Question 1

In a market system, what must take place for quantity demanded to continually be equated with quantity supplied?

Accepted Answer

A)  Price controls must be applied by governments. 
B)  Relative prices must be able to adjust to market clearing levels. 
C)  Tastes and preferences of consumers must adjust to eliminate surpluses or shortages. 
D)  Businesses must engage in involuntary, unprofitable exchanges to eliminate surpluses or shortages. 
A)  Price controls must be applied by governments. 
B)  Relative prices must be able to adjust to market clearing levels. 
C)  Tastes and preferences of consumers must adjust to eliminate surpluses or shortages. 
D)  Businesses must engage in involuntary, unprofitable exchanges to eliminate surpluses or shortages.

Question 2

Assume that the market clearing price for portable power banks is $5, but that the maximum price that can be charged is $4. This is an example of

Accepted Answer

A)  a price control that will lead to a surplus of portable power banks on the market. 
B)  a price floor that will lead to a shortage of portable power banks on the market. 
C)  markets failing to ration a fixed quantity of portable power banks. 
D)  a price ceiling that will likely lead to a shortage of portable power banks on the market. 
A)  a price control that will lead to a surplus of portable power banks on the market. 
B)  a price floor that will lead to a shortage of portable power banks on the market. 
C)  markets failing to ration a fixed quantity of portable power banks. 
D)  a price ceiling that will likely lead to a shortage of portable power banks on the market.

Question 3

The City Council of Happy Village is thinking about imposing rent controls. If they put rent controls in place, which constituency are they trying to please?

Accepted Answer

A)  landlords 
B)  all taxpayers 
C)  existing tenants 
D)  all voters 
A)  landlords 
B)  all taxpayers 
C)  existing tenants 
D)  all voters

Question 4

When the supply and/or demand curve shift, the new market clearing price is

Accepted Answer

A)  reached instantaneously. 
B)  reached only after the government intervenes in the market. 
C)  reached after some period of adjustment. 
D)  never reached. 
A)  reached instantaneously. 
B)  reached only after the government intervenes in the market. 
C)  reached after some period of adjustment. 
D)  never reached.

Question 5

We cannot predict the effect on the equilibrium quantity, but know that the market clearing price will increase when

Accepted Answer

A)  supply decreases and at the same time demand increases. 
B)  supply increases and demand increases simultaneously. 
C)  supply and demand decreases simultaneously. 
D)  supply and demand increases simultaneously. 
A)  supply decreases and at the same time demand increases. 
B)  supply increases and demand increases simultaneously. 
C)  supply and demand decreases simultaneously. 
D)  supply and demand increases simultaneously.

Question 6

A price floor set below the equilibrium price will cause which of the following?

Accepted Answer

A)  an increase in demand 
B)  a shortage 
C)  a surplus 
D)  none of the above 
A)  an increase in demand 
B)  a shortage 
C)  a surplus 
D)  none of the above

Question 7

A limit on the amount of strawberries that can be imported into the United States is an example of

Accepted Answer

A)  the rationing function of prices protecting domestic strawberry farmers. 
B)  a price floor set by the government. 
C)  a price ceiling set by government. 
D)  an import quota. 
A)  the rationing function of prices protecting domestic strawberry farmers. 
B)  a price floor set by the government. 
C)  a price ceiling set by government. 
D)  an import quota.

Question 8

People consume more fresh fruit in the summer than during the rest of the year, yet the prices of fresh fruit are lower in the summer than in other seasons. What accounts for this?

Accepted Answer

A)  Fresh fruit is not subject to the law of supply. 
B)  The supply of fresh fruit increases in the summer. 
C)  Fresh fruit is an inferior good. 
D)  Fresh fruit is not subject to the law of demand. 
A)  Fresh fruit is not subject to the law of supply. 
B)  The supply of fresh fruit increases in the summer. 
C)  Fresh fruit is an inferior good. 
D)  Fresh fruit is not subject to the law of demand.

Question 9

An example of a black market is

Accepted Answer

A)  a retail market. 
B)  a discount market. 
C)  scalping. 
D)  barter. 
A)  a retail market. 
B)  a discount market. 
C)  scalping. 
D)  barter.

Question 10

Government policies such as price controls, rent controls, and quantity restrictions have the effect of

Accepted Answer

A)  promoting the attainment of an unhindered market equilibrium. 
B)  allowing quantity demanded to adjust to equality with aggregate supply. 
C)  creating excess quantities demanded or excess quantities supplied. 
D)  pushing prices to market clearing levels more rapidly than private market forces. 
A)  promoting the attainment of an unhindered market equilibrium. 
B)  allowing quantity demanded to adjust to equality with aggregate supply. 
C)  creating excess quantities demanded or excess quantities supplied. 
D)  pushing prices to market clearing levels more rapidly than private market forces.

Question 11

-A reduction in the minimum wage will tend to cause which of the following?

Accepted Answer

A)  a reduction in poverty 
B)  an increase in the number of workers employed 
C)  an increase in the quantity supplied of labor 
D)  a reduction in the quantity demanded of labor 
A)  a reduction in poverty 
B)  an increase in the number of workers employed 
C)  an increase in the quantity supplied of labor 
D)  a reduction in the quantity demanded of labor

Question 12

When the government sets a maximum price that can be charged for a good or service, it creates

Accepted Answer

A)  a price support. 
B)  a price floor. 
C)  a white market. 
D)  a price ceiling. 
A)  a price support. 
B)  a price floor. 
C)  a white market. 
D)  a price ceiling.

Question 13

-Refer to the above figure. If the government imposes a price ceiling of $60

Accepted Answer

A)  the quantity traded will be 150, and the price will be $40. 
B)  the quantity traded will be 100, and the price will be $60. 
C)  the quantity traded will be 200, and the price will be $60. 
D)  the quantity traded will be 150, and the price will be $60. 
A)  the quantity traded will be 150, and the price will be $40. 
B)  the quantity traded will be 100, and the price will be $60. 
C)  the quantity traded will be 200, and the price will be $60. 
D)  the quantity traded will be 150, and the price will be $60.

Question 14

Which of the following statements is NOT true about exchanges in the market system?

Accepted Answer

A)  In voluntary exchange both parties are better off because of the exchange. 
B)  Exchanges occur only in situations of barter where the market price is irrelevant. 
C)  Prices indicate what is relatively abundant and what is relatively scarce. 
D)  Transaction costs in exchanges include the cost of enforcing a contract as well as the costs of information. 
A)  In voluntary exchange both parties are better off because of the exchange. 
B)  Exchanges occur only in situations of barter where the market price is irrelevant. 
C)  Prices indicate what is relatively abundant and what is relatively scarce. 
D)  Transaction costs in exchanges include the cost of enforcing a contract as well as the costs of information.

Question 15

All of the following reduce the transaction costs for consumers EXCEPT

Accepted Answer

A)  eBay. 
B)  a shopping mall. 
C)  a court decision regarding product safety. 
D)  a grocery store. 
A)  eBay. 
B)  a shopping mall. 
C)  a court decision regarding product safety. 
D)  a grocery store.

Question 16

-Refer to the above figure. Other things being equal, when the government imposes a price floor at P2, then we would expect

Accepted Answer

A)  the quantity demanded is Q2. 
B)  a surplus will occur. 
C)  price to decline until an equilibrium is achieved at P0. 
D)  consumers to bid against each other for goods and force the price even higher. 
A)  the quantity demanded is Q2. 
B)  a surplus will occur. 
C)  price to decline until an equilibrium is achieved at P0. 
D)  consumers to bid against each other for goods and force the price even higher.

Question 17

Suppose that consumer income increases and that ground meat is an inferior good. Which of the following will occur in the market for ground meat?

Accepted Answer

A)  Market clearing price will rise, and equilibrium quantity will rise. 
B)  Market clearing price will fall, and equilibrium quantity will fall. 
C)  Market clearing price will rise, and equilibrium quantity will fall. 
D)  Market clearing price will fall, and equilibrium quantity will rise. 
A)  Market clearing price will rise, and equilibrium quantity will rise. 
B)  Market clearing price will fall, and equilibrium quantity will fall. 
C)  Market clearing price will rise, and equilibrium quantity will fall. 
D)  Market clearing price will fall, and equilibrium quantity will rise.

Question 18

-Consider the above table. Assuming the government imposes a price ceiling on strawberries of $4 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 19

What is the result of an agricultural support price established above the equilibrium price?

Accepted Answer

A)  The market gravitates toward and remains in equilibrium. 
B)  There will be excess quantity supplied of the product involved. 
C)  There will be excess quantity demanded the product in this market. 
D)  Since the support price is set above the equilibrium price, it will have no impact on the market price. 
A)  The market gravitates toward and remains in equilibrium. 
B)  There will be excess quantity supplied of the product involved. 
C)  There will be excess quantity demanded the product in this market. 
D)  Since the support price is set above the equilibrium price, it will have no impact on the market price.

Question 20

Market clearing prices in a market system act as

Accepted Answer

A)  a signaling device. 
B)  a direct measure of resource costs. 
C)  a way for producers to advertise. 
D)  a legally determined rationing device. 
A)  a signaling device. 
B)  a direct measure of resource costs. 
C)  a way for producers to advertise. 
D)  a legally determined rationing device.

Exam 4: Extensions of Demand and Supply Analysis

In a market system, what must take place for quantity demanded to continually be equated with quantity supplied?

Assume that the market clearing price for portable power banks is $5, but that the maximum price that can be charged is $4. This is an example of

The City Council of Happy Village is thinking about imposing rent controls. If they put rent controls in place, which constituency are they trying to please?

When the supply and/or demand curve shift, the new market clearing price is

We cannot predict the effect on the equilibrium quantity, but know that the market clearing price will increase when

A price floor set below the equilibrium price will cause which of the following?

A limit on the amount of strawberries that can be imported into the United States is an example of

People consume more fresh fruit in the summer than during the rest of the year, yet the prices of fresh fruit are lower in the summer than in other seasons. What accounts for this?

An example of a black market is

Government policies such as price controls, rent controls, and quantity restrictions have the effect of

-A reduction in the minimum wage will tend to cause which of the following?

When the government sets a maximum price that can be charged for a good or service, it creates

-Refer to the above figure. If the government imposes a price ceiling of $60

Which of the following statements is NOT true about exchanges in the market system?

All of the following reduce the transaction costs for consumers EXCEPT

-Refer to the above figure. Other things being equal, when the government imposes a price floor at P2, then we would expect

Suppose that consumer income increases and that ground meat is an inferior good. Which of the following will occur in the market for ground meat?

-Consider the above table. Assuming the government imposes a price ceiling on strawberries of $4 per pound, what would be the likely result?

What is the result of an agricultural support price established above the equilibrium price?

Market clearing prices in a market system act as

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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