Question 1

Exhibit 4-3
  
-Refer to Exhibit 4-3.Which of the following is true?

Accepted Answer

A)  If price P1 is set as a price ceiling it will have an effect on the market for good X. 
B)  If price P1 is set as a price floor it will have an effect on the market for good X. 
C)  Price P1 is the equilibrium price for good X. 
D)  If price P1 is set as a price floor, then it is the highest price that can legally be charged in the market for good X. 
A)  If price P1 is set as a price ceiling it will have an effect on the market for good X. 
B)  If price P1 is set as a price floor it will have an effect on the market for good X. 
C)  Price P1 is the equilibrium price for good X. 
D)  If price P1 is set as a price floor, then it is the highest price that can legally be charged in the market for good X. A

Question 2

If the relative price of one unit of good X is 5 units of good Y,then it follows that the absolute price of good X can be __________ and the absolute price of good Y can be __________.

Accepted Answer

A)  $20,000; $10,000 
B)  $40,000; $8,000 
C)  $30,000; $5,0000 
D)  $5,000; $40,000 
E)  a and c 
A)  $20,000; $10,000 
B)  $40,000; $8,000 
C)  $30,000; $5,0000 
D)  $5,000; $40,000 
E)  a and c B

Question 3

If the relative price of one unit of good Y is 0.25 units of good Z,then it follows that the absolute price of good Z can be __________ and the absolute price of good Y can be __________.

Accepted Answer

A)  $4,000; $2,000 
B)  $1,000; $2,000 
C)  $2,000; $1,000 
D)  a and c 
E)  none of the above 
A)  $4,000; $2,000 
B)  $1,000; $2,000 
C)  $2,000; $1,000 
D)  a and c 
E)  none of the above E

Question 4

The absolute price of a good is the price of that good in terms of another good.

Accepted Answer

A) True 
 B)False

Question 5

If the price of good X is $90 and the price of good Y is $30,it follows that the relative price of one unit of good Y is ___________ unit(s)of good X.

Accepted Answer

A)  0.33 
B)  1.33 
C)  3.00 
D)  2.00 
E)  There is not enough information to answer the question. 
A)  0.33 
B)  1.33 
C)  3.00 
D)  2.00 
E)  There is not enough information to answer the question.

Question 6

Situation 4-1
  
-Refer to Situation 4-1.Because price controls were in effect at the time the embargo occurred,an economist would predict that

Accepted Answer

A)  the number of dollars one would need to pay at the pump for a full tank of gasoline would increase sharply. 
B)  the number of dollars one would need to pay at the pump for a full tank of gasoline would decline sharply. 
C)  long waiting lines and black markets would appear. 
D)  a surplus of gasoline would result. 
A)  the number of dollars one would need to pay at the pump for a full tank of gasoline would increase sharply. 
B)  the number of dollars one would need to pay at the pump for a full tank of gasoline would decline sharply. 
C)  long waiting lines and black markets would appear. 
D)  a surplus of gasoline would result.

Question 7

Exhibit 4-3
  
-Refer to Exhibit 4-3.Which of the following is true?

Accepted Answer

A)  If price P3 is set as a price ceiling it will have an effect on the market for good X. 
B)  If price P3 is set as a price floor it will have an effect on the market for good X. 
C)  Price P3 is the equilibrium price for good X. 
D)  Price P3 is the highest price that can legally be charged in the market for good X. 
A)  If price P3 is set as a price ceiling it will have an effect on the market for good X. 
B)  If price P3 is set as a price floor it will have an effect on the market for good X. 
C)  Price P3 is the equilibrium price for good X. 
D)  Price P3 is the highest price that can legally be charged in the market for good X.

Question 8

Exhibit 4-2
  
-Exhibit 4-2 represents the orange juice market.The horizontal line at $2 shows a price ceiling imposed by the government.Which of the following statements is true at this price?

Accepted Answer

A)  At the price ceiling the surplus equals 400 units. 
B)  At the price ceiling the shortage equals 400 units. 
C)  At the price ceiling the surplus equals 300 units. 
D)  At the price ceiling the shortage equals 200 units. 
E)  none of the above 
A)  At the price ceiling the surplus equals 400 units. 
B)  At the price ceiling the shortage equals 400 units. 
C)  At the price ceiling the surplus equals 300 units. 
D)  At the price ceiling the shortage equals 200 units. 
E)  none of the above

Question 9

If the absolute price of a computer is $1,500 and the relative price of a dining room table is 2 computers,it follows that the absolute price of a dining room table is

Accepted Answer

A)  $10,000. 
B)  $750. 
C)  $3,000. 
D)  $30,000. 
E)  none of the above 
A)  $10,000. 
B)  $750. 
C)  $3,000. 
D)  $30,000. 
E)  none of the above

Question 10

A minimum wage law (that sets the minimum wage above the equilibrium wage)can be expected to

Accepted Answer

A)  clear the market for unskilled workers. 
B)  increase employment for unskilled workers. 
C)  increase the number of firms in those industries where the law is effective. 
D)  reduce the hours worked for some unskilled workers. 
E)  all of the above 
A)  clear the market for unskilled workers. 
B)  increase employment for unskilled workers. 
C)  increase the number of firms in those industries where the law is effective. 
D)  reduce the hours worked for some unskilled workers. 
E)  all of the above

Question 11

Exhibit 4-4
  
-Refer to Exhibit 4-4.Which of the following is false?

Accepted Answer

A)  Graph (1): There is a shortage when price is P3. 
B)  Graph (2): As supply increases, equilibrium quantity remains constant. 
C)  Graph (3): As demand increases, equilibrium price remains constant. 
D)  Graph (4): As supply changes, equilibrium price stays the same. 
A)  Graph (1): There is a shortage when price is P3. 
B)  Graph (2): As supply increases, equilibrium quantity remains constant. 
C)  Graph (3): As demand increases, equilibrium price remains constant. 
D)  Graph (4): As supply changes, equilibrium price stays the same.

Question 12

Exhibit 4-8
  
-Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What is the quantity of wheat purchased at PF?

Accepted Answer

A)  Q1 
B)  Q2 
C)  Q3 
D)  Q2 - Q1 
A)  Q1 
B)  Q2 
C)  Q3 
D)  Q2 - Q1

Question 13

Price ceilings and price floors

Accepted Answer

A)  shift demand and supply curves and therefore have no effect upon the rationing function of prices. 
B)  interfere with the rationing function of prices. 
C)  make the rationing function of free markets more efficient. 
D)  cause surpluses and shortages, respectively. 
A)  shift demand and supply curves and therefore have no effect upon the rationing function of prices. 
B)  interfere with the rationing function of prices. 
C)  make the rationing function of free markets more efficient. 
D)  cause surpluses and shortages, respectively.

Question 14

In 1973 and 1979,the U.S.federal government imposed price ceilings on gasoline which resulted in surpluses of gasoline.

Accepted Answer

A) True 
 B)False

Question 15

A price floor (set above the equilibrium price)on rice will

Accepted Answer

A)  force otherwise profitable farmers out of business. 
B)  result in a shortage of rice. 
C)  result in a surplus of rice. 
D)  clear the market for rice. 
E)  both a and b 
A)  force otherwise profitable farmers out of business. 
B)  result in a shortage of rice. 
C)  result in a surplus of rice. 
D)  clear the market for rice. 
E)  both a and b

Question 16

Jake is an excellent barber.However,all customers who come to him for a haircut must buy a bottle of shampoo.This type of arrangement is known as

Accepted Answer

A)  a tie-in sale. 
B)  a sweetheart deal. 
C)  an exclusive contract. 
D)  a cross subsidy. 
A)  a tie-in sale. 
B)  a sweetheart deal. 
C)  an exclusive contract. 
D)  a cross subsidy.

Question 17

Which of the following statement is false?

Accepted Answer

A)  There is evidence of a shortage in the market for kidneys (for transplants). 
B)  The waiting list for transplanted kidneys is used as a non-price rationing device. 
C)  Kidneys are currently being illegally bought and sold. 
D)  In the market for kidneys (for transplants) the legal price is the equilibrium price. 
A)  There is evidence of a shortage in the market for kidneys (for transplants). 
B)  The waiting list for transplanted kidneys is used as a non-price rationing device. 
C)  Kidneys are currently being illegally bought and sold. 
D)  In the market for kidneys (for transplants) the legal price is the equilibrium price.

Question 18

Exhibit 4-8
  
-Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What is the size of the total surplus at PF?

Accepted Answer

A)  area 1 + 2 + 3 
B)  area 1 + 2 + 3 + 4 
C)  area 1 + 2 + 3 + 4 + 5 
D)  area 1 + 2 + 3 + 4 + 5 + 6 
A)  area 1 + 2 + 3 
B)  area 1 + 2 + 3 + 4 
C)  area 1 + 2 + 3 + 4 + 5 
D)  area 1 + 2 + 3 + 4 + 5 + 6

Question 19

In the market for a given product,when a price floor is set above the equilibrium price the result will be

Accepted Answer

A)  more exchanges made in the market. 
B)  an increase in the supply of the product. 
C)  a decrease in the demand for the product. 
D)  a deadweight loss. 
A)  more exchanges made in the market. 
B)  an increase in the supply of the product. 
C)  a decrease in the demand for the product. 
D)  a deadweight loss.

Question 20

Exhibit 4-4
  
-Refer to Exhibit 4-4.Which of the following is false?

Accepted Answer

A)  Graph (1): A price ceiling set at P2 would not have an impact on the market. 
B)  Graph (2): As supply increases, equilibrium price remains constant. 
C)  Graph (3): As demand increases, equilibrium quantity remains constant. 
D)  Graph (4): As supply increases, equilibrium quantity increases. 
A)  Graph (1): A price ceiling set at P2 would not have an impact on the market. 
B)  Graph (2): As supply increases, equilibrium price remains constant. 
C)  Graph (3): As demand increases, equilibrium quantity remains constant. 
D)  Graph (4): As supply increases, equilibrium quantity increases.

Exam 4: Prices: Free, Controlled, and Relative

Exhibit 4-3 -Refer to Exhibit 4-3.Which of the following is true?

If the relative price of one unit of good X is 5 units of good Y,then it follows that the absolute price of good X can be __________ and the absolute price of good Y can be __________.

If the relative price of one unit of good Y is 0.25 units of good Z,then it follows that the absolute price of good Z can be __________ and the absolute price of good Y can be __________.

The absolute price of a good is the price of that good in terms of another good.

If the price of good X is $90 and the price of good Y is $30,it follows that the relative price of one unit of good Y is ___________ unit(s)of good X.

Situation 4-1 -Refer to Situation 4-1.Because price controls were in effect at the time the embargo occurred,an economist would predict that

Exhibit 4-3 -Refer to Exhibit 4-3.Which of the following is true?

Exhibit 4-2 -Exhibit 4-2 represents the orange juice market.The horizontal line at $2 shows a price ceiling imposed by the government.Which of the following statements is true at this price?

If the absolute price of a computer is $1,500 and the relative price of a dining room table is 2 computers,it follows that the absolute price of a dining room table is

A minimum wage law (that sets the minimum wage above the equilibrium wage)can be expected to

Exhibit 4-4 -Refer to Exhibit 4-4.Which of the following is false?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What is the quantity of wheat purchased at PF?

Price ceilings and price floors

In 1973 and 1979,the U.S.federal government imposed price ceilings on gasoline which resulted in surpluses of gasoline.

A price floor (set above the equilibrium price)on rice will

Jake is an excellent barber.However,all customers who come to him for a haircut must buy a bottle of shampoo.This type of arrangement is known as

Which of the following statement is false?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What is the size of the total surplus at PF?

In the market for a given product,when a price floor is set above the equilibrium price the result will be

Exhibit 4-4 -Refer to Exhibit 4-4.Which of the following is false?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

If the relative price of one unit of good X is 5 units of good Y,then it follows that the absolute price of good X can be and the absolute price of good Y can be .

If the relative price of one unit of good Y is 0.25 units of good Z,then it follows that the absolute price of good Z can be and the absolute price of good Y can be .

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the quantity of wheat purchased at P_F?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the size of the total surplus at P_F?