Question 1

When the government imposes a price ceiling on a good whose price is too high,

Accepted Answer

A)  surpluses are created. 
B)  supply will increase to meet the demand. 
C)  rationing is not necessary. 
D)  quantity demanded of the good will fall. 
E)  chronic excess demand occurs. 
A)  surpluses are created. 
B)  supply will increase to meet the demand. 
C)  rationing is not necessary. 
D)  quantity demanded of the good will fall. 
E)  chronic excess demand occurs.

Question 2

Collusive action among producers creates higher prices for consumers because it:

Accepted Answer

A)  causes overproduction and inefficiency. 
B)  creates negative externalities. 
C)  forces producers to be more competitive. 
D)  allows producers to artificially restrict their supply. 
A)  causes overproduction and inefficiency. 
B)  creates negative externalities. 
C)  forces producers to be more competitive. 
D)  allows producers to artificially restrict their supply.

Question 3

When there is a positive externality associated with the watering of one's lawn, the free market results in:

Accepted Answer

A)  not enough lawn watering. 
B)  too much lawn watering. 
C)  the socially optimal level of lawn watering. 
D)  people watering each other's lawns. 
E)  government subsidies for lawn watering. 
A)  not enough lawn watering. 
B)  too much lawn watering. 
C)  the socially optimal level of lawn watering. 
D)  people watering each other's lawns. 
E)  government subsidies for lawn watering.

Question 4

Suppose a price ceiling is set by the government below the market equilibrium price. Which of the following will result?

Accepted Answer

A)  The demand curve will shift to the left. 
B)  The quantity demanded will exceed the quantity supplied. 
C)  The quantity supplied will exceed the quantity demanded. 
D)  There will be a surplus. 
A)  The demand curve will shift to the left. 
B)  The quantity demanded will exceed the quantity supplied. 
C)  The quantity supplied will exceed the quantity demanded. 
D)  There will be a surplus.

Question 5

Nonsmoking sections in restaurants are designed to remove ____ from a market ____.

Accepted Answer

A)  smoke; with food service 
B)  third parties; for food service 
C)  externalities; with public goods 
D)  third parties; externality 
E)  nonsmokers; for food service 
A)  smoke; with food service 
B)  third parties; for food service 
C)  externalities; with public goods 
D)  third parties; externality 
E)  nonsmokers; for food service

Question 6

If the cost of producing a good rises for sellers, then how will this affect the market equilibrium for that good?

Accepted Answer

A)  ​Price will rise and quantity will fall. 
B)  ​Price will fall and quantity will rise. 
C)  ​Price and quantity will both rise. 
D)  ​Price and quantity will both fall. 
A)  ​Price will rise and quantity will fall. 
B)  ​Price will fall and quantity will rise. 
C)  ​Price and quantity will both rise. 
D)  ​Price and quantity will both fall.

Question 7

A competitive market economy is unlikely to provide an efficient quantity of some public goods because:

Accepted Answer

A)  only the government has the vast resources necessary to produce public goods. 
B)  the nature of public goods makes it difficult for producers to withhold them from nonpaying consumers. 
C)  the technology involved in the production of public goods makes it difficult for private firms to produce them even though, once produced, they could be marketed efficiently. 
D)  private production of public goods generally results in a large amount of profit, which is difficult for a firm to effectively pay out to shareholders. 
A)  only the government has the vast resources necessary to produce public goods. 
B)  the nature of public goods makes it difficult for producers to withhold them from nonpaying consumers. 
C)  the technology involved in the production of public goods makes it difficult for private firms to produce them even though, once produced, they could be marketed efficiently. 
D)  private production of public goods generally results in a large amount of profit, which is difficult for a firm to effectively pay out to shareholders.

Question 8

If market supply decreases and, simultaneously, market demand increases, the new equilibrium will show:

Accepted Answer

A)  market price will decrease, and market quantity exchanged will increase. 
B)  market price will increase, and market quantity exchanged will decrease. 
C)  market price will increase, and the quantity exchanged could increase, decrease, or remain the same. 
D)  market price could increase, decrease, or remain the same, and quantity exchanged will increase. 
E)  market price will increase, decrease, or remain the same, and quantity exchanged will decrease. 
A)  market price will decrease, and market quantity exchanged will increase. 
B)  market price will increase, and market quantity exchanged will decrease. 
C)  market price will increase, and the quantity exchanged could increase, decrease, or remain the same. 
D)  market price could increase, decrease, or remain the same, and quantity exchanged will increase. 
E)  market price will increase, decrease, or remain the same, and quantity exchanged will decrease.

Question 9

Which of the following is not a characteristic of a public good?

Accepted Answer

A)  It is scarce. 
B)  It is not diminished in amount as additional people consume the product. 
C)  Its benefits cannot be withheld from anyone. 
D)  It is free. 
E)  It yields widespread benefits. 
A)  It is scarce. 
B)  It is not diminished in amount as additional people consume the product. 
C)  Its benefits cannot be withheld from anyone. 
D)  It is free. 
E)  It yields widespread benefits.

Question 10

If consumers switch away from eating margarine at the same time that the number of margarine suppliers increases, then:

Accepted Answer

A)  these two effects cancel each other out and there is no change in the margarine market equilibrium. 
B)  the demand curve shifts left and the supply curve shifts right. 
C)  there is a margarine price increase. 
D)  there is an excess demand for margarine. 
E)  the equilibrium quantity of margarine must increase. 
A)  these two effects cancel each other out and there is no change in the margarine market equilibrium. 
B)  the demand curve shifts left and the supply curve shifts right. 
C)  there is a margarine price increase. 
D)  there is an excess demand for margarine. 
E)  the equilibrium quantity of margarine must increase.

Question 11

Which of the following is not an example of an externality?

Accepted Answer

A)  Drunk drivers raise everyone's auto insurance premiums. 
B)  The price of lumber increases as lumberjacks' wages increase. 
C)  The neighbor's beautiful front yard increases your home value. 
D)  Someone drives a car that emits thick black smoke. 
E)  People who live near a bakery enjoy the smell of baked bread. 
A)  Drunk drivers raise everyone's auto insurance premiums. 
B)  The price of lumber increases as lumberjacks' wages increase. 
C)  The neighbor's beautiful front yard increases your home value. 
D)  Someone drives a car that emits thick black smoke. 
E)  People who live near a bakery enjoy the smell of baked bread.

Question 12

Rent controls create distortions in the housing market by:

Accepted Answer

A)  increasing rents received by landlords 
B)  raising property values. 
C)  encouraging landlords to overspend for maintenance. 
D)  discouraging new housing construction. 
E)  increasing the supply of housing in the long run. 
A)  increasing rents received by landlords 
B)  raising property values. 
C)  encouraging landlords to overspend for maintenance. 
D)  discouraging new housing construction. 
E)  increasing the supply of housing in the long run.

Question 13

Exhibit 4-2 Supply and demand curves   ​
-Beginning from an equilibrium at point E1 in Exhibit 4-2, an increase in demand for good X, other things being equal, would move the equilibrium point to:

Accepted Answer

A)  E1, no change. 
B)  E2. 
C)  E3. 
D)  E4. 
A)  E1, no change. 
B)  E2. 
C)  E3. 
D)  E4.

Question 14

Which of the following is a public good?

Accepted Answer

A)  Pencil. 
B)  Apple. 
C)  Light house. 
D)  Gun. 
A)  Pencil. 
B)  Apple. 
C)  Light house. 
D)  Gun.

Question 15

Exhibit 4-4 Supply and demand curves for good X  
-Which of the graphs in Exhibit 4-4 represents a decrease in the price of a factor of production?

Accepted Answer

A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  None of these. 
A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  None of these.

Question 16

Which of the following is a public good?

Accepted Answer

A)  Air traffic control. 
B)  National defense. 
C)  Clean air. 
D)  All of these. 
A)  Air traffic control. 
B)  National defense. 
C)  Clean air. 
D)  All of these.

Question 17

​A public good is any good or service that users collectively consume and there is no way to bar free riders.

Accepted Answer

A) True 
 B)False

Question 18

Assuming supply is held constant, an increase in demand for a product will cause an increase in the equilibrium price and the amount bought and sold.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 4-3 Supply and demand curves  
-In Exhibit 4-3, which of the following might cause a shift from S2 to S1?

Accepted Answer

A)  A decrease in input prices. 
B)  An improvement in technology. 
C)  An increase in input prices. 
D)  An increase in consumer income. 
A)  A decrease in input prices. 
B)  An improvement in technology. 
C)  An increase in input prices. 
D)  An increase in consumer income.

Question 20

A hurricane destroyed the peach crop in South Carolina. Shortly thereafter the price of peaches rose significantly. These events suggest that a(n):

Accepted Answer

A)  decrease in the supply of peaches caused the price of peaches to rise. 
B)  increase in the supply of peaches caused the price of peaches to rise. 
C)  increase in demand caused the price of peaches to rise. 
D)  decrease in demand caused the price of peaches to rise. 
A)  decrease in the supply of peaches caused the price of peaches to rise. 
B)  increase in the supply of peaches caused the price of peaches to rise. 
C)  increase in demand caused the price of peaches to rise. 
D)  decrease in demand caused the price of peaches to rise.

When the government imposes a price ceiling on a good whose price is too high,

Collusive action among producers creates higher prices for consumers because it:

When there is a positive externality associated with the watering of one's lawn, the free market results in:

Suppose a price ceiling is set by the government below the market equilibrium price. Which of the following will result?

Nonsmoking sections in restaurants are designed to remove from a market .

If the cost of producing a good rises for sellers, then how will this affect the market equilibrium for that good?

A competitive market economy is unlikely to provide an efficient quantity of some public goods because:

If market supply decreases and, simultaneously, market demand increases, the new equilibrium will show:

Which of the following is not a characteristic of a public good?

If consumers switch away from eating margarine at the same time that the number of margarine suppliers increases, then:

Which of the following is not an example of an externality?

Rent controls create distortions in the housing market by:

Exhibit 4-2 Supply and demand curves -Beginning from an equilibrium at point E₁ in Exhibit 4-2, an increase in demand for good X, other things being equal, would move the equilibrium point to:

Which of the following is a public good?

Exhibit 4-4 Supply and demand curves for good X -Which of the graphs in Exhibit 4-4 represents a decrease in the price of a factor of production?

Which of the following is a public good?

A public good is any good or service that users collectively consume and there is no way to bar free riders.

Assuming supply is held constant, an increase in demand for a product will cause an increase in the equilibrium price and the amount bought and sold.

Exhibit 4-3 Supply and demand curves -In Exhibit 4-3, which of the following might cause a shift from S₂ to S₁?

A hurricane destroyed the peach crop in South Carolina. Shortly thereafter the price of peaches rose significantly. These events suggest that a(n):

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Exam 4: Markets in Action

When the government imposes a price ceiling on a good whose price is too high,

Collusive action among producers creates higher prices for consumers because it:

When there is a positive externality associated with the watering of one's lawn, the free market results in:

Suppose a price ceiling is set by the government below the market equilibrium price. Which of the following will result?

Nonsmoking sections in restaurants are designed to remove ____ from a market ____.

If the cost of producing a good rises for sellers, then how will this affect the market equilibrium for that good?

A competitive market economy is unlikely to provide an efficient quantity of some public goods because:

If market supply decreases and, simultaneously, market demand increases, the new equilibrium will show:

Which of the following is not a characteristic of a public good?

If consumers switch away from eating margarine at the same time that the number of margarine suppliers increases, then:

Which of the following is not an example of an externality?

Rent controls create distortions in the housing market by:

Exhibit 4-2 Supply and demand curves ​ -Beginning from an equilibrium at point E1 in Exhibit 4-2, an increase in demand for good X, other things being equal, would move the equilibrium point to:

Which of the following is a public good?

Exhibit 4-4 Supply and demand curves for good X -Which of the graphs in Exhibit 4-4 represents a decrease in the price of a factor of production?

Which of the following is a public good?

​A public good is any good or service that users collectively consume and there is no way to bar free riders.

Assuming supply is held constant, an increase in demand for a product will cause an increase in the equilibrium price and the amount bought and sold.

Exhibit 4-3 Supply and demand curves -In Exhibit 4-3, which of the following might cause a shift from S2 to S1?

A hurricane destroyed the peach crop in South Carolina. Shortly thereafter the price of peaches rose significantly. These events suggest that a(n):

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Nonsmoking sections in restaurants are designed to remove from a market .

Exhibit 4-2 Supply and demand curves -Beginning from an equilibrium at point E₁ in Exhibit 4-2, an increase in demand for good X, other things being equal, would move the equilibrium point to:

A public good is any good or service that users collectively consume and there is no way to bar free riders.

Exhibit 4-3 Supply and demand curves -In Exhibit 4-3, which of the following might cause a shift from S₂ to S₁?