Question 1

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

Accepted Answer

A)  supply increases and demand increases. 
B)  supply decreases and demand decreases. 
C)  supply decreases and at the same time demand increases. 
D)  supply increases and at the same time demand decreases. 
A)  supply increases and demand increases. 
B)  supply decreases and demand decreases. 
C)  supply decreases and at the same time demand increases. 
D)  supply increases and at the same time demand decreases.

Question 2

The long-run effect of rent control on an area includes

Accepted Answer

A)  rampant building of new low-income housing. 
B)  many new luxury apartments new luxury apartments will be built. 
C)  new investors into the real estate market in the area. 
D)  less investment into the real estate market in the area. 
A)  rampant building of new low-income housing. 
B)  many new luxury apartments new luxury apartments will be built. 
C)  new investors into the real estate market in the area. 
D)  less investment into the real estate market in the area.

Question 3

Suppose there is a simultaneous increase in the demand for rice and increase in the supply of rice. Which of the following will occur as a result of these simultaneous events?

Accepted Answer

A)  Both the market clearing price and equilibrium quantity will rise. 
B)  The market clearing price will fall, but the equilibrium quantity will rise. 
C)  The market clearing price may rise, fall, or stay the same, but the equilibrium quantity will rise. 
D)  The market clearing price will fall, but the equilibrium quantity may rise, fall, or stay the same. 
A)  Both the market clearing price and equilibrium quantity will rise. 
B)  The market clearing price will fall, but the equilibrium quantity will rise. 
C)  The market clearing price may rise, fall, or stay the same, but the equilibrium quantity will rise. 
D)  The market clearing price will fall, but the equilibrium quantity may rise, fall, or stay the same.

Question 4

Which of the following is NOT a predictable result of a price ceiling set below the market clearing price?

Accepted Answer

A)  an illegal market in the good 
B)  excess quantity supplied 
C)  excess quantity demanded 
D)  lines to purchase the product 
A)  an illegal market in the good 
B)  excess quantity supplied 
C)  excess quantity demanded 
D)  lines to purchase the product

Question 5

Price ceilings are adopted in most cases because

Accepted Answer

A)  the government views the current equilibrium price as too high for consumers. 
B)  the government wants to create surpluses. 
C)  the government favors a non-intervention policy. 
D)  producers need incentives to produce more of the good or service. 
A)  the government views the current equilibrium price as too high for consumers. 
B)  the government wants to create surpluses. 
C)  the government favors a non-intervention policy. 
D)  producers need incentives to produce more of the good or service.

Question 6

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 7

All of the following result from price floors in agriculture EXCEPT

Accepted Answer

A)  surpluses of agricultural products that have price floors. 
B)  higher prices to consumers for agricultural products that have price floors. 
C)  lower prices to consumers for agricultural products that have price floors. 
D)  governmental bureaucracy. 
A)  surpluses of agricultural products that have price floors. 
B)  higher prices to consumers for agricultural products that have price floors. 
C)  lower prices to consumers for agricultural products that have price floors. 
D)  governmental bureaucracy.

Question 8

As compared to the market clearing price, the total amount of consumer surplus and producer surplus is

Accepted Answer

A)  greater for a government-imposed price floor that is higher than that market clearing price. 
B)  greater for a government-imposed price ceiling that is lower than that market clearing price. 
C)  the same as a government-imposed price floor that is higher than that market clearing price. 
D)  smaller for a government-imposed price ceiling that is lower than that market clearing price. 
A)  greater for a government-imposed price floor that is higher than that market clearing price. 
B)  greater for a government-imposed price ceiling that is lower than that market clearing price. 
C)  the same as a government-imposed price floor that is higher than that market clearing price. 
D)  smaller for a government-imposed price ceiling that is lower than that market clearing price.

Question 9

Price floors

Accepted Answer

A)  provide free market incentives for producers. 
B)  create surpluses by setting the price above equilibrium. 
C)  create shortages by setting the price above equilibrium. 
D)  are used by advocates of the free market. 
A)  provide free market incentives for producers. 
B)  create surpluses by setting the price above equilibrium. 
C)  create shortages by setting the price above equilibrium. 
D)  are used by advocates of the free market.

Question 10

A price ceiling set above the equilibrium price will cause which of the following?

Accepted Answer

A)  an increase in supply 
B)  a surplus 
C)  a shortage 
D)  no effect on either the price or quantity 
A)  an increase in supply 
B)  a surplus 
C)  a shortage 
D)  no effect on either the price or quantity

Question 11

Why does an economy need a rationing mechanism?

Accepted Answer

A)  because of scarcity 
B)  because it preserves the power of the wealthy 
C)  because it eliminates poverty 
D)  All of the above are correct. 
A)  because of scarcity 
B)  because it preserves the power of the wealthy 
C)  because it eliminates poverty 
D)  All of the above are correct.

Question 12

Suppose that the supply curve remains unchanged. If the demand curve shifts to the right

Accepted Answer

A)  the market clearing price definitely will decrease. 
B)  the market clearing price definitely will increase. 
C)  there will be no change in the market clearing price. 
D)  the market will collapse. 
A)  the market clearing price definitely will decrease. 
B)  the market clearing price definitely will increase. 
C)  there will be no change in the market clearing price. 
D)  the market will collapse.

Question 13

Following adjustments to a new equilibrium in a market, the market clearing price remains unchanged, but the equilibrium quantity 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 14

In a market, the rationing function of prices results in

Accepted Answer

A)  long waiting lines. 
B)  a price ceiling. 
C)  an equilibrium between supply and demand. 
D)  a shortage or surplus. 
A)  long waiting lines. 
B)  a price ceiling. 
C)  an equilibrium between supply and demand. 
D)  a shortage or surplus.

Question 15

Which of the following is most likely to benefit from government established price floors in agriculture?

Accepted Answer

A)  large farm owners and corporate farms 
B)  small farmers 
C)  cattle ranchers 
D)  low income farmers 
A)  large farm owners and corporate farms 
B)  small farmers 
C)  cattle ranchers 
D)  low income farmers

Question 16

A price ceiling is

Accepted Answer

A)  the lowest price a seller can charge without losing all of its customers. 
B)  a legal minimum price below which a good or service cannot be sold. 
C)  a legal price above which a good or service cannot be sold. 
D)  a nonprice rationing device. 
A)  the lowest price a seller can charge without losing all of its customers. 
B)  a legal minimum price below which a good or service cannot be sold. 
C)  a legal price above which a good or service cannot be sold. 
D)  a nonprice rationing device.

Question 17

Suppose the price of pepperoni falls. In the market for pizza, in which pepperoni of a popular ingredient, one would expect that

Accepted Answer

A)  the supply of pizza would increase, and the price would fall. 
B)  the demand for pizza would increase, and the price would increase. 
C)  the demand for pizza would decrease, and price would fall. 
D)  the supply of pizza would decrease, and price would rise. 
A)  the supply of pizza would increase, and the price would fall. 
B)  the demand for pizza would increase, and the price would increase. 
C)  the demand for pizza would decrease, and price would fall. 
D)  the supply of pizza would decrease, and price would rise.

Question 18

In September 2005, destruction to U.S. gasoline refineries was caused by back-to-back storms along the U.S. Gulf Coast-Hurricane Katrina and Hurricane Rita. In one week, the average price of a gallon of gasoline in the United States increased by about 40 cents. Which of the following best explains why these events pushed up the price of gasoline?

Accepted Answer

A)  The demand curve for gasoline shifted to the left along the supply curve for gasoline. 
B)  The supply curve for gasoline shifted to the left along the demand curve for gasoline. 
C)  The demand curve for gasoline shifted to the right along the supply curve for gasoline. 
D)  The supply curve for gasoline shifted to the right along the demand curve for gasoline. 
A)  The demand curve for gasoline shifted to the left along the supply curve for gasoline. 
B)  The supply curve for gasoline shifted to the left along the demand curve for gasoline. 
C)  The demand curve for gasoline shifted to the right along the supply curve for gasoline. 
D)  The supply curve for gasoline shifted to the right along the demand curve for gasoline.

Question 19

An example of a quantity restriction is

Accepted Answer

A)  the minimum wage. 
B)  an import quota. 
C)  rent controls. 
D)  price supports in agriculture. 
A)  the minimum wage. 
B)  an import quota. 
C)  rent controls. 
D)  price supports in agriculture.

Question 20

-Refer to the above figure. At a price of $2 per gallon, there is

Accepted Answer

A)  a surplus of 20,000 gallons per month. 
B)  a shortage of 40,000 gallons per month. 
C)  a shortage of 80,000 gallons per month. 
D)  a shortage of 60,000 gallons per month. 
A)  a surplus of 20,000 gallons per month. 
B)  a shortage of 40,000 gallons per month. 
C)  a shortage of 80,000 gallons per month. 
D)  a shortage of 60,000 gallons per month.

Exam 4: Extensions of Demand and Supply Analysis

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

The long-run effect of rent control on an area includes

Suppose there is a simultaneous increase in the demand for rice and increase in the supply of rice. Which of the following will occur as a result of these simultaneous events?

Which of the following is NOT a predictable result of a price ceiling set below the market clearing price?

Price ceilings are adopted in most cases because

If both supply and demand simultaneously decrease

All of the following result from price floors in agriculture EXCEPT

As compared to the market clearing price, the total amount of consumer surplus and producer surplus is

Price floors

A price ceiling set above the equilibrium price will cause which of the following?

Why does an economy need a rationing mechanism?

Suppose that the supply curve remains unchanged. If the demand curve shifts to the right

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

In a market, the rationing function of prices results in

Which of the following is most likely to benefit from government established price floors in agriculture?

A price ceiling is

Suppose the price of pepperoni falls. In the market for pizza, in which pepperoni of a popular ingredient, one would expect that

An example of a quantity restriction is

-Refer to the above figure. At a price of $2 per gallon, there is

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

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