Question 1

A cold winter will increase the quantity of heating fuel demanded at every price.

Accepted Answer

A) True 
 B)False

Question 2

In January,2,500 quarts of ice cream are sold in Boston at $2 a quart.In February,3,000 quarts are sold at $2.50 a quart.This change in quantity sold and price may have been caused by

Accepted Answer

A)  a reduction in wages in the Boston area. 
B)  the introduction of labor-saving automated ice cream-packing machinery. 
C)  the release of a medical study showing that ice cream consumption improves mental health. 
D)  the decision by Boston ice cream sellers to eliminate discount coupons.

Question 3

Rent controls and controls on other prices often aggravate the very problem they are intended to solve.

Accepted Answer

A) True 
 B)False

Question 4

A shift in the demand curve occurs when

Accepted Answer

A)  suppliers place more goods on the market. 
B)  the price of a good rises. 
C)  consumers want to buy more or less than before at a given price. 
D)  the price of the good falls.

Question 5

If the supply curve for housing has the normal positive slope,rent controls will likely

Accepted Answer

A)  increase the amount of housing. 
B)  improve the quality of housing. 
C)  aggravate the housing shortage. 
D)  help low-income families find suitable housing. 
E)  increase the demand for housing.

Question 6

Legal limits on prices will tend to cause misallocation of resources because

Accepted Answer

A)  production (or opportunity) cost no longer corresponds to market price. 
B)  people are unable to determine their preferences at the high or low price. 
C)  producers no longer have incentive to be profitable. 
D)  consumers no longer have incentive to spend their income efficiently. 
E)  All of the above are correct.

Question 7

Are markets always in equilibrium?

Accepted Answer

A)  Yes, they are always at the equilibrium point, or very close to it. 
B)  Yes, because few things tend to alter supply and demand. 
C)  No, but if there is no interference, they tend to move toward equilibrium. 
D)  No, they never "settle down" into a stable price and quantity. 
E)  Uncertain, economic theory has no answer to this question.

Question 8

Scarcity and choice are the basic problems of economics; the supply and demand mechanism is the basic investigative tool of economics.

Accepted Answer

A) True 
 B)False

Question 9

In 1989,Hurricane Hugo devastated Charleston,South Carolina,leaving residents with no electricity for light or refrigeration,and completely cut off from the outside world by fallen trees and washed-out roads.Consequently,the price of ice rose 1,000 percent and generators 300 percent.Tree removal firms were charging $4,000 to cut up a single tree.Outraged,the city government enacted an emergency law prohibiting price "gouging." This law is an example of

Accepted Answer

A)  the cost disease of services. 
B)  a price ceiling. 
C)  the laissez-faire rule. 
D)  the indispensable necessity syndrome.

Question 10

Tampering with the price mechanism

Accepted Answer

A)  can be efficient for a while. 
B)  cannot be attempted in a market economy. 
C)  can enhance societal welfare if done properly. 
D)  often produces undesired side effects.

Question 11

A decrease in supply will have what effect on equilibrium price and quantity?

Accepted Answer

A)  Price will increase; quantity will decrease. 
B)  Price will decrease; quantity will increase. 
C)  Both price and quantity will increase. 
D)  Both price and quantity will decrease.

Question 12

Which of the following would be most likely to cause an outward shift of the demand curve for electricity?

Accepted Answer

A)  a decrease in the price of electricity 
B)  an increase in the price of air conditioners 
C)  an increase in the price of heating oil 
D)  a decrease in the price of natural gas

Question 13

If both the supply and demand curves shift to the left,then we can conclude that there will be

Accepted Answer

A)  an increase in the equilibrium quantity sold. 
B)  a decrease in the equilibrium quantity sold. 
C)  an increase in the equilibrium price. 
D)  a decrease in the equilibrium price.

Question 14

Economists generally recognize that rent controls cause shortages in housing,yet rent controls tend to persist.Why does this occur?

Accepted Answer

A)  Many people do not understand the effects that controls cause. 
B)  Property owners are politically unpopular. 
C)  Many persons tend to benefit from rent controls. 
D)  All of the above are correct.

Question 15

Changes in consumer preference toward small,imported automobiles have shifted their demand curves downward and to the left.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following suggests that the "laws" of supply and demand are being disobeyed?

Accepted Answer

A)  outside forces disturbing an equilibrium 
B)  persistent shortages or surpluses 
C)  the market never moving from an equilibrium 
D)  "other things" not always being equal

Question 17

Figure 4-18
 
-In Figure 4-18,there would be a surplus of T-shirts if the price were

Accepted Answer

A)  $10. 
B)  $8. 
C)  below $8. 
D)  between $8 and $6.

Question 18

The Red Jacket Mountain View Inn in New Hampshire charges $159 per room in the winter ski season and $114 during the summer months.The number of rooms and operating costs are constant year round.These prices indicate

Accepted Answer

A)  rightward shifts in the demand curve in the summer. 
B)  a rightward shift in demand in the winter. 
C)  leftward shifts in the supply curve in the summer. 
D)  a leftward shift in demand in the winter.

Question 19

Equilibrium in a market is

Accepted Answer

A)  a situation in which there are no inherent forces that produce change. 
B)  the natural state of affairs in the market. 
C)  the actual price and quantity that will exist in a market. 
D)  the best price and quantity that can exist in a market. 
E)  All of the above are correct.

Question 20

Change in the price of a good causes the demand schedule for that good to shift.

Accepted Answer

A) True 
 B)False

Exam 4: Supply and Demand: An Initial Look

A cold winter will increase the quantity of heating fuel demanded at every price.

In January,2,500 quarts of ice cream are sold in Boston at $2 a quart.In February,3,000 quarts are sold at $2.50 a quart.This change in quantity sold and price may have been caused by

Rent controls and controls on other prices often aggravate the very problem they are intended to solve.

A shift in the demand curve occurs when

If the supply curve for housing has the normal positive slope,rent controls will likely

Legal limits on prices will tend to cause misallocation of resources because

Are markets always in equilibrium?

Scarcity and choice are the basic problems of economics; the supply and demand mechanism is the basic investigative tool of economics.

Tampering with the price mechanism

A decrease in supply will have what effect on equilibrium price and quantity?

Which of the following would be most likely to cause an outward shift of the demand curve for electricity?

If both the supply and demand curves shift to the left,then we can conclude that there will be

Economists generally recognize that rent controls cause shortages in housing,yet rent controls tend to persist.Why does this occur?

Changes in consumer preference toward small,imported automobiles have shifted their demand curves downward and to the left.

Which of the following suggests that the "laws" of supply and demand are being disobeyed?

Figure 4-18 -In Figure 4-18,there would be a surplus of T-shirts if the price were

The Red Jacket Mountain View Inn in New Hampshire charges $159 per room in the winter ski season and $114 during the summer months.The number of rooms and operating costs are constant year round.These prices indicate

Equilibrium in a market is

Change in the price of a good causes the demand schedule for that good to shift.