Question 1

The total amount of consumer surplus and producer surplus is at its maximum when

Accepted Answer

A)  consumers and producers are allowed to trade at the market clearing price. 
B)  the government imposes a price floor that is higher than the market clearing price. 
C)  the government imposes a price ceiling that is lower than the market clearing price. 
D)  free market exchanges do not exist. 
A)  consumers and producers are allowed to trade at the market clearing price. 
B)  the government imposes a price floor that is higher than the market clearing price. 
C)  the government imposes a price ceiling that is lower than the market clearing price. 
D)  free market exchanges do not exist.

Question 2

Which of the following will tend to occur when a surplus exists in a market?

Accepted Answer

A)  supply will increase and demand will decrease until the surplus disappears. 
B)  supply will decrease and demand will increase until the surplus disappears. 
C)  the price will tend to rise over time. 
D)  the price will tend to decrease over time. 
A)  supply will increase and demand will decrease until the surplus disappears. 
B)  supply will decrease and demand will increase until the surplus disappears. 
C)  the price will tend to rise over time. 
D)  the price will tend to decrease over time.

Question 3

If demand increases and supply decreases

Accepted Answer

A)  the market clearing price definitely will increase, and the equilibrium quantity definitely will increase. 
B)  the market clearing price definitely will increase, and the equilibrium quantity definitely will decrease. 
C)  the market clearing price definitely will increase, but the change in the equilibrium quantity cannot be determined without more information. 
D)  the equilibrium quantity definitely will decrease, but the change in the market clearing price cannot be determined without more information. 
A)  the market clearing price definitely will increase, and the equilibrium quantity definitely will increase. 
B)  the market clearing price definitely will increase, and the equilibrium quantity definitely will decrease. 
C)  the market clearing price definitely will increase, but the change in the equilibrium quantity cannot be determined without more information. 
D)  the equilibrium quantity definitely will decrease, but the change in the market clearing price cannot be determined without more information.

Question 4

Which of the following is an example of a price ceiling?

Accepted Answer

A)  the minimum wage 
B)  agricultural price supports 
C)  rent controls 
D)  None of the above is correct. 
A)  the minimum wage 
B)  agricultural price supports 
C)  rent controls 
D)  None of the above is correct.

Question 5

Total producer surplus in a market is measured as the

Accepted Answer

A)  area bounded above the market clearing price and beneath the market demand curve. 
B)  area bounded below the market clearing price and above the market supply curve. 
C)  vertical distance from the horizontal (quantity) axis to the market clearing price. 
D)  horizontal distance from the vertical (price) axis to the equilibrium quantity. 
A)  area bounded above the market clearing price and beneath the market demand curve. 
B)  area bounded below the market clearing price and above the market supply curve. 
C)  vertical distance from the horizontal (quantity) axis to the market clearing price. 
D)  horizontal distance from the vertical (price) axis to the equilibrium quantity.

Question 6

Suppose there is a simultaneous increase in demand and increase in supply. Given this information, we know with certainty that

Accepted Answer

A)  both the equilibrium price and the equilibrium quantity will increase. 
B)  the equilibrium price will increase, and the equilibrium quantity will increase. 
C)  the equilibrium quantity will increase. 
D)  the equilibrium price will increase. 
A)  both the equilibrium price and the equilibrium quantity will increase. 
B)  the equilibrium price will increase, and the equilibrium quantity will increase. 
C)  the equilibrium quantity will increase. 
D)  the equilibrium price will increase.

Question 7

A black market is a market in which

Accepted Answer

A)  goods are traded at prices above their legal maximum prices. 
B)  sales taxes are effectively doubled. 
C)  goods are sold at outlet prices. 
D)  sales take place exclusively at outlet prices. 
A)  goods are traded at prices above their legal maximum prices. 
B)  sales taxes are effectively doubled. 
C)  goods are sold at outlet prices. 
D)  sales take place exclusively at outlet prices.

Question 8

The minimum wage laws seek to

Accepted Answer

A)  penalize employers that are not complying with labor laws. 
B)  assure a minimum standard of payment for work. 
C)  assure that all workers are paid the same wage rate. 
D)  help teenagers find work. 
A)  penalize employers that are not complying with labor laws. 
B)  assure a minimum standard of payment for work. 
C)  assure that all workers are paid the same wage rate. 
D)  help teenagers find work.

Question 9

In which of the following situations will both market clearing price and the equilibrium quantity decrease?

Accepted Answer

A)  an increase in demand and no change in supply 
B)  an increase in supply with no change in demand 
C)  a decrease in supply with no change in demand 
D)  a decrease in demand with no change in supply 
A)  an increase in demand and no change in supply 
B)  an increase in supply with no change in demand 
C)  a decrease in supply with no change in demand 
D)  a decrease in demand with no change in supply

Question 10

A price floor above the market clearing price typically results in I. an excess quantity supplied
II) a shortage
III) an excess quantity demand

Accepted Answer

A)  I only 
B)  II only 
C)  III only 
D)  II and III only 
A)  I only 
B)  II only 
C)  III only 
D)  II and III only

Question 11

In the 1970s, the government placed price ceilings on gasoline prices. A shortage of gasoline occurred, and long lines formed at the pumps. Some gas stations required that in addition to paying the price on the pump you had to buy a blank will. The action of having to purchase the will in order to purchase gas is known as

Accepted Answer

A)  a surplus. 
B)  a price support. 
C)  the price system. 
D)  a black market. 
A)  a surplus. 
B)  a price support. 
C)  the price system. 
D)  a black market.

Question 12

Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of the following to occur?

Accepted Answer

A)  The shortage in the market will decrease. 
B)  The shortage in the market will increase. 
C)  The surplus in the market will decrease. 
D)  The surplus in the market will increase. 
A)  The shortage in the market will decrease. 
B)  The shortage in the market will increase. 
C)  The surplus in the market will decrease. 
D)  The surplus in the market will increase.

Question 13

Amazon's Home Services website connects customers of appliances with professionals who can install appliances for those customers. As a result of this service, Amazon is a

Accepted Answer

A)  loss leader. 
B)  platform firm. 
C)  voluntary firm. 
D)  supermarket. 
A)  loss leader. 
B)  platform firm. 
C)  voluntary firm. 
D)  supermarket.

Question 14

An import quota is a limit on the

Accepted Answer

A)  number of foreign workers allowed to work in a country. 
B)  number of container ships allowed to enter the territorial waters of the United States. 
C)  value of low-priced foreign goods that are allowed to be imported into the United States. 
D)  amount of a product that may be imported. 
A)  number of foreign workers allowed to work in a country. 
B)  number of container ships allowed to enter the territorial waters of the United States. 
C)  value of low-priced foreign goods that are allowed to be imported into the United States. 
D)  amount of a product that may be imported.

Question 15

If the federal government sets a minimum price for wheat at $5.00 per bushel when the equilibrium price is $4.50, then

Accepted Answer

A)  a surplus will be created causing the price to fall to the equilibrium price of $4.50. 
B)  a permanent surplus will develop because the government established the minimum price at $5.00. 
C)  a shortage will be created causing the price to rise to the equilibrium price of $4.50. 
D)  a permanent shortage will develop because the government established the minimum price at $5.00. 
A)  a surplus will be created causing the price to fall to the equilibrium price of $4.50. 
B)  a permanent surplus will develop because the government established the minimum price at $5.00. 
C)  a shortage will be created causing the price to rise to the equilibrium price of $4.50. 
D)  a permanent shortage will develop because the government established the minimum price at $5.00.

Question 16

Who benefits primarily from rent controls?

Accepted Answer

A)  construction workers 
B)  poor people looking for low-income housing 
C)  all who want to rent 
D)  only renters who are able to get units at below-market rates 
A)  construction workers 
B)  poor people looking for low-income housing 
C)  all who want to rent 
D)  only renters who are able to get units at below-market rates

Question 17

Which of the following statement is FALSE?

Accepted Answer

A)  Only the price system can be used to ration goods. 
B)  Random assignment can be a method of rationing. 
C)  Coupons can be used to ration goods. 
D)  Queuing can be used for rationing. 
A)  Only the price system can be used to ration goods. 
B)  Random assignment can be a method of rationing. 
C)  Coupons can be used to ration goods. 
D)  Queuing can be used for rationing.

Question 18

Consumer surplus is

Accepted Answer

A)  the total difference between the total amount that consumers actually pay for an item and the total amount that they would have been willing to pay. 
B)  the total difference between the total costs firms incur in producing an item and the utility consumers derive from purchasing the item. 
C)  the total difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay. 
D)  the total difference between the utility consumers derive from purchasing an item and the total costs firms incur in producing the item. 
A)  the total difference between the total amount that consumers actually pay for an item and the total amount that they would have been willing to pay. 
B)  the total difference between the total costs firms incur in producing an item and the utility consumers derive from purchasing the item. 
C)  the total difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay. 
D)  the total difference between the utility consumers derive from purchasing an item and the total costs firms incur in producing the item.

Question 19

If demand decreases and supply increases

Accepted Answer

A)  the market clearing price will decrease, and the equilibrium quantity will increase. 
B)  the market clearing price will decrease, and equilibrium quantity will decrease. 
C)  the equilibrium quantity will decrease, but the change in the market clearing price cannot be determined without more information. 
D)  the equilibrium price will decrease, but the change in the equilibrium quantity cannot be determined without more information. 
A)  the market clearing price will decrease, and the equilibrium quantity will increase. 
B)  the market clearing price will decrease, and equilibrium quantity will decrease. 
C)  the equilibrium quantity will decrease, but the change in the market clearing price cannot be determined without more information. 
D)  the equilibrium price will decrease, but the change in the equilibrium quantity cannot be determined without more information.

Question 20

Who ultimately benefits from price supports in agriculture?

Accepted Answer

A)  consumers 
B)  grocery store owners 
C)  farmers 
D)  exporters 
A)  consumers 
B)  grocery store owners 
C)  farmers 
D)  exporters

Exam 4: Extensions of Demand and Supply Analysis

The total amount of consumer surplus and producer surplus is at its maximum when

Which of the following will tend to occur when a surplus exists in a market?

If demand increases and supply decreases

Which of the following is an example of a price ceiling?

Total producer surplus in a market is measured as the

Suppose there is a simultaneous increase in demand and increase in supply. Given this information, we know with certainty that

A black market is a market in which

The minimum wage laws seek to

In which of the following situations will both market clearing price and the equilibrium quantity decrease?

A price floor above the market clearing price typically results in I. an excess quantity supplied II) a shortage III) an excess quantity demand

Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of the following to occur?

Amazon's Home Services website connects customers of appliances with professionals who can install appliances for those customers. As a result of this service, Amazon is a

An import quota is a limit on the

If the federal government sets a minimum price for wheat at $5.00 per bushel when the equilibrium price is $4.50, then

Who benefits primarily from rent controls?

Which of the following statement is FALSE?

Consumer surplus is

If demand decreases and supply increases

Who ultimately benefits from price supports in agriculture?

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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