not in the way. 
A) reconstruction to take longer because the quantity supplied of new materials would increase more slowly. 
B) reconstruction to take less time because the demand for materials would increase faster. 
C) reconstruction never to occur. 
D) reconstruction to take less time because the government could rebuild more quickly when people are not in the way.

Question 18

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

Question 19

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 20

A black market may occur when

Accepted Answer

A) the government imposes a price floor below the market clearing price. 
B) the government imposes a price ceiling below the market clearing price. 
C) the government imposes a price ceiling above the market clearing price. 
D) the government does not impose either a price ceiling or a price floor. 
A) the government imposes a price floor below the market clearing price. 
B) the government imposes a price ceiling below the market clearing price. 
C) the government imposes a price ceiling above the market clearing price. 
D) the government does not impose either a price ceiling or a price floor.

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

If a producer is willing to receive at least $5 for a pen that she manufactures but she actually receives $7 for it.The producer surplus of the pen for that producer is

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

Goods X and Y are complementary goods.A decrease in price of good X has occurred.In the market for good Y,this will lead to

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:

-Refer to the above figure.Other things being equal,when the government imposes a price floor at P₂,then we would expect

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

Following adjustments to a new equilibrium in a market,the equilibrium quantity remains unchanged,but the market clearing price is now lower.Which of the following could definitely have caused this outcome?

Which of the following is NOT a function of rental prices?

In a market system,how are the price signals established?

If the demand for a product remains the same and the supply falls,

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

Nonprice rationing devices are required

Suppose Brad Pitts and Angelina Jolie wear matching platinum jewelry in their new movie.After the movie is released,suppose that consumers increase their demand for the jewelry and at the same time manufacturers increase the supply of the jewelry.As a result,

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

People often complain about price gouging after a disaster such as a hurricane.Suppose the government successfully prevented price increases due to the disaster.We would expect

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

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

A black market may occur when

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

Exam 3: Extensions of Demand and Supply Analysis

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

If a producer is willing to receive at least $5 for a pen that she manufactures but she actually receives $7 for it.The producer surplus of the pen for that producer is

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

Goods X and Y are complementary goods.A decrease in price of good X has occurred.In the market for good Y,this will lead to

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:

-Refer to the above figure.Other things being equal,when the government imposes a price floor at P2,then we would expect

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

Following adjustments to a new equilibrium in a market,the equilibrium quantity remains unchanged,but the market clearing price is now lower.Which of the following could definitely have caused this outcome?

Which of the following is NOT a function of rental prices?

In a market system,how are the price signals established?

If the demand for a product remains the same and the supply falls,

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

Nonprice rationing devices are required

Suppose Brad Pitts and Angelina Jolie wear matching platinum jewelry in their new movie.After the movie is released,suppose that consumers increase their demand for the jewelry and at the same time manufacturers increase the supply of the jewelry.As a result,

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

People often complain about price gouging after a disaster such as a hurricane.Suppose the government successfully prevented price increases due to the disaster.We would expect

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

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

A black market may occur when

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

-Refer to the above figure.Other things being equal,when the government imposes a price floor at P₂,then we would expect