Question 1

When a government imposes price controls, the result is that

Accepted Answer

A)  the rationing function of prices is not allowed to function freely. 
B)  the price system operates more efficiently. 
C)  all trades are as mutually beneficial to each party as possible. 
D)  scarcity usually disappears. 
A)  the rationing function of prices is not allowed to function freely. 
B)  the price system operates more efficiently. 
C)  all trades are as mutually beneficial to each party as possible. 
D)  scarcity usually disappears.

Question 2

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

Question 3

A price ceiling established below the market clearing price will usually cause

Accepted Answer

A)  nonprice rationing. 
B)  an excess supply. 
C)  no change in the market clearing price. 
D)  a decrease in the market clearing price. 
A)  nonprice rationing. 
B)  an excess supply. 
C)  no change in the market clearing price. 
D)  a decrease in the market clearing price.

Question 4

Of the following groups, which benefits most from a government price support program that establishes a floor price for an agricultural product that is higher than the product's market clearing price?

Accepted Answer

A)  consumers, who purchase more units of the product than they did before the price support program was implemented 
B)  taxpayers, who no longer must provide funds to purchase surplus units of the product once the price support program is in place 
C)  producers, who earn a higher price on the sale of each unit and also sell more units, thereby unambiguously earning higher revenues 
D)  the government, which receives subsidy payments from producers that are required to sell more of the product at a higher price under the government's program 
A)  consumers, who purchase more units of the product than they did before the price support program was implemented 
B)  taxpayers, who no longer must provide funds to purchase surplus units of the product once the price support program is in place 
C)  producers, who earn a higher price on the sale of each unit and also sell more units, thereby unambiguously earning higher revenues 
D)  the government, which receives subsidy payments from producers that are required to sell more of the product at a higher price under the government's program

Question 5

Suppose you observe that the price of a good increases and that the quantity of this good sold also increases. If only the demand curve or the supply curve shifts this suggests that

Accepted Answer

A)  supply increased over time while demand remained the same. 
B)  supply decreased over time while demand remained the same. 
C)  demand increased over time while supply remained the same. 
D)  demand decreased over time while supply remained the same. 
A)  supply increased over time while demand remained the same. 
B)  supply decreased over time while demand remained the same. 
C)  demand increased over time while supply remained the same. 
D)  demand decreased over time while supply remained the same.

Question 6

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 7

The income of consumers increases. and the wage rate in the seafood industry increases. As a result

Accepted Answer

A)  the price of seafood stays the same and the quantity sold can either increase or decrease, depending on whether the change in demand is greater than the change in supply. 
B)  the price of seafood increases and the quantity sold can either increase, decrease or stay the same depending on whether the change in demand was greater than the change in supply. 
C)  the equilibrium quantity sold increases and price can either increase or decrease, depending on whether the change in demand is greater than the change in supply. 
D)  the equilibrium quantity sold can either increase or decrease and the price can either increase or decrease, depending on whether the change in demand was greater than the change in supply. 
A)  the price of seafood stays the same and the quantity sold can either increase or decrease, depending on whether the change in demand is greater than the change in supply. 
B)  the price of seafood increases and the quantity sold can either increase, decrease or stay the same depending on whether the change in demand was greater than the change in supply. 
C)  the equilibrium quantity sold increases and price can either increase or decrease, depending on whether the change in demand is greater than the change in supply. 
D)  the equilibrium quantity sold can either increase or decrease and the price can either increase or decrease, depending on whether the change in demand was greater than the change in supply.

Question 8

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 9

Holding demand constant, an increase in supply leads to

Accepted Answer

A)  lower prices and higher quantity demanded. 
B)  lower prices and lower quantity demanded. 
C)  higher prices and higher quantity demanded. 
D)  higher prices and lower quantity demanded. 
A)  lower prices and higher quantity demanded. 
B)  lower prices and lower quantity demanded. 
C)  higher prices and higher quantity demanded. 
D)  higher prices and lower quantity demanded.

Question 10

Price controls may be thought of as

Accepted Answer

A)  a restraint on the rationing function of prices. 
B)  useful tools that promote production. 
C)  necessary in market economies. 
D)  the freeing-up of free market forces. 
A)  a restraint on the rationing function of prices. 
B)  useful tools that promote production. 
C)  necessary in market economies. 
D)  the freeing-up of free market forces.

Question 11

In 2010, a British Petroleum oil rig exploded in the Gulf of Mexico. The explosion resulted in a major oil spill and a decrease in the supply of oil. At the same time, the average price of gasoline decreased. Which of the following best explains the decrease in the price of gasoline?

Accepted Answer

A)  The quantity demanded of gasoline increased. 
B)  The demand for gasoline decreased, and the effect of the decrease in demand on the gasoline price was greater than the price effect of the decrease in supply. 
C)  The demand for gasoline increased, and the effect of the increase in demand on the gasoline price was less than the price effect of the decrease in supply. 
D)  The demand for gasoline remained unchanged. 
A)  The quantity demanded of gasoline increased. 
B)  The demand for gasoline decreased, and the effect of the decrease in demand on the gasoline price was greater than the price effect of the decrease in supply. 
C)  The demand for gasoline increased, and the effect of the increase in demand on the gasoline price was less than the price effect of the decrease in supply. 
D)  The demand for gasoline remained unchanged.

Question 12

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 13

Suppose Brad Pitt 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 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

Which of the following is NOT a device to reduce transaction costs?

Accepted Answer

A)  shopping centers 
B)  auto dealers located close together 
C)  government prohibitions on advertising 
D)  banks that direct funds from savers to borrowers 
A)  shopping centers 
B)  auto dealers located close together 
C)  government prohibitions on advertising 
D)  banks that direct funds from savers to borrowers

Question 16

As demand for phone apps increases, other things being equal, we can expect

Accepted Answer

A)  a decrease in both the relative price and quantity of phone apps. 
B)  a decrease in the supply of phone apps. 
C)  more phone apps to be produced. 
D)  an excess number of phone apps in the market. 
A)  a decrease in both the relative price and quantity of phone apps. 
B)  a decrease in the supply of phone apps. 
C)  more phone apps to be produced. 
D)  an excess number of phone apps in the market.

Question 17

After an increase in the demand for construction workers, the market will attain its new long-run equilibrium faster if

Accepted Answer

A)  wages are flexible. 
B)  wages are inflexible, forcing new people to enter the market. 
C)  unions restrict the number of new construction workers. 
D)  people ignore the shortage in the short run. 
A)  wages are flexible. 
B)  wages are inflexible, forcing new people to enter the market. 
C)  unions restrict the number of new construction workers. 
D)  people ignore the shortage in the short run.

Question 18

If a price floor is set below the current market clearing price, then

Accepted Answer

A)  a surplus must immediately occur. 
B)  a shortage must immediately occur. 
C)  there will be incentives for black markets to develop. 
D)  quantity demanded will remain equal to quantity supplied at the current market clearing price. 
A)  a surplus must immediately occur. 
B)  a shortage must immediately occur. 
C)  there will be incentives for black markets to develop. 
D)  quantity demanded will remain equal to quantity supplied at the current market clearing price.

Question 19

A price floor that is set above market equilibrium will cause

Accepted Answer

A)  an excess quantity demanded. 
B)  a shortage. 
C)  a surplus. 
D)  queuing on the part of consumers. 
A)  an excess quantity demanded. 
B)  a shortage. 
C)  a surplus. 
D)  queuing on the part of consumers.

Question 20

Rationing occurs for goods

Accepted Answer

A)  that have a positive price. 
B)  that have a zero price. 
C)  that have a negative price. 
D)  that are not manufactured. 
A)  that have a positive price. 
B)  that have a zero price. 
C)  that have a negative price. 
D)  that are not manufactured.

Exam 4: Extensions of Demand and Supply Analysis

When a government imposes price controls, the result is that

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 ________.

A price ceiling established below the market clearing price will usually cause

Of the following groups, which benefits most from a government price support program that establishes a floor price for an agricultural product that is higher than the product's market clearing price?

Suppose you observe that the price of a good increases and that the quantity of this good sold also increases. If only the demand curve or the supply curve shifts this suggests that

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

The income of consumers increases. and the wage rate in the seafood industry increases. As a result

Which of the following statements is FALSE?

Holding demand constant, an increase in supply leads to

Price controls may be thought of as

In 2010, a British Petroleum oil rig exploded in the Gulf of Mexico. The explosion resulted in a major oil spill and a decrease in the supply of oil. At the same time, the average price of gasoline decreased. Which of the following best explains the decrease in the price of gasoline?

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

Suppose Brad Pitt 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

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

Which of the following is NOT a device to reduce transaction costs?

As demand for phone apps increases, other things being equal, we can expect

After an increase in the demand for construction workers, the market will attain its new long-run equilibrium faster if

If a price floor is set below the current market clearing price, then

A price floor that is set above market equilibrium will cause

Rationing occurs for goods

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

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 .