Question 1

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 2

-Assume that the initial demand and supply curves in the above figure are DA and SA,respectively.The initial equilibrium price and quantity are

Accepted Answer

A) P1 and E. 
B) P3 and F. 
C) P1 and G. 
D) P2 and F. 
A) P1 and E. 
B) P3 and F. 
C) P1 and G. 
D) P2 and F.

Question 3

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 4

"Scarcity implies that some way of rationing goods must be found." Explain what this statement means.How is this rationing done?

Accepted Answer

Scarcity means that there are not enough

Question 5

Suppose that 20,000 tickets were sold at $120 for an NBA game at Madison Square Garden in New York.The game was sold out and some fans could not get tickets.This suggests that

Accepted Answer

A) selling price was below equilibrium price. 
B) selling price was above equilibrium price. 
C) selling price was at equilibrium. 
D) the game was advertised too heavily. 
A) selling price was below equilibrium price. 
B) selling price was above equilibrium price. 
C) selling price was at equilibrium. 
D) the game was advertised too heavily.

Question 6

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 7

Under rent controls,

Accepted Answer

A) apartments tend to be nicer than they would be under freely competitive markets. 
B) landlord-tenant relationships are more harmonious than under freely competitive markets. 
C) the quantity demanded of rental units is less than it would be under freely competitive markets. 
D) the number of rental units available for rent is lower than under freely competitive markets. 
A) apartments tend to be nicer than they would be under freely competitive markets. 
B) landlord-tenant relationships are more harmonious than under freely competitive markets. 
C) the quantity demanded of rental units is less than it would be under freely competitive markets. 
D) the number of rental units available for rent is lower than under freely competitive markets.

Question 8

Suppose that the market for coffee is in equilibrium at a price of $1.50 per pound and a monthly quantity of 20 million pounds.News of a freeze in Brazil arrives so that people know that the supply of coffee months from now will be sharply reduced.What,if anything,will happen in the coffee market now? Explain.

Accepted Answer

The expectations of reduced su

Question 9

-In the above figure,a shortage could be caused by a government price ceiling set at

Accepted Answer

A) $1.00. 
B) $2.00. 
C) $2.50. 
D) $3.00. 
A) $1.00. 
B) $2.00. 
C) $2.50. 
D) $3.00.

Question 10

-Refer to the above table.Suppose the demand for smartphones rises because more people use the Internet with a smartphone.The new equilibrium price will be

Accepted Answer

A) $200. 
B) $275. 
C) more than $275. 
D) impossible to be determined given the information. 
A) $200. 
B) $275. 
C) more than $275. 
D) impossible to be determined given the information.

Question 11

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 12

One effect of a minimum wage in the market for low-skilled labor is

Accepted Answer

A) a shortage of low-skilled labor. 
B) a surplus of low-skilled labor. 
C) no effect in the market for low-skilled labor. 
D) an increase in demand for low-skilled labor. 
A) a shortage of low-skilled labor. 
B) a surplus of low-skilled labor. 
C) no effect in the market for low-skilled labor. 
D) an increase in demand for low-skilled labor.

Question 13

In a market system,the costs associated with exchanging goods are known as

Accepted Answer

A) voluntary costs. 
B) signaling costs. 
C) wholesale costs. 
D) transaction costs. 
A) voluntary costs. 
B) signaling costs. 
C) wholesale costs. 
D) transaction costs.

Question 14

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 15

Goods X and Y are complementary goods.A decrease in price of good X has occurred.In the market for good Y,this will lead to

Accepted Answer

A) an increase in price and a decrease in quantity. 
B) an increase in price and an increase in quantity. 
C) a decrease in price and a decrease in quantity. 
D) a decrease in price and an increase in quantity. 
A) an increase in price and a decrease in quantity. 
B) an increase in price and an increase in quantity. 
C) a decrease in price and a decrease in quantity. 
D) a decrease in price and an increase in quantity.

Question 16

Prices in a market economy perform a rationing function because they reflect

Accepted Answer

A) the demand of all buyers in the market. 
B) the extent to which the goods are necessities. 
C) the strength of the supply curve. 
D) the relative scarcity of the goods. 
A) the demand of all buyers in the market. 
B) the extent to which the goods are necessities. 
C) the strength of the supply curve. 
D) the relative scarcity of the goods.

Question 17

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 18

The rationing function of prices means that

Accepted Answer

A) government is responsible for setting the prices of basic foods. 
B) all goods and services are produced by large firms. 
C) businesses determine what goods consumers should purchase. 
D) buyers and sellers synchronize their decisions through the price system. 
A) government is responsible for setting the prices of basic foods. 
B) all goods and services are produced by large firms. 
C) businesses determine what goods consumers should purchase. 
D) buyers and sellers synchronize their decisions through the price system.

Question 19

A minimum wage is an example of a

Accepted Answer

A) price ceiling. 
B) price floor. 
C) black market. 
D) market clearing price. 
A) price ceiling. 
B) price floor. 
C) black market. 
D) market clearing price.

Question 20

An increase in the minimum wage will tend to cause which of the following to occur?

Accepted Answer

A) an increase in the size of the surplus of labor 
B) a leftward shift in the demand for labor 
C) a rightward shift in the supply of labor 
D) a reduction in the unemployment rate 
A) an increase in the size of the surplus of labor 
B) a leftward shift in the demand for labor 
C) a rightward shift in the supply of labor 
D) a reduction in the unemployment rate

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

-Assume that the initial demand and supply curves in the above figure are DA and SA,respectively.The initial equilibrium price and quantity are

When are black markets likely to arise?

"Scarcity implies that some way of rationing goods must be found." Explain what this statement means.How is this rationing done?

Suppose that 20,000 tickets were sold at $120 for an NBA game at Madison Square Garden in New York.The game was sold out and some fans could not get tickets.This suggests that

Your local grocery store reduces transaction costs to the consumer

Under rent controls,

-In the above figure,a shortage could be caused by a government price ceiling set at

-Refer to the above table.Suppose the demand for smartphones rises because more people use the Internet with a smartphone.The new equilibrium price will be

If demand increases and supply decreases,

One effect of a minimum wage in the market for low-skilled labor is

In a market system,the costs associated with exchanging goods are known as

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

Goods X and Y are complementary goods.A decrease in price of good X has occurred.In the market for good Y,this will lead to

Prices in a market economy perform a rationing function because they reflect

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?

The rationing function of prices means that

A minimum wage is an example of a

An increase in the minimum wage will tend to cause 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

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 4: Extensions of Demand and Supply Analysis

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

-Assume that the initial demand and supply curves in the above figure are DA and SA,respectively.The initial equilibrium price and quantity are

When are black markets likely to arise?

"Scarcity implies that some way of rationing goods must be found." Explain what this statement means.How is this rationing done?

Suppose that 20,000 tickets were sold at $120 for an NBA game at Madison Square Garden in New York.The game was sold out and some fans could not get tickets.This suggests that

Your local grocery store reduces transaction costs to the consumer

Under rent controls,

-In the above figure,a shortage could be caused by a government price ceiling set at

-Refer to the above table.Suppose the demand for smartphones rises because more people use the Internet with a smartphone.The new equilibrium price will be

If demand increases and supply decreases,

One effect of a minimum wage in the market for low-skilled labor is

In a market system,the costs associated with exchanging goods are known as

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

Goods X and Y are complementary goods.A decrease in price of good X has occurred.In the market for good Y,this will lead to

Prices in a market economy perform a rationing function because they reflect

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?

The rationing function of prices means that

A minimum wage is an example of a

An increase in the minimum wage will tend to cause 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

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters