Question 1

Which of the following statements is FALSE?

Accepted Answer

A) The rationing function of prices is not allowed to freely operate when the government imposes price controls. 
B) Price controls may take the form of price ceilings or price floors. 
C) Price ceilings below the equilibrium price can cause black markets to develop. 
D) Rent controls are examples of price floors. 
A) The rationing function of prices is not allowed to freely operate when the government imposes price controls. 
B) Price controls may take the form of price ceilings or price floors. 
C) Price ceilings below the equilibrium price can cause black markets to develop. 
D) Rent controls are examples of price floors.

Question 2

Suppose that the market for coffee is in equilibrium at a price of $1.50 per pound and a monthly quantity of 20 million pounds.News of a freeze in Brazil arrives so that people know that the supply of coffee months from now will be sharply reduced.What,if anything,will happen in the coffee market now? Explain.

Accepted Answer

The expectations of reduced su

Question 3

If the government created a surplus of an agricultural product due to price supports,how might they dispose of this surplus?

Accepted Answer

A) give it away to a foreign country 
B) purchase it and store it away 
C) have the farmer destroy the crop 
D) Any of these answers might be a successful tool in disposing of agricultural surpluses. 
A) give it away to a foreign country 
B) purchase it and store it away 
C) have the farmer destroy the crop 
D) Any of these answers might be a successful tool in disposing of agricultural surpluses.

Question 4

In recent years,the price of smartphones has fallen,while the quantity exchanged of smartphones has risen.We can conclude that this is most likely a result of

Accepted Answer

A) a decrease in supply while demand remained constant. 
B) an increase in demand while supply remained constant. 
C) an increase in demand that exceeded an increase in supply. 
D) an increase in supply that exceeded an increase in demand. 
A) a decrease in supply while demand remained constant. 
B) an increase in demand while supply remained constant. 
C) an increase in demand that exceeded an increase in supply. 
D) an increase in supply that exceeded an increase in demand.

Question 5

Suppose that an early frost damages the Florida orange crop.As a result,the price of California oranges increases.Ceteris paribus,which one of the following statements best explains this situation?

Accepted Answer

A) The supply of Florida oranges decreased,causing the supply of California oranges to increase,which resulted in a higher price. 
B) The supply of Florida oranges decreased,causing the supply of California oranges to decrease,which resulted in a higher price. 
C) The supply of Florida oranges decreased,causing their price to increase,and thus causing the demand for California oranges to increase. 
D) The demand for Florida oranges fell because of the freeze,and this led to a higher demand for California oranges. 
A) The supply of Florida oranges decreased,causing the supply of California oranges to increase,which resulted in a higher price. 
B) The supply of Florida oranges decreased,causing the supply of California oranges to decrease,which resulted in a higher price. 
C) The supply of Florida oranges decreased,causing their price to increase,and thus causing the demand for California oranges to increase. 
D) The demand for Florida oranges fell because of the freeze,and this led to a higher demand for California oranges.

Question 6

Scalping at major sporting events is an example of

Accepted Answer

A) a surplus caused by the existence of price ceilings. 
B) the operation of rationing by the market. 
C) a black market caused by a price ceiling. 
D) a black market caused by a price floor. 
A) a surplus caused by the existence of price ceilings. 
B) the operation of rationing by the market. 
C) a black market caused by a price ceiling. 
D) a black market caused by a price floor.

Question 7

Prices ration goods to

Accepted Answer

A) the people who most deserve it. 
B) the people with the lowest opportunity cost of time. 
C) the people willing and able to pay the highest price. 
D) the richest people. 
A) the people who most deserve it. 
B) the people with the lowest opportunity cost of time. 
C) the people willing and able to pay the highest price. 
D) the richest people.

Question 8

Who gains and who loses from rent controls?

Accepted Answer

Those who gain are people who live in an

Question 9

If both supply and demand simultaneously decrease,

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 10

In the United States,the minimum wage is defined as

Accepted Answer

A) the wage that the youngest job entrant into the job market makes. 
B) the lowest wage that a corporation should pay a worker if the corporation wants to ensure that its employees are well trained. 
C) the lowest hourly wage rate a firm may legally pay its workers,as legislated by the U.S.government. 
D) the wage ceiling above which a firm no longer must pay its employees additional benefits. 
A) the wage that the youngest job entrant into the job market makes. 
B) the lowest wage that a corporation should pay a worker if the corporation wants to ensure that its employees are well trained. 
C) the lowest hourly wage rate a firm may legally pay its workers,as legislated by the U.S.government. 
D) the wage ceiling above which a firm no longer must pay its employees additional benefits.

Question 11

-Assume that the initial demand and supply curves in the above figure are DA and SA,respectively.The initial equilibrium price and quantity are

Accepted Answer

A) P1 and E. 
B) P3 and F. 
C) P1 and G. 
D) P2 and F. 
A) P1 and E. 
B) P3 and F. 
C) P1 and G. 
D) P2 and F.

Question 12

If demand and supply both increase,

Accepted Answer

A) the equilibrium quantity definitely will increase and market clearing price definitely will decrease. 
B) the equilibrium quantity definitely will increase and market clearing price definitely will increase. 
C) the equilibrium quantity definitely will increase but the change in market clearing price cannot be determined without more information. 
D) market clearing price definitely will increase but the change in the equilibrium quantity cannot be determined without further information. 
A) the equilibrium quantity definitely will increase and market clearing price definitely will decrease. 
B) the equilibrium quantity definitely will increase and market clearing price definitely will increase. 
C) the equilibrium quantity definitely will increase but the change in market clearing price cannot be determined without more information. 
D) market clearing price definitely will increase but the change in the equilibrium quantity cannot be determined without further information.

Question 13

-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.

Question 14

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 15

The objective of rent controls is to

Accepted Answer

A) ensure an adequate supply of rental housing for the poor. 
B) keep rents below levels that would be observed in a freely competitive market. 
C) encourage the construction of new rental units. 
D) raise revenue for the local government. 
A) ensure an adequate supply of rental housing for the poor. 
B) keep rents below levels that would be observed in a freely competitive market. 
C) encourage the construction of new rental units. 
D) raise revenue for the local government.

Question 16

Transaction costs are

Accepted Answer

A) production costs. 
B) taxes on production. 
C) regulations on production. 
D) costs associated with exchange. 
A) production costs. 
B) taxes on production. 
C) regulations on production. 
D) costs associated with exchange.

Question 17

Which of the following statements about markets is correct?
I.A market helps resources move to their highest-valued uses by means of prices.
II.A market encompasses the exchange arrangements of both buyers and sellers.

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 18

The decrease in the price of gasoline to a national average of less than $3.20 during the summer of 2012 was most likely a result of

Accepted Answer

A) an increase in demand due to reduced summer driving. 
B) an increase in supply resulting from higher refinery output. 
C) an increase in demand due to increase in summer driving along with a decrease in supply resulting from reduced refinery output. 
D) an increase in supply resulting from higher refinery output along with a decrease in demand in summer driving. 
A) an increase in demand due to reduced summer driving. 
B) an increase in supply resulting from higher refinery output. 
C) an increase in demand due to increase in summer driving along with a decrease in supply resulting from reduced refinery output. 
D) an increase in supply resulting from higher refinery output along with a decrease in demand in summer driving.

Question 19

The price rationing mechanism of a freely functioning market leads to the most efficient use of resources because

Accepted Answer

A) all gains from mutually beneficial trade are captured. 
B) the Federal Trade Commission regulates the market. 
C) of the rise of the legislative apparatus that supports trade. 
D) the Justice Department monitors market activities. 
A) all gains from mutually beneficial trade are captured. 
B) the Federal Trade Commission regulates the market. 
C) of the rise of the legislative apparatus that supports trade. 
D) the Justice Department monitors market activities.

Question 20

What are the terms of exchange and how are these terms related to the price?

Accepted Answer

The terms of exchange are the terms unde

Which of the following statements is FALSE?

If the government created a surplus of an agricultural product due to price supports,how might they dispose of this surplus?

In recent years,the price of smartphones has fallen,while the quantity exchanged of smartphones has risen.We can conclude that this is most likely a result of

Suppose that an early frost damages the Florida orange crop.As a result,the price of California oranges increases.Ceteris paribus,which one of the following statements best explains this situation?

Scalping at major sporting events is an example of

Prices ration goods to

Who gains and who loses from rent controls?

If both supply and demand simultaneously decrease,

In the United States,the minimum wage is defined as

-Assume that the initial demand and supply curves in the above figure are D_A and S_A,respectively.The initial equilibrium price and quantity are

If demand and supply both increase,

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

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

The objective of rent controls is to

Transaction costs are

Which of the following statements about markets is correct? I.A market helps resources move to their highest-valued uses by means of prices. II.A market encompasses the exchange arrangements of both buyers and sellers.

The decrease in the price of gasoline to a national average of less than $3.20 during the summer of 2012 was most likely a result of

The price rationing mechanism of a freely functioning market leads to the most efficient use of resources because

What are the terms of exchange and how are these terms related to the price?

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

Which of the following statements is FALSE?

If the government created a surplus of an agricultural product due to price supports,how might they dispose of this surplus?

In recent years,the price of smartphones has fallen,while the quantity exchanged of smartphones has risen.We can conclude that this is most likely a result of

Suppose that an early frost damages the Florida orange crop.As a result,the price of California oranges increases.Ceteris paribus,which one of the following statements best explains this situation?

Scalping at major sporting events is an example of

Prices ration goods to

Who gains and who loses from rent controls?

If both supply and demand simultaneously decrease,

In the United States,the minimum wage is defined as

-Assume that the initial demand and supply curves in the above figure are DA and SA,respectively.The initial equilibrium price and quantity are

If demand and supply both increase,

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

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

The objective of rent controls is to

Transaction costs are

Which of the following statements about markets is correct? I.A market helps resources move to their highest-valued uses by means of prices. II.A market encompasses the exchange arrangements of both buyers and sellers.

The decrease in the price of gasoline to a national average of less than $3.20 during the summer of 2012 was most likely a result of

The price rationing mechanism of a freely functioning market leads to the most efficient use of resources because

What are the terms of exchange and how are these terms related to the price?

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

-Assume that the initial demand and supply curves in the above figure are D_A and S_A,respectively.The initial equilibrium price and quantity are