Question 1

As a result of establishing a legal minimum wage above the market clearing wage

Accepted Answer

A)  there will be a shortage of workers. 
B)  firms will hire fewer workers. 
C)  firms will hire more workers. 
D)  fewer workers will want to work. 
A)  there will be a shortage of workers. 
B)  firms will hire fewer workers. 
C)  firms will hire more workers. 
D)  fewer workers will want to work.

Question 2

An increase in the price of labor used to produce good A will lead to

Accepted Answer

A)  an increase in the market clearing price of good A. 
B)  an increase in the supply of good A. 
C)  a decrease in the demand for good A. 
D)  an increase in the demand for good A. 
A)  an increase in the market clearing price of good A. 
B)  an increase in the supply of good A. 
C)  a decrease in the demand for good A. 
D)  an increase in the demand for good A.

Question 3

The market system is also called the price system because

Accepted Answer

A)  rising prices are the signal to producers to offer more of a particular good. 
B)  people pay money in markets. 
C)  everything has a price tag. 
D)  inflation is a significant problem. 
A)  rising prices are the signal to producers to offer more of a particular good. 
B)  people pay money in markets. 
C)  everything has a price tag. 
D)  inflation is a significant problem.

Question 4

If a price ceiling were established above the equilibrium price,

Accepted Answer

A)  it would have no effect on the quantity demanded. 
B)  it would create a shortage. 
C)  it would create a surplus. 
D)  none of the above. 
A)  it would have no effect on the quantity demanded. 
B)  it would create a shortage. 
C)  it would create a surplus. 
D)  none of the above.

Question 5

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

Accepted Answer

A)  80,000 gallons per month. 
B)  100,000 gallons per month. 
C)  60,000 gallons per month. 
D)  140,000 gallons per month. 
A)  80,000 gallons per month. 
B)  100,000 gallons per month. 
C)  60,000 gallons per month. 
D)  140,000 gallons per month.

Question 6

-Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve shifts from DA to DB. Which of the following is TRUE about the results of the shifts in the supply and demand curves?

Accepted Answer

A)  The equilibrium price increases while the equilibrium quantity remains unchanged. 
B)  Both the equilibrium price and equilibrium quantity increase. 
C)  The equilibrium price remains unchanged while the equilibrium quantity increases. 
D)  Both the equilibrium price and equilibrium quantity remain unchanged. 
A)  The equilibrium price increases while the equilibrium quantity remains unchanged. 
B)  Both the equilibrium price and equilibrium quantity increase. 
C)  The equilibrium price remains unchanged while the equilibrium quantity increases. 
D)  Both the equilibrium price and equilibrium quantity remain unchanged.

Question 7

An increase 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 increase in quantity, but the effect on price is indeterminate. 
D)  an unambiguous increase in price, but the effect on quantity is indeterminate. 
A)  unambiguous increases in both price and quantity. 
B)  unambiguous decreases in both price and quantity. 
C)  an unambiguous increase in quantity, but the effect on price is indeterminate. 
D)  an unambiguous increase in price, but the effect on quantity is indeterminate.

Question 8

A minimum wage is an example of a

Accepted Answer

A)  price ceiling. 
B)  price floor. 
C)  black market. 
D)  market clearing price. 
A)  price ceiling. 
B)  price floor. 
C)  black market. 
D)  market clearing price.

Question 9

An effective price ceiling usually generates

Accepted Answer

A)  fire sales as firms try to unload their excess inventories. 
B)  higher nominal prices. 
C)  the use of nonprice rationing devices. 
D)  happy sellers and dissatisfied buyers. 
A)  fire sales as firms try to unload their excess inventories. 
B)  higher nominal prices. 
C)  the use of nonprice rationing devices. 
D)  happy sellers and dissatisfied buyers.

Question 10

The U.S. government imposes import quotas on many agricultural products, especially products that receive price supports. Offer an economic explanation for this.

Accepted Answer

If the price supports generate a price i

Question 11

Which of these would NOT be considered a middleman in a market?

Accepted Answer

A)  a produce wholesaler 
B)  a wheat farmer 
C)  a cellphone retailer 
D)  a meat distributor 
A)  a produce wholesaler 
B)  a wheat farmer 
C)  a cellphone retailer 
D)  a meat distributor

Question 12

Other things being equal, suppose that the demand for wheat in constant quality units increases. The increase in demand will cause

Accepted Answer

A)  a surplus of wheat. 
B)  a higher equilibrium price and higher equilibrium quantity of wheat. 
C)  fall in the market clearing price of corn, a substitute for wheat. 
D)  a higher equilibrium quantity, but a lower equilibrium price of wheat. 
A)  a surplus of wheat. 
B)  a higher equilibrium price and higher equilibrium quantity of wheat. 
C)  fall in the market clearing price of corn, a substitute for wheat. 
D)  a higher equilibrium quantity, but a lower equilibrium price of wheat.

Question 13

Which group of individuals most likely benefits from rent controls?

Accepted Answer

A)  the unemployed who fail to obtain rental housing 
B)  low-income wage earners who fail to obtain rental housing 
C)  single parent families without savings or other financial assets who fail to obtain rental housing 
D)  upper-income professionals who rent apartments at the price ceiling rate 
A)  the unemployed who fail to obtain rental housing 
B)  low-income wage earners who fail to obtain rental housing 
C)  single parent families without savings or other financial assets who fail to obtain rental housing 
D)  upper-income professionals who rent apartments at the price ceiling rate

Question 14

A price ceiling set below a market equilibrium price causes

Accepted Answer

A)  a shortage. 
B)  a surplus. 
C)  producers to receive higher prices. 
D)  consumers to pay higher prices. 
A)  a shortage. 
B)  a surplus. 
C)  producers to receive higher prices. 
D)  consumers to pay higher prices.

Question 15

The rationing function of prices means that

Accepted Answer

A)  government is responsible for setting the prices of basic foods. 
B)  all goods and services are produced by large firms. 
C)  businesses determine what goods consumers should purchase. 
D)  buyers and sellers synchronize their decisions through the price system. 
A)  government is responsible for setting the prices of basic foods. 
B)  all goods and services are produced by large firms. 
C)  businesses determine what goods consumers should purchase. 
D)  buyers and sellers synchronize their decisions through the price system.

Question 16

In a market system, which component conveys information about what is relatively scarce and what is relatively abundant?

Accepted Answer

A)  the number of producers 
B)  the number of consumers 
C)  market price 
D)  the amount of resources used in producing the goods and services 
A)  the number of producers 
B)  the number of consumers 
C)  market price 
D)  the amount of resources used in producing the goods and services

Question 17

Under rent controls

Accepted Answer

A)  there is a shortage of rental units. 
B)  the quantity supplied of rental units is greater than it would be under freely competitive markets. 
C)  there is less government involvement in rental markets overall because there is a better supply of low-income housing. 
D)  all renters are better off than under freely competitive markets. 
A)  there is a shortage of rental units. 
B)  the quantity supplied of rental units is greater than it would be under freely competitive markets. 
C)  there is less government involvement in rental markets overall because there is a better supply of low-income housing. 
D)  all renters are better off than under freely competitive markets.

Question 18

-Government imposed price controls often lead to

Accepted Answer

A)  illegal trades of the good. 
B)  the most efficient use of resources. 
C)  the equilibrium solution in terms of price and quantity. 
D)  maximization of profits. 
A)  illegal trades of the good. 
B)  the most efficient use of resources. 
C)  the equilibrium solution in terms of price and quantity. 
D)  maximization of profits.

Question 19

Government-imposed quantity restrictions

Accepted Answer

A)  generate a higher price for the good than would prevail under freely competitive markets. 
B)  generate a lower price for the good than would prevail under freely competitive markets. 
C)  does not affect the price of the good because quantity restrictions always ban sale of the good completely. 
D)  can cause prices to either be higher or lower, but always cause excess quantities supplied to develop. 
A)  generate a higher price for the good than would prevail under freely competitive markets. 
B)  generate a lower price for the good than would prevail under freely competitive markets. 
C)  does not affect the price of the good because quantity restrictions always ban sale of the good completely. 
D)  can cause prices to either be higher or lower, but always cause excess quantities supplied to develop.

Question 20

Goods A and B are complementary goods. An increase in the price of good A has occurred. In the market for good B this 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.

Exam 4: Extensions of Demand and Supply Analysis

As a result of establishing a legal minimum wage above the market clearing wage

An increase in the price of labor used to produce good A will lead to

The market system is also called the price system because

If a price ceiling were established above the equilibrium price,

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

-Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve shifts from DA to DB. Which of the following is TRUE about the results of the shifts in the supply and demand curves?

An increase in demand and an increase in supply will lead to

A minimum wage is an example of a

An effective price ceiling usually generates

The U.S. government imposes import quotas on many agricultural products, especially products that receive price supports. Offer an economic explanation for this.

Which of these would NOT be considered a middleman in a market?

Other things being equal, suppose that the demand for wheat in constant quality units increases. The increase in demand will cause

Which group of individuals most likely benefits from rent controls?

A price ceiling set below a market equilibrium price causes

The rationing function of prices means that

In a market system, which component conveys information about what is relatively scarce and what is relatively abundant?

Under rent controls

-Government imposed price controls often lead to

Government-imposed quantity restrictions

Goods A and B are complementary goods. An increase in the price of good A has occurred. In the market for good B this will lead to

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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