Question 1

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.

Question 2

If both buyers and sellers expect the price of a commodity to fall in the future, it is likely that the market clearing price ________ and the equilibrium quantity ________.

Accepted Answer

A) will fall, cannot be predicted 
B) will rise, cannot be predicted 
C) cannot be predicted, will fall 
D) cannot be predicted, will rise

Question 3

One result of the agriculture price supports cited in the text is that

Accepted Answer

A) sometimes surplus food is given away. 
B) food shortages result in most cases. 
C) small farms receive most of the benefits. 
D) none of the above.

Question 4

Rent controls are an example of a

Accepted Answer

A) price floor. 
B) price ceiling. 
C) price floor for the consumer and a price ceiling for the producer. 
D) nonprice rationing device.

Question 5

Holding demand constant, a reduction in supply leads to

Accepted Answer

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

Question 6

An import quota

Accepted Answer

A) is a price ceiling imposed on an imported good. 
B) is a price floor imposed on an imported good. 
C) is a supply restriction limiting the quantity of a good that can be imported. 
D) is a legislative requirement stating that firms which import some of their merchandise must hire a certain number of immigrant workers.

Question 7

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

Question 8

Rent controls often have adverse effects, including

Accepted Answer

A) too much housing in a community. 
B) deterioration in the quality of existing rental units. 
C) too much construction of new rental units in the community. 
D) income transfers from the poor to landlords.

Question 9

-Refer to the above figure. A price floor of $60 results in

Accepted Answer

A) a shortage of 100 units. 
B) a shortage of 200 units. 
C) a surplus of 100 units. 
D) a surplus of 200 units.

Question 10

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

Question 11

If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that the market clearing price ________ and the equilibrium quantity ________.

Accepted Answer

A) will fall, cannot be predicted 
B) will rise, cannot be predicted 
C) cannot be predicted, will fall 
D) cannot be predicted, will rise

Question 12

The market for gasoline in May is in equilibrium, at a market clearing price of $4.50 per gallon. After Memorial Day, the demand curve for gasoline increases, which causes

Accepted Answer

A) the demand curve for gasoline to shift to the right, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to rise. 
B) the demand curve for gasoline to shift to the right, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to fall. 
C) the demand curve for gasoline to shift to the left, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to rise. 
D) the demand curve for gasoline to shift to the left, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to fall.

Question 13

The price of a good always changes when

Accepted Answer

A) either a shortage or a surplus occurs. 
B) quantity demanded and quantity supplied are constant. 
C) there is an increase in demand and an increase in supply. 
D) there is a decrease in demand and a decrease in supply.

Question 14

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

Question 15

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

Accepted Answer

A) the quantity of goods that will be traded is 100. 
B) the quantity of goods that will be traded is 200. 
C) the quantity of goods that will be traded is 150. 
D) the quantity of goods that will be traded is 0.

Question 16

The difference between quantity restrictions and price ceilings as to their effect on the market is that

Accepted Answer

A) only price ceilings make the market inefficient. 
B) only quantity restrictions make the market inefficient. 
C) while some consumers gain from price ceilings, no consumers gain from quantity restrictions. 
D) while price ceilings are efficient, quantity restrictions are not.

Question 17

-Refer to the above figure. A surplus occurs if the government imposes

Accepted Answer

A) a price floor at $60. 
B) a price floor at $20. 
C) a price ceiling at $60. 
D) a price ceiling at $20.

Question 18

Rationing of resources, goods, and services

Accepted Answer

A) is not required under the price system. 
B) is required because of scarcity. 
C) must be done by the government. 
D) happens only when the price is zero.

Question 19

Garbanzo Beans 
-Consider the above table. If the government imposes a price ceiling on garbanzo beans of $8, what would be the likely result?

Accepted Answer

A) a surplus of 2,000 garbanzo beans on the market 
B) a shortage of 2,000 garbanzo beans on the market 
C) Market equilibrium will be reached. 
D) The quantity demanded of garbanzo beans would fall to zero.

Question 20

An import quota will

Accepted Answer

A) lead to a shift of the demand curve. 
B) leave the equilibrium price unchanged and increase the quantity sold. 
C) limit the amount of a foreign good that can be brought into the United States. 
D) limit the amount of a good local producers can make.

Exam 4: Extensions of Demand and Supply Analysis