Question 1

​ A price floor is a price set below equilibrium by government and it creates a shortage.

Accepted Answer

A) True 
 B)False

Question 2

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that a below-equilibrium price established by rent control:

Accepted Answer

A)  creates a surplus of rental housing. 
B)  promotes a rapid increase in the future supply of housing. 
C)  results in poor service and quality deterioration of many rental units. 
D)  leads to a reduction in housing discrimination against minorities. 
A)  creates a surplus of rental housing. 
B)  promotes a rapid increase in the future supply of housing. 
C)  results in poor service and quality deterioration of many rental units. 
D)  leads to a reduction in housing discrimination against minorities.

Question 3

Which of the following is not an example of market failure?

Accepted Answer

A)  Lack of competition. 
B)  Externalities. 
C)  Equilibrium. 
D)  Extreme income inequality. 
A)  Lack of competition. 
B)  Externalities. 
C)  Equilibrium. 
D)  Extreme income inequality.

Question 4

Many student government candidates at colleges and universities propose rent controls on local rental housing as a way to help students afford rental housing. Economic theory suggests that this policy would harm students as a whole despite the fact that some students who are able to find housing at the reduced price would benefit. Which of the following are some of the offsetting secondary effects of the rent controls that would work to the disadvantage of students?

Accepted Answer

A)  There would be a shortage of rental housing, making it very difficult for students to find places to rent and causing increased discrimination in the rental housing market. 
B)  There would be a reduction in the quality of rental housing. 
C)  There would be a reduction in the future supply of rental housing. 
D)  All of these would be secondary effects of the rent controls. 
A)  There would be a shortage of rental housing, making it very difficult for students to find places to rent and causing increased discrimination in the rental housing market. 
B)  There would be a reduction in the quality of rental housing. 
C)  There would be a reduction in the future supply of rental housing. 
D)  All of these would be secondary effects of the rent controls.

Question 5

Which of the following is a free rider?

Accepted Answer

A)  Butch breeds the feared pit bulls, and his neighbors now erect fences around their property. 
B)  Fred watches many public television programs, but he has never sent in a contribution. 
C)  Barry steals candy from the store where he works. 
D)  Betty regularly uses the local public library. 
E)  Joe drives 20,000 miles a year on public streets, but he pays no more in taxes than Sam, who only drives 1,000 miles. 
A)  Butch breeds the feared pit bulls, and his neighbors now erect fences around their property. 
B)  Fred watches many public television programs, but he has never sent in a contribution. 
C)  Barry steals candy from the store where he works. 
D)  Betty regularly uses the local public library. 
E)  Joe drives 20,000 miles a year on public streets, but he pays no more in taxes than Sam, who only drives 1,000 miles.

Question 6

Which of the following would generate positive externalities?

Accepted Answer

A)  Flu vaccinations. 
B)  Farmers' use of pesticides. 
C)  Cigarette smoking in elevators. 
D)  Litter left at the beach. 
E)  An unkept front yard. 
A)  Flu vaccinations. 
B)  Farmers' use of pesticides. 
C)  Cigarette smoking in elevators. 
D)  Litter left at the beach. 
E)  An unkept front yard.

Question 7

​If the demand curve increases while the supply curve remains unchanged, the equilibrium price would increase.

Accepted Answer

A) True 
 B)False

Question 8

A public good may be defined as any good or service that:

Accepted Answer

A)  must be provided to citizens who are most able to benefit from it. 
B)  must be distributed to all citizens in equal shares. 
C)  excludes free riders. 
D)  none of these. 
A)  must be provided to citizens who are most able to benefit from it. 
B)  must be distributed to all citizens in equal shares. 
C)  excludes free riders. 
D)  none of these.

Question 9

Exhibit 4-8 Demand and supply curves
​  
-In Exhibit 4-8, a movement from A to B is best explained by:

Accepted Answer

A)  an increase in income and in the number of suppliers. 
B)  an increase in the price of other goods. 
C)  an increase in the population. 
D)  a decrease in income and an improvement in the technology used to produce the good. 
E)  equilibrium quantity increases and the equilibrium price change is indeterminate. 
A)  an increase in income and in the number of suppliers. 
B)  an increase in the price of other goods. 
C)  an increase in the population. 
D)  a decrease in income and an improvement in the technology used to produce the good. 
E)  equilibrium quantity increases and the equilibrium price change is indeterminate.

Question 10

Suppose the market for "soda X" is in equilibrium. If the FDA announced today that this soda has been proven to cause a fatal disease, what would be most likely to happen to the equilibrium price and equilibrium quantity of soda X?

Accepted Answer

A)  Price increases and quantity increases 
B)  Price decreases and quantity increases. 
C)  Price increases and quantity increases. 
D)  Price decreases and quantity decreases 
E)  No change in price and quantity 
A)  Price increases and quantity increases 
B)  Price decreases and quantity increases. 
C)  Price increases and quantity increases. 
D)  Price decreases and quantity decreases 
E)  No change in price and quantity

Question 11

Market failure occurs when supply and demand curves only reflect:

Accepted Answer

A)  private or market costs and benefits. 
B)  external costs and benefits. 
C)  external benefits. 
D)  external costs. 
A)  private or market costs and benefits. 
B)  external costs and benefits. 
C)  external benefits. 
D)  external costs.

Question 12

Price floors are used as a method to:

Accepted Answer

A)  ensure buyers that goods won't be cheaper tomorrow. 
B)  see that production levels don't fall too low. 
C)  guarantee there will be enough food for everyone. 
D)  combat excess demand in the market. 
E)  ensure sellers a minimum price for their goods. 
A)  ensure buyers that goods won't be cheaper tomorrow. 
B)  see that production levels don't fall too low. 
C)  guarantee there will be enough food for everyone. 
D)  combat excess demand in the market. 
E)  ensure sellers a minimum price for their goods.

Question 13

If goods A and B are complements, and if the price of good B rises, how will this affect the market equilibrium for good A?

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 14

A third party is:

Accepted Answer

A)  the party to which a contractual agreement is meant to benefit. 
B)  a person, or persons, who are unintentionally affected by a market transaction. 
C)  the third person in a three-way contract. 
D)  the person who owns the property right in a contract. 
E)  when the government attempts to mediate a dispute between management and labor. 
A)  the party to which a contractual agreement is meant to benefit. 
B)  a person, or persons, who are unintentionally affected by a market transaction. 
C)  the third person in a three-way contract. 
D)  the person who owns the property right in a contract. 
E)  when the government attempts to mediate a dispute between management and labor.

Question 15

A free rider is a person who:

Accepted Answer

A)  is harmed by another's actions. 
B)  is subject to a negative externality. 
C)  receives benefits from someone else's action but does not pay for them. 
D)  pays less than the full value for a product. 
E)  won the state lottery. 
A)  is harmed by another's actions. 
B)  is subject to a negative externality. 
C)  receives benefits from someone else's action but does not pay for them. 
D)  pays less than the full value for a product. 
E)  won the state lottery.

Question 16

An increased equilibrium price and a decreased equilibrium quantity results from a(an):

Accepted Answer

A)  decrease in demand. 
B)  increase in supply. 
C)  decrease in supply. 
D)  increase in demand. 
A)  decrease in demand. 
B)  increase in supply. 
C)  decrease in supply. 
D)  increase in demand.

Question 17

If the government imposes a price ceiling, then:

Accepted Answer

A)  producers must charge the ceiling price. 
B)  the price offered by producers must be at or above the ceiling price. 
C)  the price offered by producers must be at or below the ceiling price. 
D)  producers would be inclined to increase the quantity supplied. 
E)  the market supply curve will shift to the right. 
A)  producers must charge the ceiling price. 
B)  the price offered by producers must be at or above the ceiling price. 
C)  the price offered by producers must be at or below the ceiling price. 
D)  producers would be inclined to increase the quantity supplied. 
E)  the market supply curve will shift to the right.

Question 18

When there is market failure due to a negative externality,

Accepted Answer

A)  innocent people will suffer since it cannot be corrected. 
B)  setting price equal to marginal social cost will solve it. 
C)  the free market produces too little output. 
D)  externalities have been taken into account. 
E)  the best solution eliminates the externality entirely. 
A)  innocent people will suffer since it cannot be corrected. 
B)  setting price equal to marginal social cost will solve it. 
C)  the free market produces too little output. 
D)  externalities have been taken into account. 
E)  the best solution eliminates the externality entirely.

Question 19

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

Accepted Answer

A)  Price will increase, and quantity will decrease. 
B)  Price will decrease, and quantity will decrease. 
C)  Price will decrease, and quantity will increase. 
D)  Price will increase, and quantity will increase. 
A)  Price will increase, and quantity will decrease. 
B)  Price will decrease, and quantity will decrease. 
C)  Price will decrease, and quantity will increase. 
D)  Price will increase, and quantity will increase.

Question 20

​Using supply and demand analysis, customers will stand in line for gasoline when a price ceiling is in force, even if the price ceiling is at a level higher than the equilibrium price.

Accepted Answer

A) True 
 B)False

A price floor is a price set below equilibrium by government and it creates a shortage.

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that a below-equilibrium price established by rent control:

Which of the following is not an example of market failure?

Which of the following is a free rider?

Which of the following would generate positive externalities?

If the demand curve increases while the supply curve remains unchanged, the equilibrium price would increase.

A public good may be defined as any good or service that:

Exhibit 4-8 Demand and supply curves -In Exhibit 4-8, a movement from A to B is best explained by:

Suppose the market for "soda X" is in equilibrium. If the FDA announced today that this soda has been proven to cause a fatal disease, what would be most likely to happen to the equilibrium price and equilibrium quantity of soda X?

Market failure occurs when supply and demand curves only reflect:

Price floors are used as a method to:

If goods A and B are complements, and if the price of good B rises, how will this affect the market equilibrium for good A?

A third party is:

A free rider is a person who:

An increased equilibrium price and a decreased equilibrium quantity results from a(an):

If the government imposes a price ceiling, then:

When there is market failure due to a negative externality,

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

Using supply and demand analysis, customers will stand in line for gasoline when a price ceiling is in force, even if the price ceiling is at a level higher than the equilibrium price.

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

​ A price floor is a price set below equilibrium by government and it creates a shortage.

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that a below-equilibrium price established by rent control:

Which of the following is not an example of market failure?

Which of the following is a free rider?

Which of the following would generate positive externalities?

​If the demand curve increases while the supply curve remains unchanged, the equilibrium price would increase.

A public good may be defined as any good or service that:

Exhibit 4-8 Demand and supply curves ​ -In Exhibit 4-8, a movement from A to B is best explained by:

Suppose the market for "soda X" is in equilibrium. If the FDA announced today that this soda has been proven to cause a fatal disease, what would be most likely to happen to the equilibrium price and equilibrium quantity of soda X?

Market failure occurs when supply and demand curves only reflect:

Price floors are used as a method to:

If goods A and B are complements, and if the price of good B rises, how will this affect the market equilibrium for good A?

A third party is:

A free rider is a person who:

An increased equilibrium price and a decreased equilibrium quantity results from a(an):

If the government imposes a price ceiling, then:

When there is market failure due to a negative externality,

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?

​Using supply and demand analysis, customers will stand in line for gasoline when a price ceiling is in force, even if the price ceiling is at a level higher than the equilibrium price.

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

A price floor is a price set below equilibrium by government and it creates a shortage.

If the demand curve increases while the supply curve remains unchanged, the equilibrium price would increase.

Exhibit 4-8 Demand and supply curves -In Exhibit 4-8, a movement from A to B is best explained by:

Using supply and demand analysis, customers will stand in line for gasoline when a price ceiling is in force, even if the price ceiling is at a level higher than the equilibrium price.