Question 1

Buyers and sellers receive market signals

Accepted Answer

A)  from news announcements of the government. 
B)  through the price system. 
C)  from the gossip columns in the newspapers. 
D)  from their friends and acquaintances. 
A)  from news announcements of the government. 
B)  through the price system. 
C)  from the gossip columns in the newspapers. 
D)  from their friends and acquaintances.

Question 2

-An effective government imposed price ceiling will result

Accepted Answer

A)  in a surplus on the market. 
B)  in a shortage on the market. 
C)  in additional revenue for the government. 
D)  in prices for the product falling in the future. 
A)  in a surplus on the market. 
B)  in a shortage on the market. 
C)  in additional revenue for the government. 
D)  in prices for the product falling in the future.

Question 3

The total gains from trade within a price system is

Accepted Answer

A)  the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price. 
B)  the area beneath the market supply curve and above the market clearing price plus the area above the market demand curve and beneath the market clearing price. 
C)  the area beneath the market demand curve and above the market clearing price minus the area beneath the market supply curve and beneath the market clearing price. 
D)  always equal to zero. 
A)  the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price. 
B)  the area beneath the market supply curve and above the market clearing price plus the area above the market demand curve and beneath the market clearing price. 
C)  the area beneath the market demand curve and above the market clearing price minus the area beneath the market supply curve and beneath the market clearing price. 
D)  always equal to zero.

Question 4

The prices of certain goods, such as ice and gasoline, often increase after a natural disaster such as a hurricane. The economic explanation for this observation is that

Accepted Answer

A)  people panic in disaster situations. 
B)  disasters bring out the worst in people. 
C)  the disaster temporarily reduces the supply of the goods and increases the demand for the goods. 
D)  the disaster temporarily reduces the supply of the goods and reduces the demand for the goods. 
A)  people panic in disaster situations. 
B)  disasters bring out the worst in people. 
C)  the disaster temporarily reduces the supply of the goods and increases the demand for the goods. 
D)  the disaster temporarily reduces the supply of the goods and reduces the demand for the goods.

Question 5

What are transaction costs? What are some ways in which society reduces transaction costs?

Accepted Answer

Transaction costs are costs associated w

Question 6

The supply of eggs comes from chickens. The price of eggs will decrease if

Accepted Answer

A)  the supply of chickens decreases. 
B)  the supply of eggs decreases. 
C)  the price of chickens increases. 
D)  the demand for eggs decreases. 
A)  the supply of chickens decreases. 
B)  the supply of eggs decreases. 
C)  the price of chickens increases. 
D)  the demand for eggs decreases.

Question 7

An economic system in which relative prices change to reflect changes in supply and demand for different goods and services is known as a

Accepted Answer

A)  socialist system. 
B)  communist system. 
C)  ration. 
D)  market. 
A)  socialist system. 
B)  communist system. 
C)  ration. 
D)  market.

Question 8

Suppose that demand for portable power banks increases, and simultaneously, the supply of portable power banks increases. Which of the following would you conclude definitely will occur in the market for portable power banks?

Accepted Answer

A)  The market clearing price will rise. 
B)  The market clearing price will fall. 
C)  The equilibrium quantity will rise. 
D)  The equilibrium quantity will fall. 
A)  The market clearing price will rise. 
B)  The market clearing price will fall. 
C)  The equilibrium quantity will rise. 
D)  The equilibrium quantity will fall.

Question 9

The effect of a legal minimum wage set above the equilibrium wage rate is

Accepted Answer

A)  an excess quantity of labor demanded. 
B)  an excess quantity of labor supplied. 
C)  an increase in the quantity of labor demanded. 
D)  a decrease in quantity of labor supplied. 
A)  an excess quantity of labor demanded. 
B)  an excess quantity of labor supplied. 
C)  an increase in the quantity of labor demanded. 
D)  a decrease in quantity of labor supplied.

Question 10

Price controls often generate

Accepted Answer

A)  more efficient markets. 
B)  black markets. 
C)  rapid adjustment to market-clearing prices. 
D)  greater price flexibility. 
A)  more efficient markets. 
B)  black markets. 
C)  rapid adjustment to market-clearing prices. 
D)  greater price flexibility.

Question 11

-Which of the following is a price floor?

Accepted Answer

A)  rent controls 
B)  minimum wage rates 
C)  a freeze on upward-moving gasoline prices 
D)  college tuition caps 
A)  rent controls 
B)  minimum wage rates 
C)  a freeze on upward-moving gasoline prices 
D)  college tuition caps

Question 12

Suppose local educators argue that teachers' salaries are too low. At the same time it is said that the school district received 750 applications for 5 new openings. Are salaries too low? Explain.

Accepted Answer

It is difficult to claim salaries are to

Question 13

-Refer to the above figure. A price control has been set which has led to a surplus. This means that a

Accepted Answer

A)  price ceiling has been set at P1. 
B)  price floor has been set at P1. 
C)  price ceiling has been set at P2. 
D)  price floor has been set at P2. 
A)  price ceiling has been set at P1. 
B)  price floor has been set at P1. 
C)  price ceiling has been set at P2. 
D)  price floor has been set at P2.

Question 14

In the automobile industry, workers have just negotiated a new contract giving workers a large raise. There has also been an increase in the number of licensed drivers who are in the market for a new car. In the market for new automobiles, the effects that these changes will have on the equilibrium price and quantity are

Accepted Answer

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

Question 15

If one day it was discovered that lime juice caused cancer, which of the following would likely result?

Accepted Answer

A)  The supply curve for lime juice would shift to the right. 
B)  The supply curve for lime juice would shift to the left. 
C)  The demand curve for lime juice would shift to the right. 
D)  The demand curve for lime juice would shift to the left. 
A)  The supply curve for lime juice would shift to the right. 
B)  The supply curve for lime juice would shift to the left. 
C)  The demand curve for lime juice would shift to the right. 
D)  The demand curve for lime juice would shift to the left.

Question 16

Suppose the equilibrium quantity of ethanol has decreased. Which of the following could have caused this change?

Accepted Answer

A)  a decrease in demand 
B)  an increase in supply 
C)  an increase in quantity demanded 
D)  an increase in quantity supplied 
A)  a decrease in demand 
B)  an increase in supply 
C)  an increase in quantity demanded 
D)  an increase in quantity supplied

Question 17

An import quota is an example of

Accepted Answer

A)  a price ceiling. 
B)  a price floor. 
C)  a queuing device. 
D)  a quantity restriction. 
A)  a price ceiling. 
B)  a price floor. 
C)  a queuing device. 
D)  a quantity restriction.

Question 18

When the government restricts the quantity of a good to zero

Accepted Answer

A)  an underground market develops. 
B)  there is none of the good available anywhere. 
C)  people's demand for the product evaporates. 
D)  producers stop all production. 
A)  an underground market develops. 
B)  there is none of the good available anywhere. 
C)  people's demand for the product evaporates. 
D)  producers stop all production.

Question 19

Your local grocery store reduces transaction costs to the consumer

Accepted Answer

A)  by reducing the consumer's need to travel from food producer to food producer (or manufacturer to manufacturer) to purchase the food staples that the consumer desires. 
B)  by providing a system that directs funds from lenders to borrowers. 
C)  by providing a system of justice to enforce contracts. 
D)  All of the above are correct. 
A)  by reducing the consumer's need to travel from food producer to food producer (or manufacturer to manufacturer) to purchase the food staples that the consumer desires. 
B)  by providing a system that directs funds from lenders to borrowers. 
C)  by providing a system of justice to enforce contracts. 
D)  All of the above are correct.

Question 20

Which of the following is a possible outcome of setting a legal maximum rental rate below the market clearing rental rate?

Accepted Answer

A)  an increase in the quantity of rental housing supplied 
B)  a decrease in the quantity of rental housing demanded 
C)  a black market in rental housing 
D)  a surplus of rental housing 
A)  an increase in the quantity of rental housing supplied 
B)  a decrease in the quantity of rental housing demanded 
C)  a black market in rental housing 
D)  a surplus of rental housing

Exam 4: Extensions of Demand and Supply Analysis

Buyers and sellers receive market signals

-An effective government imposed price ceiling will result

The total gains from trade within a price system is

The prices of certain goods, such as ice and gasoline, often increase after a natural disaster such as a hurricane. The economic explanation for this observation is that

What are transaction costs? What are some ways in which society reduces transaction costs?

The supply of eggs comes from chickens. The price of eggs will decrease if

An economic system in which relative prices change to reflect changes in supply and demand for different goods and services is known as a

Suppose that demand for portable power banks increases, and simultaneously, the supply of portable power banks increases. Which of the following would you conclude definitely will occur in the market for portable power banks?

The effect of a legal minimum wage set above the equilibrium wage rate is

Price controls often generate

-Which of the following is a price floor?

Suppose local educators argue that teachers' salaries are too low. At the same time it is said that the school district received 750 applications for 5 new openings. Are salaries too low? Explain.

-Refer to the above figure. A price control has been set which has led to a surplus. This means that a

If one day it was discovered that lime juice caused cancer, which of the following would likely result?

Suppose the equilibrium quantity of ethanol has decreased. Which of the following could have caused this change?

An import quota is an example of

When the government restricts the quantity of a good to zero

Your local grocery store reduces transaction costs to the consumer

Which of the following is a possible outcome of setting a legal maximum rental rate below the market clearing rental rate?

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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