Question 1

It is necessary to ration a good whenever ________ exists.

Accepted Answer

A)  excess demand 
B)  excess supply 
C)  a surplus 
D)  market equilibrium 
A)  excess demand 
B)  excess supply 
C)  a surplus 
D)  market equilibrium

Question 2

If the government imposes a maximum price that is above the equilibrium price,

Accepted Answer

A)  this maximum price will have no economic impact. 
B)  quantity demanded will be less than quantity supplied. 
C)  demand will be greater than supply. 
D)  the available supply will have to be rationed with a nonprice rationing mechanism. 
A)  this maximum price will have no economic impact. 
B)  quantity demanded will be less than quantity supplied. 
C)  demand will be greater than supply. 
D)  the available supply will have to be rationed with a nonprice rationing mechanism.

Question 3

Among the methods of nonprice rationing are

Accepted Answer

A)  coupons. 
B)  favored customers. 
C)  waiting in line. 
D)  all of the above 
A)  coupons. 
B)  favored customers. 
C)  waiting in line. 
D)  all of the above

Question 4

In the short run, it is necessary to non-price ration a good whenever ________ exists.

Accepted Answer

A)  excess demand 
B)  excess supply 
C)  a surplus 
D)  market equilibrium 
A)  excess demand 
B)  excess supply 
C)  a surplus 
D)  market equilibrium

Question 5

A U.S. import fee on oil would reduce imports and raise the price of U.S. oil products.

Accepted Answer

A) True 
 B)False

Question 6

Attempts to bypass price rationing in the market

Accepted Answer

A)  are efficient. 
B)  are easily administered. 
C)  are costly. 
D)  always fail. 
A)  are efficient. 
B)  are easily administered. 
C)  are costly. 
D)  always fail.

Question 7

Nonprice rationing will happen whenever there is excess supply in a market.

Accepted Answer

A) True 
 B)False

Question 8

Related to the Economics in Practice on page 82: If a hurricane results in the supply of hotel rooms decreasing and the equilibrium price for hotel rooms increases, the demand for hotel rooms ________ and total revenue from the sale of hotel rooms ________.

Accepted Answer

A)  has decreased; will decrease 
B)  has decreased; may increase, decrease, or stay the same 
C)  may have increased, decreased, or stayed the same; will decrease 
D)  may have increased, decreased, or stayed the same; may increase, decrease, or stay the same 
A)  has decreased; will decrease 
B)  has decreased; may increase, decrease, or stay the same 
C)  may have increased, decreased, or stayed the same; will decrease 
D)  may have increased, decreased, or stayed the same; may increase, decrease, or stay the same

Question 9

Producer surplus is

Accepted Answer

A)  the difference between the maximum a person is willing to pay and current market price. 
B)  the difference between current market price and full costs of production for the firm. 
C)  the difference between willingness to sell and full costs of productions for the firm. 
D)  current market price. 
A)  the difference between the maximum a person is willing to pay and current market price. 
B)  the difference between current market price and full costs of production for the firm. 
C)  the difference between willingness to sell and full costs of productions for the firm. 
D)  current market price.

Question 10

The total of consumer plus producer surplus is greatest

Accepted Answer

A)  when consumer surplus is maximized. 
B)  when producer surplus is maximized. 
C)  at the market equilibrium. 
D)  all of the above 
A)  when consumer surplus is maximized. 
B)  when producer surplus is maximized. 
C)  at the market equilibrium. 
D)  all of the above

Question 11

Refer to the information provided in Figure 4.3 below to answer the questions that follow.   Figure 4.3
-Refer to Figure 4.3. If the government will not allow retailers to charge less than $0.50 for a pencil, which of the following will happen?

Accepted Answer

A)  Demand must eventually increase so that the market will come into equilibrium at a price of $0.50. 
B)  Supply must eventually decrease so that the market will come into equilibrium at a price of $0.50. 
C)  Retailers will have an excess supply of pencils. 
D)  The market will be in equilibrium at a price of $0.50. 
A)  Demand must eventually increase so that the market will come into equilibrium at a price of $0.50. 
B)  Supply must eventually decrease so that the market will come into equilibrium at a price of $0.50. 
C)  Retailers will have an excess supply of pencils. 
D)  The market will be in equilibrium at a price of $0.50.

Question 12

Refer to the information provided in Figure 4.6 below to answer the questions that follow.
Equilibrium in this market occurs at the intersection of curves S and D.   Figure 4.6
-In figure 4.6 if price is P1, the deadweight loss due to under production is area

Accepted Answer

A)  A+C. 
B)  C+F 
C)  E+G. 
D)  F+G. 
A)  A+C. 
B)  C+F 
C)  E+G. 
D)  F+G.

Question 13

If the price floor is set below the equilibrium price,

Accepted Answer

A)  quantity demanded will be less than quantity supplied. 
B)  there will be a surplus. 
C)  there will be a shortage. 
D)  the floor will be ineffective. 
A)  quantity demanded will be less than quantity supplied. 
B)  there will be a surplus. 
C)  there will be a shortage. 
D)  the floor will be ineffective.

Question 14

A maximum price, set by the government, that sellers may charge for a good is known as

Accepted Answer

A)  a price floor. 
B)  a price rationing mechanism. 
C)  a price ceiling. 
D)  a subsidy. 
A)  a price floor. 
B)  a price rationing mechanism. 
C)  a price ceiling. 
D)  a subsidy.

Question 15

The government imposes a maximum price on apartments that is ABOVE the equilibrium price. You accurately predict that

Accepted Answer

A)  the law will have no economic impact. 
B)  the law will create a surplus of apartments. 
C)  renters will find that landlords start offering to furnish the apartments. 
D)  landlords are less likely to do routine maintenance work in the apartments. 
A)  the law will have no economic impact. 
B)  the law will create a surplus of apartments. 
C)  renters will find that landlords start offering to furnish the apartments. 
D)  landlords are less likely to do routine maintenance work in the apartments.

Question 16

Refer to the information provided in Figure 4.3 below to answer the questions that follow.   Figure 4.3
-Refer to Figure 4.3. An example of an effective price ceiling would be government setting the price of pencils at

Accepted Answer

A)  $0.40. 
B)  $0.45. 
C)  $0.50. 
D)  $0.55. 
A)  $0.40. 
B)  $0.45. 
C)  $0.50. 
D)  $0.55.

Question 17

The government imposes a price ceiling on sugar that is above the market price. You are asked to suggest a rationing scheme that will minimize the misallocation of resources. You suggest

Accepted Answer

A)  using rationing coupons that cannot be resold. 
B)  using rationing on a first-come, first-served basis. 
C)  using rationing coupons that can be resold. 
D)  that no rationing system will be necessary. 
A)  using rationing coupons that cannot be resold. 
B)  using rationing on a first-come, first-served basis. 
C)  using rationing coupons that can be resold. 
D)  that no rationing system will be necessary.

Question 18

If the price ceiling is set below the equilibrium price,

Accepted Answer

A)  quantity demanded will equal quantity supplied. 
B)  there will be a surplus. 
C)  there will be a shortage. 
D)  demand will be less than supply. 
A)  quantity demanded will equal quantity supplied. 
B)  there will be a surplus. 
C)  there will be a shortage. 
D)  demand will be less than supply.

Question 19

Refer to the information provided in Figure 4.5 below to answer the questions that follow.   Figure 4.5
-Refer to Figure 4.5. Assume that initially there is free trade. If the United States then imposes a $10.00 tax per CD-Rom drive on imported CD-Rom drives,

Accepted Answer

A)  the quantity of CD-Rom drives demanded will be reduced by 3 million. 
B)  the quantity of CD-Rom drives supplied by U.S. firms will increase by 3 million. 
C)  the price of CD-Rom drives in the United States will increase to $25. 
D)  all of the above 
A)  the quantity of CD-Rom drives demanded will be reduced by 3 million. 
B)  the quantity of CD-Rom drives supplied by U.S. firms will increase by 3 million. 
C)  the price of CD-Rom drives in the United States will increase to $25. 
D)  all of the above

Question 20

Consumer surplus is the difference between the most a person is willing to pay and market price.

Accepted Answer

A) True 
 B)False

Exam 4: Demand and Supply Applications

It is necessary to ration a good whenever ________ exists.

If the government imposes a maximum price that is above the equilibrium price,

Among the methods of nonprice rationing are

In the short run, it is necessary to non-price ration a good whenever ________ exists.

A U.S. import fee on oil would reduce imports and raise the price of U.S. oil products.

Attempts to bypass price rationing in the market

Nonprice rationing will happen whenever there is excess supply in a market.

Related to the Economics in Practice on page 82: If a hurricane results in the supply of hotel rooms decreasing and the equilibrium price for hotel rooms increases, the demand for hotel rooms ________ and total revenue from the sale of hotel rooms ________.

Producer surplus is

The total of consumer plus producer surplus is greatest

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3 -Refer to Figure 4.3. If the government will not allow retailers to charge less than $0.50 for a pencil, which of the following will happen?

Refer to the information provided in Figure 4.6 below to answer the questions that follow. Equilibrium in this market occurs at the intersection of curves S and D. Figure 4.6 -In figure 4.6 if price is P1, the deadweight loss due to under production is area

If the price floor is set below the equilibrium price,

A maximum price, set by the government, that sellers may charge for a good is known as

The government imposes a maximum price on apartments that is ABOVE the equilibrium price. You accurately predict that

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3 -Refer to Figure 4.3. An example of an effective price ceiling would be government setting the price of pencils at

The government imposes a price ceiling on sugar that is above the market price. You are asked to suggest a rationing scheme that will minimize the misallocation of resources. You suggest

If the price ceiling is set below the equilibrium price,

Refer to the information provided in Figure 4.5 below to answer the questions that follow. Figure 4.5 -Refer to Figure 4.5. Assume that initially there is free trade. If the United States then imposes a $10.00 tax per CD-Rom drive on imported CD-Rom drives,

Consumer surplus is the difference between the most a person is willing to pay and market price.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

Related to the Economics in Practice on page 82: If a hurricane results in the supply of hotel rooms decreasing and the equilibrium price for hotel rooms increases, the demand for hotel rooms and total revenue from the sale of hotel rooms .