Question 1

The price of coffee increases. Which of the following is NOT part of the likely chain of events that follows from this price change?

Accepted Answer

A)  Some coffee consumers reduce their consumption of coffee. 
B)  Coffee producers increase their production of coffee. 
C)  The producers of coffee beans increase production. 
D)  The manufacturers of coffee machines lay off some workers. 
A)  Some coffee consumers reduce their consumption of coffee. 
B)  Coffee producers increase their production of coffee. 
C)  The producers of coffee beans increase production. 
D)  The manufacturers of coffee machines lay off some workers. D

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. A

Question 3

One effect of a minimum wage in the market for low-skilled labor is

Accepted Answer

A)  a shortage of low-skilled labor. 
B)  a surplus of low-skilled labor. 
C)  no effect in the market for low-skilled labor. 
D)  an increase in demand for low-skilled labor. 
A)  a shortage of low-skilled labor. 
B)  a surplus of low-skilled labor. 
C)  no effect in the market for low-skilled labor. 
D)  an increase in demand for low-skilled labor. B

Question 4

Minimum wages are examples of

Accepted Answer

A)  a price floor. 
B)  a price ceiling. 
C)  the rationing function of prices not working. 
D)  government increasing the demand for certain products. 
A)  a price floor. 
B)  a price ceiling. 
C)  the rationing function of prices not working. 
D)  government increasing the demand for certain products.

Question 5

For a given market demand curve, if the market clearing price increases, then the amount of consumer surplus will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  become negative. 
D)  none of the above due to insufficient information. 
A)  increase. 
B)  decrease. 
C)  become negative. 
D)  none of the above due to insufficient information.

Question 6

When prices are used as a rationing device, goods that are relatively more scarce than they used to be will have

Accepted Answer

A)  greater demand. 
B)  lower excess demands. 
C)  higher prices. 
D)  long queues. 
A)  greater demand. 
B)  lower excess demands. 
C)  higher prices. 
D)  long queues.

Question 7

In a market system, intermediaries in the exchange process are known as

Accepted Answer

A)  producers. 
B)  consumers. 
C)  middlemen. 
D)  free agents. 
A)  producers. 
B)  consumers. 
C)  middlemen. 
D)  free agents.

Question 8

All of the following are methods of rationing goods EXCEPT

Accepted Answer

A)  political power. 
B)  the profit motive. 
C)  first come, first served. 
D)  prices. 
A)  political power. 
B)  the profit motive. 
C)  first come, first served. 
D)  prices.

Question 9

In the market for domestic avocados, what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?

Accepted Answer

A)  The market clearing price would rise, and the equilibrium quantity would rise. 
B)  The market clearing price would fall, and the equilibrium quantity would rise. 
C)  The market clearing price would rise, and the equilibrium quantity would fall. 
D)  The market clearing price would fall, and the equilibrium quantity would fall. 
A)  The market clearing price would rise, and the equilibrium quantity would rise. 
B)  The market clearing price would fall, and the equilibrium quantity would rise. 
C)  The market clearing price would rise, and the equilibrium quantity would fall. 
D)  The market clearing price would fall, and the equilibrium quantity would fall.

Question 10

Red wine has just been found to increase your expected life span by 5 years if you eat it every day. In the market for red wine, this information 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 11

In the United States, the wage floor legislated by government below which it is generally illegal to pay workers is known as

Accepted Answer

A)  the minimum wage. 
B)  the wage ceiling. 
C)  the employment gap. 
D)  the going wage. 
A)  the minimum wage. 
B)  the wage ceiling. 
C)  the employment gap. 
D)  the going wage.

Question 12

When rent controls establish a legal maximum rental rate below the equilibrium rental rate

Accepted Answer

A)  quantity demanded exceeds quantity supplied. 
B)  quantity supplied exceeds quantity demanded. 
C)  demand exceeds supply. 
D)  supply exceeds demand. 
A)  quantity demanded exceeds quantity supplied. 
B)  quantity supplied exceeds quantity demanded. 
C)  demand exceeds supply. 
D)  supply exceeds demand.

Question 13

If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that the market clearing price ________ and the equilibrium quantity ________.

Accepted Answer

A)  will fall, cannot be predicted 
B)  will rise, cannot be predicted 
C)  cannot be predicted, will fall 
D)  cannot be predicted, will rise 
A)  will fall, cannot be predicted 
B)  will rise, cannot be predicted 
C)  cannot be predicted, will fall 
D)  cannot be predicted, will rise

Question 14

An effective rent control will

Accepted Answer

A)  lead to a surplus of housing units. 
B)  keep rents below the competitive market level. 
C)  keep rents above the competitive market level. 
D)  be set at the price where quantity supplied equals quantity demanded. 
A)  lead to a surplus of housing units. 
B)  keep rents below the competitive market level. 
C)  keep rents above the competitive market level. 
D)  be set at the price where quantity supplied equals quantity demanded.

Question 15

What are the effects of an increase in the minimum wage? Who would be most affected?

Accepted Answer

An increase in the minimum wage induces

Question 16

A decrease in demand and an increase in supply will lead to

Accepted Answer

A)  unambiguous increases in both price and quantity. 
B)  unambiguous decreases in both price and 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 and 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 17

In New York City, apartment rent can be adjusted only when a tenant leaves. This leads

Accepted Answer

A)  people to change apartments often. 
B)  landlords to encourage tenants to stay in their apartments. 
C)  tenants to stay in apartments longer than they would otherwise. 
D)  businesses to build new rental units. 
A)  people to change apartments often. 
B)  landlords to encourage tenants to stay in their apartments. 
C)  tenants to stay in apartments longer than they would otherwise. 
D)  businesses to build new rental units.

Question 18

A change in an equilibrium price can result from I. A change in demand
II) A change in supply

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 19

If the government should decide to legalize marijuana, all other things remaining the same, we should expect to see

Accepted Answer

A)  a decrease in the price of marijuana. 
B)  an increase in the price of marijuana. 
C)  a decrease in the demand for marijuana. 
D)  an increase in the use of imported versus domestic marijuana. 
A)  a decrease in the price of marijuana. 
B)  an increase in the price of marijuana. 
C)  a decrease in the demand for marijuana. 
D)  an increase in the use of imported versus domestic marijuana.

Question 20

Some Internet companies like Amazon reduce the transaction costs of many purchases by

Accepted Answer

A)  providing misleading information about the quality of products. 
B)  providing information about products and firms that supply those products. 
C)  advertising sales at local discount stores. 
D)  paying its employees low wages. 
A)  providing misleading information about the quality of products. 
B)  providing information about products and firms that supply those products. 
C)  advertising sales at local discount stores. 
D)  paying its employees low wages.

Exam 4: Extensions of Demand and Supply Analysis

The price of coffee increases. Which of the following is NOT part of the likely chain of events that follows from this price change?

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

One effect of a minimum wage in the market for low-skilled labor is

Minimum wages are examples of

For a given market demand curve, if the market clearing price increases, then the amount of consumer surplus will

When prices are used as a rationing device, goods that are relatively more scarce than they used to be will have

In a market system, intermediaries in the exchange process are known as

All of the following are methods of rationing goods EXCEPT

In the market for domestic avocados, what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?

Red wine has just been found to increase your expected life span by 5 years if you eat it every day. In the market for red wine, this information will lead to

In the United States, the wage floor legislated by government below which it is generally illegal to pay workers is known as

When rent controls establish a legal maximum rental rate below the equilibrium rental rate

If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that the market clearing price ________ and the equilibrium quantity ________.

An effective rent control will

What are the effects of an increase in the minimum wage? Who would be most affected?

A decrease in demand and an increase in supply will lead to

In New York City, apartment rent can be adjusted only when a tenant leaves. This leads

A change in an equilibrium price can result from I. A change in demand II) A change in supply

If the government should decide to legalize marijuana, all other things remaining the same, we should expect to see

Some Internet companies like Amazon reduce the transaction costs of many purchases by

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

If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that the market clearing price and the equilibrium quantity .