Question 1

Suppose that X and Y are substitutes. If the price of Y increases, how will this change the market equilibrium for X? ​

Accepted Answer

A)  ​Equilibrium price and quantity both decline. 
B)  ​Equilibrium price and quantity both rise. 
C)  ​Equilibrium price declines, and equilibrium quantity rises. 
D)  Equilibrium price rises, and equilibrium quantity falls.​ 
A)  ​Equilibrium price and quantity both decline. 
B)  ​Equilibrium price and quantity both rise. 
C)  ​Equilibrium price declines, and equilibrium quantity rises. 
D)  Equilibrium price rises, and equilibrium quantity falls.​

Question 2

The government would use production taxes to remedy the problem of substantial:

Accepted Answer

A)  internal benefits of production. 
B)  external benefits of production. 
C)  external costs of production. 
D)  external benefits of consumption 
E)  external costs of consumption. 
A)  internal benefits of production. 
B)  external benefits of production. 
C)  external costs of production. 
D)  external benefits of consumption 
E)  external costs of consumption.

Question 3

External benefits cause the market to:

Accepted Answer

A)  underallocate resources. 
B)  be more efficient. 
C)  set excessively high prices. 
D)  have persistent shortages. 
A)  underallocate resources. 
B)  be more efficient. 
C)  set excessively high prices. 
D)  have persistent shortages.

Question 4

Suppose the government imposes rent control (a price ceiling) below the equilibrium price for rental housing. Which of the following could result?

Accepted Answer

A)  Tenants risk breaking rent control law. 
B)  The quality of existing rental housing deteriorates. 
C)  Shortages. 
D)  All of these. 
A)  Tenants risk breaking rent control law. 
B)  The quality of existing rental housing deteriorates. 
C)  Shortages. 
D)  All of these.

Question 5

​It's difficult for a private firm to provide a public good because of free riders.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 4-4 Supply and demand curves for good X  
-An increase in the price of a complementary good would be represented in which of the graphs in Exhibit 4-4?

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 7

Consider the market for chicken. Assuming that chicken and beef are substitutes, an increase in the price of beef will:

Accepted Answer

A)  decrease the demand for chicken creating a lower price and a smaller amount of chicken purchased in the market. 
B)  decrease the supply of chicken creating a higher price and a smaller amount of chicken purchased in the market. 
C)  increase the demand for chicken creating a higher price and a greater amount of chicken purchased in the market. 
D)  increase the supply of chicken creating a lower price and a greater amount of chicken purchased in the market. 
A)  decrease the demand for chicken creating a lower price and a smaller amount of chicken purchased in the market. 
B)  decrease the supply of chicken creating a higher price and a smaller amount of chicken purchased in the market. 
C)  increase the demand for chicken creating a higher price and a greater amount of chicken purchased in the market. 
D)  increase the supply of chicken creating a lower price and a greater amount of chicken purchased in the market.

Question 8

Exhibit 4-4 Supply and demand curves for good X  
-Which of the graphs in Exhibit 4-4 illustrates an increase in buyers' income, assuming that good X is a normal good?

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 9

A decrease in demand with the supply held constant leads to:

Accepted Answer

A)  ​an increased equilibrium price and an increased equilibrium quantity. 
B)  ​a decreased equilibrium price and a decreased equilibrium quantity. 
C)  ​a decreased equilibrium price and an increased equilibrium quantity. 
D)  ​an increased equilibrium price and a decreased equilibrium quantity. 
A)  ​an increased equilibrium price and an increased equilibrium quantity. 
B)  ​a decreased equilibrium price and a decreased equilibrium quantity. 
C)  ​a decreased equilibrium price and an increased equilibrium quantity. 
D)  ​an increased equilibrium price and a decreased equilibrium quantity.

Question 10

If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen?

Accepted Answer

A)  The quantity of beef demanded will decrease. 
B)  The quantity of beef supplied will increase. 
C)  There will be a surplus of beef. 
D)  There will be a shortage of beef. 
A)  The quantity of beef demanded will decrease. 
B)  The quantity of beef supplied will increase. 
C)  There will be a surplus of beef. 
D)  There will be a shortage of beef.

Question 11

The positive externality associated with education is:

Accepted Answer

A)  producers can get higher prices for their goods and services. 
B)  less crowding in the classrooms. 
C)  increases in societal well-being and economic growth. 
D)  technological progress slows as basic research increases. 
E)  the market excludes noncontributors to education from benefits. 
A)  producers can get higher prices for their goods and services. 
B)  less crowding in the classrooms. 
C)  increases in societal well-being and economic growth. 
D)  technological progress slows as basic research increases. 
E)  the market excludes noncontributors to education from benefits.

Question 12

Exhibit 4-1 Supply and demand data $$\begin{array} { | c | c | c | } 
\hline \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { demanded }
\end{array} & \begin{array} { r } 
\text { Quantity } \
\text { supplied }
\end{array} \
\hline \$ 1.00 & 500 & 50 \
1.50 & 450 & 150 \
2.00 & 400 & 250 \
2.50 & 300 & 300 \
3.00 & 150 & 350 \
\hline
\end{array}$$ ​
-Exhibit 4-1 shows that at a price of $3.00,

Accepted Answer

A)  the market is in equilibrium. 
B)  there will be excess quantity demanded. 
C)  there will be excess quantity supplied. 
D)  there is a price ceiling in effect. 
A)  the market is in equilibrium. 
B)  there will be excess quantity demanded. 
C)  there will be excess quantity supplied. 
D)  there is a price ceiling in effect.

Question 13

The minimum price for a good set by the government above the equilibrium price is called a:

Accepted Answer

A)  price ceiling. 
B)  price floor. 
C)  parity price ratio. 
D)  market-generated price. 
E)  deficiency price. 
A)  price ceiling. 
B)  price floor. 
C)  parity price ratio. 
D)  market-generated price. 
E)  deficiency price.

Question 14

There was an extensive black market (illegal market) for many consumer products in the United States during World War II. A likely explanation of the black market is that:

Accepted Answer

A)  the prices of goods were artificially held down by price controls. 
B)  black markets were legal during the war. 
C)  goods were not subject to price controls. 
D)  gasoline rationing greatly restricted civilians from driving to stores. 
A)  the prices of goods were artificially held down by price controls. 
B)  black markets were legal during the war. 
C)  goods were not subject to price controls. 
D)  gasoline rationing greatly restricted civilians from driving to stores.

Question 15

A minimum wage that is set below the equilibrium wage will:

Accepted Answer

A)  cause increased unemployment. 
B)  have no effect on employment. 
C)  cause the overall wage to increase. 
D)  cause the overall wage to decrease. 
E)  create more jobs. 
A)  cause increased unemployment. 
B)  have no effect on employment. 
C)  cause the overall wage to increase. 
D)  cause the overall wage to decrease. 
E)  create more jobs.

Question 16

Public goods differ from private goods in that:

Accepted Answer

A)  they produce negative externalities. 
B)  they are not scarce. 
C)  their benefits cannot be denied to anyone. 
D)  their consumption must be regulated by the government. 
E)  their benefits are very narrow. 
A)  they produce negative externalities. 
B)  they are not scarce. 
C)  their benefits cannot be denied to anyone. 
D)  their consumption must be regulated by the government. 
E)  their benefits are very narrow.

Question 17

Exhibit 4-2 Supply and demand curves   ​
-The market shown in Exhibit 4-2 is initially in equilibrium at point E1. Union negotiations for workers producing good X result in a wage increase. Other things being equal, which of the following is the new equilibrium after this wage increase is in effect?

Accepted Answer

A)  E1. 
B)  E2. 
C)  E3. 
D)  E4. 
A)  E1. 
B)  E2. 
C)  E3. 
D)  E4.

Question 18

City streets, sewage systems, and police protection are all examples of:

Accepted Answer

A)  public goods. 
B)  private goods. 
C)  exclusive goods. 
D)  rival goods. 
E)  consumer goods. 
A)  public goods. 
B)  private goods. 
C)  exclusive goods. 
D)  rival goods. 
E)  consumer goods.

Question 19

Assume a ceiling price is set above the equilibrium price. The eventual result is a shortage.

Accepted Answer

A) True 
 B)False

Question 20

Unintended costs that are imposed in third parties as a result of an economic activity are called:

Accepted Answer

A)  marginal costs. 
B)  direct costs. 
C)  negative externalities. 
D)  positive externalities. 
E)  positive costs. 
A)  marginal costs. 
B)  direct costs. 
C)  negative externalities. 
D)  positive externalities. 
E)  positive costs.

Suppose that X and Y are substitutes. If the price of Y increases, how will this change the market equilibrium for X?

The government would use production taxes to remedy the problem of substantial:

External benefits cause the market to:

Suppose the government imposes rent control (a price ceiling) below the equilibrium price for rental housing. Which of the following could result?

It's difficult for a private firm to provide a public good because of free riders.

Exhibit 4-4 Supply and demand curves for good X -An increase in the price of a complementary good would be represented in which of the graphs in Exhibit 4-4?

Consider the market for chicken. Assuming that chicken and beef are substitutes, an increase in the price of beef will:

Exhibit 4-4 Supply and demand curves for good X -Which of the graphs in Exhibit 4-4 illustrates an increase in buyers' income, assuming that good X is a normal good?

A decrease in demand with the supply held constant leads to:

If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen?

The positive externality associated with education is:

Exhibit 4-1 Supply and demand data Price Quantity demanded Quantity supplied \ 1.00 500 50 1.50 450 150 2.00 400 250 2.50 300 300 3.00 150 350 -Exhibit 4-1 shows that at a price of $3.00,

The minimum price for a good set by the government above the equilibrium price is called a:

There was an extensive black market (illegal market) for many consumer products in the United States during World War II. A likely explanation of the black market is that:

A minimum wage that is set below the equilibrium wage will:

Public goods differ from private goods in that:

Exhibit 4-2 Supply and demand curves -The market shown in Exhibit 4-2 is initially in equilibrium at point E₁. Union negotiations for workers producing good X result in a wage increase. Other things being equal, which of the following is the new equilibrium after this wage increase is in effect?

City streets, sewage systems, and police protection are all examples of:

Assume a ceiling price is set above the equilibrium price. The eventual result is a shortage.

Unintended costs that are imposed in third parties as a result of an economic activity are called:

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

Suppose that X and Y are substitutes. If the price of Y increases, how will this change the market equilibrium for X? ​

The government would use production taxes to remedy the problem of substantial:

External benefits cause the market to:

Suppose the government imposes rent control (a price ceiling) below the equilibrium price for rental housing. Which of the following could result?

​It's difficult for a private firm to provide a public good because of free riders.

Exhibit 4-4 Supply and demand curves for good X -An increase in the price of a complementary good would be represented in which of the graphs in Exhibit 4-4?

Consider the market for chicken. Assuming that chicken and beef are substitutes, an increase in the price of beef will:

Exhibit 4-4 Supply and demand curves for good X -Which of the graphs in Exhibit 4-4 illustrates an increase in buyers' income, assuming that good X is a normal good?

A decrease in demand with the supply held constant leads to:

If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen?

The positive externality associated with education is:

Exhibit 4-1 Supply and demand data Price Quantity demanded Quantity supplied \ 1.00 500 50 1.50 450 150 2.00 400 250 2.50 300 300 3.00 150 350 ​ -Exhibit 4-1 shows that at a price of $3.00,

The minimum price for a good set by the government above the equilibrium price is called a:

There was an extensive black market (illegal market) for many consumer products in the United States during World War II. A likely explanation of the black market is that:

A minimum wage that is set below the equilibrium wage will:

Public goods differ from private goods in that:

City streets, sewage systems, and police protection are all examples of:

Assume a ceiling price is set above the equilibrium price. The eventual result is a shortage.

Unintended costs that are imposed in third parties as a result of an economic activity are called:

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

Suppose that X and Y are substitutes. If the price of Y increases, how will this change the market equilibrium for X?

It's difficult for a private firm to provide a public good because of free riders.

Exhibit 4-1 Supply and demand data Price Quantity demanded Quantity supplied \ 1.00 500 50 1.50 450 150 2.00 400 250 2.50 300 300 3.00 150 350 -Exhibit 4-1 shows that at a price of $3.00,