Question 1

What are the terms of exchange and how are these terms related to the price?

Accepted Answer

The terms of exchange are the terms unde

Question 2

If other factors remain unchanged, technological progress in producing good A definitely will lead to

Accepted Answer

A)  an increase in the market clearing price of good A and a decrease in the equilibrium quantity of good A. 
B)  an increase in both the market clearing price and the equilibrium quantity of good A. 
C)  a decrease in the market clearing price of good A and an increase in the equilibrium quantity of good A. 
D)  a decrease in both the market clearing price and the equilibrium quantity of good A. 
A)  an increase in the market clearing price of good A and a decrease in the equilibrium quantity of good A. 
B)  an increase in both the market clearing price and the equilibrium quantity of good A. 
C)  a decrease in the market clearing price of good A and an increase in the equilibrium quantity of good A. 
D)  a decrease in both the market clearing price and the equilibrium quantity of good A.

Question 3

Rent controls often have adverse effects, including

Accepted Answer

A)  too much housing in a community. 
B)  deterioration in the quality of existing rental units. 
C)  too much construction of new rental units in the community. 
D)  income transfers from the poor to landlords. 
A)  too much housing in a community. 
B)  deterioration in the quality of existing rental units. 
C)  too much construction of new rental units in the community. 
D)  income transfers from the poor to landlords.

Question 4

When supply increases and at the same time demand decreases, we

Accepted Answer

A)  can predict that both equilibrium price and quantity will increase. 
B)  can predict that both equilibrium price and quantity will decrease. 
C)  cannot predict equilibrium quantity, but know that equilibrium price will decrease. 
D)  cannot predict the change in either the equilibrium quantity or equilibrium price. 
A)  can predict that both equilibrium price and quantity will increase. 
B)  can predict that both equilibrium price and quantity will decrease. 
C)  cannot predict equilibrium quantity, but know that equilibrium price will decrease. 
D)  cannot predict the change in either the equilibrium quantity or equilibrium price.

Question 5

To enhance their prestige, some country clubs like to point to the fact that they have a waiting list for new members. Even at clubs with high initiation fees, it is common that prospective members have to wait three or more years before there is room for them on the membership rolls. How do these country clubs set the price of membership to ensure that they have a waiting list?

Accepted Answer

A)  Set the membership price above the market clearing price. 
B)  Set the membership price below the market clearing price. 
C)  Set the price so that the quantity supplied of memberships exceeds the quantity demanded. 
D)  Set the price at a level that will generate a surplus of memberships. 
A)  Set the membership price above the market clearing price. 
B)  Set the membership price below the market clearing price. 
C)  Set the price so that the quantity supplied of memberships exceeds the quantity demanded. 
D)  Set the price at a level that will generate a surplus of memberships.

Question 6

-A price ceiling represents

Accepted Answer

A)  a maximum price that can be legally charged for a product or service. 
B)  a minimum price that can be legally charged for a good or service. 
C)  a lottery imposed upon producers by the government. 
D)  a first come, first served mechanism for controlling prices. 
A)  a maximum price that can be legally charged for a product or service. 
B)  a minimum price that can be legally charged for a good or service. 
C)  a lottery imposed upon producers by the government. 
D)  a first come, first served mechanism for controlling prices.

Question 7

Which of the following statements about a price system is TRUE? I. Prices ration goods and services.
II) Prices indicate relative scarcity.

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 8

Because of scarcity, rationing is

Accepted Answer

A)  unimportant because people get what they want. 
B)  necessary because people cannot get everything they want. 
C)  unimportant because prices clear markets. 
D)  not a problem because governments can determine what everybody wants. 
A)  unimportant because people get what they want. 
B)  necessary because people cannot get everything they want. 
C)  unimportant because prices clear markets. 
D)  not a problem because governments can determine what everybody wants.

Question 9

-When are black markets likely to arise?

Accepted Answer

A)  when the government removes a price floor 
B)  when the government enforces a price ceiling 
C)  when there is a surplus of a good 
D)  when the quantity supplied of a good exceeds the quantity demanded 
A)  when the government removes a price floor 
B)  when the government enforces a price ceiling 
C)  when there is a surplus of a good 
D)  when the quantity supplied of a good exceeds the quantity demanded

Question 10

-Refer to the above figure. A price support set at P3 will

Accepted Answer

A)  lead to a surplus of Q3 minus Q1. 
B)  lead to a shortage of Q3 minus Q1. 
C)  lead to an equilibrium quantity of Q2. 
D)  be ineffective. 
A)  lead to a surplus of Q3 minus Q1. 
B)  lead to a shortage of Q3 minus Q1. 
C)  lead to an equilibrium quantity of Q2. 
D)  be ineffective.

Question 11

-Refer to the above figure. A price ceiling of $20 results in

Accepted Answer

A)  a shortage of 100 units. 
B)  a shortage of 200 units. 
C)  a surplus of 100 units. 
D)  a surplus of 200 units. 
A)  a shortage of 100 units. 
B)  a shortage of 200 units. 
C)  a surplus of 100 units. 
D)  a surplus of 200 units.

Question 12

-Refer to the above figure. Suppose the government imposes a minimum wage rate of $20.00 per hour. This will likely result in

Accepted Answer

A)  a surplus of labor. 
B)  a shortage of labor. 
C)  an equilibrium in the labor market. 
D)  an increase in the demand for labor. 
A)  a surplus of labor. 
B)  a shortage of labor. 
C)  an equilibrium in the labor market. 
D)  an increase in the demand for labor.

Question 13

If an excess quantity of labor demanded exists in a free market, there is a tendency for

Accepted Answer

A)  quantity supplied to rise. 
B)  the wage rate to fall. 
C)  quantity demanded to fall. 
D)  the wage rate to rise. 
A)  quantity supplied to rise. 
B)  the wage rate to fall. 
C)  quantity demanded to fall. 
D)  the wage rate to rise.

Question 14

In a city that has rent control for apartments, there is

Accepted Answer

A)  less turnover of apartments. 
B)  a surplus of apartments available to rent. 
C)  a shortage of renters in the city. 
D)  neither a surplus nor a shortage of apartments. 
A)  less turnover of apartments. 
B)  a surplus of apartments available to rent. 
C)  a shortage of renters in the city. 
D)  neither a surplus nor a shortage of apartments.

Question 15

-Refer to the above figure. If a price floor of $3 was set

Accepted Answer

A)  the quantity sold would be 70 units. 
B)  there would be a surplus of 40 units. 
C)  there would be a shortage of 40 units. 
D)  there would be a shortage of 20 units. 
A)  the quantity sold would be 70 units. 
B)  there would be a surplus of 40 units. 
C)  there would be a shortage of 40 units. 
D)  there would be a shortage of 20 units.

Question 16

Which of the following statements is most accurate regarding who benefits and loses from establishment of a minimum wage above the market clearing wage?

Accepted Answer

A)  Individuals who obtain jobs benefit because they earn a higher wage, but some individuals lose because employers will not hire them at the minimum wage. 
B)  All workers benefit equally from the establishment of the minimum wage because just as many workers as before remain employed, and all earn the higher minimum wage. 
C)  All employers benefit equally from the establishment of the minimum wage because they are able to hire fewer workers at a lower wage. 
D)  All employers lose because they must pay the higher minimum wage to the same number of employees as they did before the minimum wage was established. 
A)  Individuals who obtain jobs benefit because they earn a higher wage, but some individuals lose because employers will not hire them at the minimum wage. 
B)  All workers benefit equally from the establishment of the minimum wage because just as many workers as before remain employed, and all earn the higher minimum wage. 
C)  All employers benefit equally from the establishment of the minimum wage because they are able to hire fewer workers at a lower wage. 
D)  All employers lose because they must pay the higher minimum wage to the same number of employees as they did before the minimum wage was established.

Question 17

-Consider the above table. Assuming the government imposes a price floor on strawberries of $8 per pound, what would be the likely result?

Accepted Answer

A)  a surplus of 2,000 pounds of strawberries 
B)  a shortage of 2,000 pounds of strawberries 
C)  No change, equilibrium would prevail. 
D)  The quantity demanded of strawberries would fall to zero. 
A)  a surplus of 2,000 pounds of strawberries 
B)  a shortage of 2,000 pounds of strawberries 
C)  No change, equilibrium would prevail. 
D)  The quantity demanded of strawberries would fall to zero.

Question 18

Suppose the market clearing price is $15 and the price ceiling is $17. The price that prevails in the market will be

Accepted Answer

A)  $17. 
B)  $15. 
C)  less than $15. 
D)  more than $17. 
A)  $17. 
B)  $15. 
C)  less than $15. 
D)  more than $17.

Question 19

When a market clearing price is determined

Accepted Answer

A)  the exchange between buyers and sellers is voluntary. 
B)  the exchange between buyers and sellers is directed by outside factors such as the government. 
C)  the exchange between buyers and sellers benefits only the buyers. 
D)  the exchange between buyers and sellers benefits only the sellers. 
A)  the exchange between buyers and sellers is voluntary. 
B)  the exchange between buyers and sellers is directed by outside factors such as the government. 
C)  the exchange between buyers and sellers benefits only the buyers. 
D)  the exchange between buyers and sellers benefits only the sellers.

Question 20

Nonprice rationing devices are required

Accepted Answer

A)  because the price system does not allocate resources efficiently. 
B)  when there are price floors but not when there are price ceilings. 
C)  so that prices will go back to equilibrium. 
D)  to allocate goods when there is a price ceiling. 
A)  because the price system does not allocate resources efficiently. 
B)  when there are price floors but not when there are price ceilings. 
C)  so that prices will go back to equilibrium. 
D)  to allocate goods when there is a price ceiling.

Exam 4: Extensions of Demand and Supply Analysis

What are the terms of exchange and how are these terms related to the price?

If other factors remain unchanged, technological progress in producing good A definitely will lead to

Rent controls often have adverse effects, including

When supply increases and at the same time demand decreases, we

-A price ceiling represents

Which of the following statements about a price system is TRUE? I. Prices ration goods and services. II) Prices indicate relative scarcity.

Because of scarcity, rationing is

-When are black markets likely to arise?

-Refer to the above figure. A price support set at P3 will

-Refer to the above figure. A price ceiling of $20 results in

-Refer to the above figure. Suppose the government imposes a minimum wage rate of $20.00 per hour. This will likely result in

If an excess quantity of labor demanded exists in a free market, there is a tendency for

In a city that has rent control for apartments, there is

-Refer to the above figure. If a price floor of $3 was set

Which of the following statements is most accurate regarding who benefits and loses from establishment of a minimum wage above the market clearing wage?

-Consider the above table. Assuming the government imposes a price floor on strawberries of $8 per pound, what would be the likely result?

Suppose the market clearing price is $15 and the price ceiling is $17. The price that prevails in the market will be

When a market clearing price is determined

Nonprice rationing devices are required

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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