Question 1

A side effect of a price floor set above the equilibrium price is:

Accepted Answer

A)  the new price is below equilibrium price. 
B)  an excess supply of the good is created. 
C)  an excess demand for the good is created. 
D)  the supply of the good decreases. 
E)  the demand for the good increases. 
A)  the new price is below equilibrium price. 
B)  an excess supply of the good is created. 
C)  an excess demand for the good is created. 
D)  the supply of the good decreases. 
E)  the demand for the good increases.

Question 2

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by a(n):

Accepted Answer

A)  increase in the supply of the good. 
B)  increase in the demand for the good. 
C)  decrease in the demand for the good. 
D)  decrease in the supply of the good. 
A)  increase in the supply of the good. 
B)  increase in the demand for the good. 
C)  decrease in the demand for the good. 
D)  decrease in the supply of the good.

Question 3

A third party is a person, or persons, who:

Accepted Answer

A)  consume goods produced from at least two intermediate inputs. 
B)  avoids the transactions of the two principal parties. 
C)  takes risks to avoid externalities. 
D)  internalizes the costs of market failure. 
E)  is imposed upon by the activity of others. 
A)  consume goods produced from at least two intermediate inputs. 
B)  avoids the transactions of the two principal parties. 
C)  takes risks to avoid externalities. 
D)  internalizes the costs of market failure. 
E)  is imposed upon by the activity of others.

Question 4

Which of the following is an example of a negative externality?

Accepted Answer

A)  A Japanese company begins to produce cars, which causes American workers to lose their jobs. 
B)  An employee of a chemical company spills acid on his arm, causing severe damage. 
C)  John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary. 
D)  Sally buys coffee at McDonald's, spills some on her, and burns her arm. 
E)  Jack attempts to fix his roof, falls off, and breaks his leg. 
A)  A Japanese company begins to produce cars, which causes American workers to lose their jobs. 
B)  An employee of a chemical company spills acid on his arm, causing severe damage. 
C)  John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary. 
D)  Sally buys coffee at McDonald's, spills some on her, and burns her arm. 
E)  Jack attempts to fix his roof, falls off, and breaks his leg.

Question 5

Which of the following is an example of market failure?

Accepted Answer

A)  Public goods. 
B)  Externalities. 
C)  Lack of competition. 
D)  all of these. 
A)  Public goods. 
B)  Externalities. 
C)  Lack of competition. 
D)  all of these.

Question 6

One likely result of a price ceiling is that:

Accepted Answer

A)  a surplus of product would result. 
B)  the price charged in the market would be above the equilibrium price. 
C)  the price charged in the market would be the equilibrium price. 
D)  the available product must be rationed. 
E)  the market supply curve will shift to the right. 
A)  a surplus of product would result. 
B)  the price charged in the market would be above the equilibrium price. 
C)  the price charged in the market would be the equilibrium price. 
D)  the available product must be rationed. 
E)  the market supply curve will shift to the right.

Question 7

Exhibit 4-9 Data on supply and demand $$\begin{array} { | r | c | c | } 
\hline \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { Demanded }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Supplied }
\end{array} \
\hline \$ 2.00 & 100 & 300 \
1.50 & 150 & 250 \
1.00 & 200 & 200 \
0.50 & 250 & 150 \
\hline
\end{array}$$
-In Exhibit 4-9 the equilibrium price and quantity in the market are:

Accepted Answer

A)  $5.50, 200. 
B)  $1.50, 300. 
C)  $2.00, 100. 
D)  $1.00, 200. 
A)  $5.50, 200. 
B)  $1.50, 300. 
C)  $2.00, 100. 
D)  $1.00, 200.

Question 8

The former Soviet Union was known for black markets. An explanation for the existence of these illegal markets is that:

Accepted Answer

A)  goods were not subject to price controls. 
B)  the government imposed a price ceiling below the equilibrium price. 
C)  the government imposed a price ceiling above the equilibrium price. 
D)  all of these. 
A)  goods were not subject to price controls. 
B)  the government imposed a price ceiling below the equilibrium price. 
C)  the government imposed a price ceiling above the equilibrium price. 
D)  all of these.

Question 9

Which of the following would be an example of a public good?

Accepted Answer

A)  A candy bar. 
B)  A painting by Monet. 
C)  A taxi cab. 
D)  A sunset. 
E)  The beach. 
A)  A candy bar. 
B)  A painting by Monet. 
C)  A taxi cab. 
D)  A sunset. 
E)  The beach.

Question 10

In order to avoid the free-rider problem, which of the following goods is best provided by the government and paid for with tax dollars?

Accepted Answer

A)  Automobiles. 
B)  Lighthouses. 
C)  Bread. 
D)  Prescription drugs. 
E)  Windows. 
A)  Automobiles. 
B)  Lighthouses. 
C)  Bread. 
D)  Prescription drugs. 
E)  Windows.

Question 11

Which of the following is a property of a public good?

Accepted Answer

A)  It is established by legislation. 
B)  Free riders are excluded. 
C)  Users collectively consume benefits. 
D)  It is determined by positive economics. 
A)  It is established by legislation. 
B)  Free riders are excluded. 
C)  Users collectively consume benefits. 
D)  It is determined by positive economics.

Question 12

Exhibit 4-10 Supply and demand data for apricots $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Bushels demanded } \
\text { per month }
\end{array} & \begin{array} { c } 
\text { Price per } \
\text { bushel }
\end{array} & \begin{array} { c } 
\text { Bushels supplied } \
\text { per month }
\end{array} \
\hline 50 & \$ 5 & 80 \
55 & 4 & 75 \
60 & 3 & 70 \
65 & 2 & 65 \
70 & 1 & 55 \
\hline
\end{array}$$
-In Exhibit 4-10, assume that the government initially sets a price floor of $4 for apricots, and then removes the $4 price floor. What effect will this price change have?

Accepted Answer

A)  The price of apricots will rise. 
B)  The quantity of apricots demanded will fall. 
C)  The quantity of apricots supplied will decline. 
D)  Quantity supplied will continue to exceed quantity demanded. 
A)  The price of apricots will rise. 
B)  The quantity of apricots demanded will fall. 
C)  The quantity of apricots supplied will decline. 
D)  Quantity supplied will continue to exceed quantity demanded.

Question 13

In the case of negative externalities in production, the firm's internal costs:

Accepted Answer

A)  exceed the external costs. 
B)  are less than the external costs. 
C)  equal the external costs. 
D)  understate the true cost of producing the product. 
E)  overstate the true cost of producing the product. 
A)  exceed the external costs. 
B)  are less than the external costs. 
C)  equal the external costs. 
D)  understate the true cost of producing the product. 
E)  overstate the true cost of producing the product.

A side effect of a price floor set above the equilibrium price is:

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by a(n):

A third party is a person, or persons, who:

Which of the following is an example of a negative externality?

Which of the following is an example of market failure?

One likely result of a price ceiling is that:

Exhibit 4-9 Data on supply and demand Price Quantity Demanded Quantity Supplied \ 2.00 100 300 1.50 150 250 1.00 200 200 0.50 250 150 -In Exhibit 4-9 the equilibrium price and quantity in the market are:

The former Soviet Union was known for black markets. An explanation for the existence of these illegal markets is that:

Which of the following would be an example of a public good?

In order to avoid the free-rider problem, which of the following goods is best provided by the government and paid for with tax dollars?

Which of the following is a property of a public good?

In the case of negative externalities in production, the firm's internal costs:

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

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Exam 4: Markets in Action

A side effect of a price floor set above the equilibrium price is:

If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by a(n):

A third party is a person, or persons, who:

Which of the following is an example of a negative externality?

Which of the following is an example of market failure?

One likely result of a price ceiling is that:

Exhibit 4-9 Data on supply and demand Price Quantity Demanded Quantity Supplied \ 2.00 100 300 1.50 150 250 1.00 200 200 0.50 250 150 -In Exhibit 4-9 the equilibrium price and quantity in the market are:

The former Soviet Union was known for black markets. An explanation for the existence of these illegal markets is that:

Which of the following would be an example of a public good?

In order to avoid the free-rider problem, which of the following goods is best provided by the government and paid for with tax dollars?

Which of the following is a property of a public good?

In the case of negative externalities in production, the firm's internal costs:

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