Question 1

The objective of rent controls is to

Accepted Answer

A)  ensure an adequate supply of rental housing for the poor. 
B)  keep rents below levels that would be observed in a freely competitive market. 
C)  encourage the construction of new rental units. 
D)  raise revenue for the local government. 
A)  ensure an adequate supply of rental housing for the poor. 
B)  keep rents below levels that would be observed in a freely competitive market. 
C)  encourage the construction of new rental units. 
D)  raise revenue for the local government.

Question 2

When supply and demand for a product increase simultaneously, we

Accepted Answer

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

Question 3

When supply and demand for a product decrease simultaneously, 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 price, but know that equilibrium quantity 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 price, but know that equilibrium quantity will decrease. 
D)  cannot predict the change in either the equilibrium quantity or equilibrium price.

Question 4

Suppose that there is an improvement in technology in the market for Samsung phones. Which of the following is TRUE?

Accepted Answer

A)  Supply will increase and the market clearing price will fall. 
B)  Supply will increase and the market clearing price will rise. 
C)  Demand will increase and the market clearing price will rise. 
D)  Demand will increase and the market clearing price will fall. 
A)  Supply will increase and the market clearing price will fall. 
B)  Supply will increase and the market clearing price will rise. 
C)  Demand will increase and the market clearing price will rise. 
D)  Demand will increase and the market clearing price will fall.

Question 5

Suppose you are told that the equilibrium price of bananas has increased, while the equilibrium quantity of bananas has fallen. You are also told that either the demand changed or supply changed, but not both. Which of the following must have occurred?

Accepted Answer

A)  Demand increased. 
B)  Demand decreased. 
C)  Supply increased. 
D)  Supply decreased. 
A)  Demand increased. 
B)  Demand decreased. 
C)  Supply increased. 
D)  Supply decreased.

Question 6

In economic terms, the total price of a pound of meat for an individual who has waited in line is

Accepted Answer

A)  the money price paid to the butcher for the pound of meat. 
B)  the money price of meat relative to the price of bread or other necessity. 
C)  the money price of the meat plus the opportunity cost of time spent waiting in line. 
D)  the money price of an equal amount of meat substitute, such as beans and rice. 
A)  the money price paid to the butcher for the pound of meat. 
B)  the money price of meat relative to the price of bread or other necessity. 
C)  the money price of the meat plus the opportunity cost of time spent waiting in line. 
D)  the money price of an equal amount of meat substitute, such as beans and rice.

Question 7

Holding supply constant, an increase in demand leads to

Accepted Answer

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

Question 8

If the government created a surplus of an agricultural product due to price supports, how might they dispose of this surplus?

Accepted Answer

A)  give it away to a foreign country 
B)  purchase it and store it away 
C)  have the farmer destroy the crop 
D)  Any of these answers might be a successful tool in disposing of agricultural surpluses. 
A)  give it away to a foreign country 
B)  purchase it and store it away 
C)  have the farmer destroy the crop 
D)  Any of these answers might be a successful tool in disposing of agricultural surpluses.

Question 9

Who is most likely to benefit from rent controls?

Accepted Answer

A)  consumers who are able to obtain apartments at the controlled rents 
B)  consumers who are unable to obtain apartments at the controlled rents 
C)  landowners who can lease the apartments at the controlled rents 
D)  the government that controls the rents 
A)  consumers who are able to obtain apartments at the controlled rents 
B)  consumers who are unable to obtain apartments at the controlled rents 
C)  landowners who can lease the apartments at the controlled rents 
D)  the government that controls the rents

Question 10

Following adjustments to a new equilibrium in a market, the equilibrium quantity remains unchanged, but the market clearing price 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 11

An import quota is

Accepted Answer

A)  a quantity restriction. 
B)  a price ceiling. 
C)  a price floor. 
D)  a direct tax on imports. 
A)  a quantity restriction. 
B)  a price ceiling. 
C)  a price floor. 
D)  a direct tax on imports.

Question 12

Which of the following is NOT a function of rental prices?

Accepted Answer

A)  to stimulate the construction of new housing 
B)  to ration the existing housing stock 
C)  to provide housing to individuals below market value 
D)  to allocate existing scarce housing among different people 
A)  to stimulate the construction of new housing 
B)  to ration the existing housing stock 
C)  to provide housing to individuals below market value 
D)  to allocate existing scarce housing among different people

Question 13

Suppose new research shows that soy milk and other products derived from soybeans provide more health benefits than previously thought. At the same time, drought conditions result in extensive damage to the soybean crop. What will be the combined impact of these two factors on the equilibrium price and quantity of soybeans?

Accepted Answer

A)  Price will decrease, but the effect on quantity is indeterminate. 
B)  Price will increase, but the effect on quantity is indeterminate. 
C)  Quantity will decrease, but the effect on price is indeterminate. 
D)  Quantity will increase, but the effect on price is indeterminate. 
A)  Price will decrease, but the effect on quantity is indeterminate. 
B)  Price will increase, but the effect on quantity is indeterminate. 
C)  Quantity will decrease, but the effect on price is indeterminate. 
D)  Quantity will increase, but the effect on price is indeterminate.

Question 14

The rationing function of prices refers to

Accepted Answer

A)  the situation when government must intervene in a market when there is a large shortage or surplus. 
B)  the synchronization of decisions by buyers and sellers that leads to an equilibrium. 
C)  the synchronization of decisions by buyers and sellers through the direction of government agencies. 
D)  the situation when only the rich get the goods they want. 
A)  the situation when government must intervene in a market when there is a large shortage or surplus. 
B)  the synchronization of decisions by buyers and sellers that leads to an equilibrium. 
C)  the synchronization of decisions by buyers and sellers through the direction of government agencies. 
D)  the situation when only the rich get the goods they want.

Question 15

Suppose the market clearing price is $20 and the price ceiling is $15. The price that prevails in the market will be

Accepted Answer

A)  $20. 
B)  $15. 
C)  less than $15. 
D)  $0. 
A)  $20. 
B)  $15. 
C)  less than $15. 
D)  $0.

Question 16

Rationing through the price system

Accepted Answer

A)  leads to an inefficient use of available resources. 
B)  leads to high prices. 
C)  works only with government interference. 
D)  leads to an efficient use of available resources. 
A)  leads to an inefficient use of available resources. 
B)  leads to high prices. 
C)  works only with government interference. 
D)  leads to an efficient use of available resources.

Question 17

A price ceiling below the market clearing price results in I. excess quantity demand
II) excess quantity supplied
III) entry of new producers

Accepted Answer

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

Question 18

Describe the market process that should occur if the price of a product is below its equilibrium price; now describe what would occur if the price is above its equilibrium price, assuming no market interference.

Accepted Answer

If price is below its equilibrium price,

Question 19

-Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as

Accepted Answer

A)  a price floor. 
B)  a price ceiling. 
C)  an equilibrium price. 
D)  a just price. 
A)  a price floor. 
B)  a price ceiling. 
C)  an equilibrium price. 
D)  a just price.

Question 20

Suppose the price of lumber decreases. In the market for new homes, we would expect which of the following to occur?

Accepted Answer

A)  the market clearing price will fall and the equilibrium quantity will rise. 
B)  the market clearing price will rise and the equilibrium quantity will fall. 
C)  both the market clearing price and the equilibrium quantity will fall. 
D)  both the market clearing price and the equilibrium quantity will rise. 
A)  the market clearing price will fall and the equilibrium quantity will rise. 
B)  the market clearing price will rise and the equilibrium quantity will fall. 
C)  both the market clearing price and the equilibrium quantity will fall. 
D)  both the market clearing price and the equilibrium quantity will rise.

Exam 4: Extensions of Demand and Supply Analysis

The objective of rent controls is to

When supply and demand for a product increase simultaneously, we

When supply and demand for a product decrease simultaneously, we

Suppose that there is an improvement in technology in the market for Samsung phones. Which of the following is TRUE?

Suppose you are told that the equilibrium price of bananas has increased, while the equilibrium quantity of bananas has fallen. You are also told that either the demand changed or supply changed, but not both. Which of the following must have occurred?

In economic terms, the total price of a pound of meat for an individual who has waited in line is

Holding supply constant, an increase in demand leads to

If the government created a surplus of an agricultural product due to price supports, how might they dispose of this surplus?

Who is most likely to benefit from rent controls?

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

An import quota is

Which of the following is NOT a function of rental prices?

The rationing function of prices refers to

Suppose the market clearing price is $20 and the price ceiling is $15. The price that prevails in the market will be

Rationing through the price system

A price ceiling below the market clearing price results in I. excess quantity demand II) excess quantity supplied III) entry of new producers

Describe the market process that should occur if the price of a product is below its equilibrium price; now describe what would occur if the price is above its equilibrium price, assuming no market interference.

-Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as

Suppose the price of lumber decreases. In the market for new homes, we would expect which of the following to occur?

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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