Question 1

Albert and Betty hire Christine and David to play music at their wedding. Elizabeth, who lives behind the church, cannot study because of the loud music. The third party is:

Accepted Answer

A)  Albert. 
B)  Betty. 
C)  Christine. 
D)  David. 
E)  Elizabeth. 
A)  Albert. 
B)  Betty. 
C)  Christine. 
D)  David. 
E)  Elizabeth.

Question 2

Ceteris paribus, if consumer tastes change so that more people are eating broccoli, then what will happen to the market equilibrium for cabbage, a substitute good for broccoli?

Accepted Answer

A)  Price will increase, and quantity will increase. 
B)  Price and quantity will stay the same. 
C)  Price will decrease, and quantity will increase. 
D)  Price will increase, and quantity will decrease. 
E)  Price will decrease, and quantity will decrease. 
A)  Price will increase, and quantity will increase. 
B)  Price and quantity will stay the same. 
C)  Price will decrease, and quantity will increase. 
D)  Price will increase, and quantity will decrease. 
E)  Price will decrease, and quantity will decrease.

Question 3

If the equilibrium price of good X is $4 and a price ceiling is imposed at $5, the result will be a(n):

Accepted Answer

A)  depletion of inventories. 
B)  shortage. 
C)  surplus. 
D)  equilibrium. 
A)  depletion of inventories. 
B)  shortage. 
C)  surplus. 
D)  equilibrium.

Question 4

Exhibit 4-4 Supply and demand curves for good X  
-An increase in the wage rate paid to workers producing good X would be represented by 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 5

Exhibit 4-2 Supply and demand curves   ​
-The market shown in Exhibit 4-2 is initially in equilibrium at E1. Changes in market conditions result in a new equilibrium at E2. This change is stated as a(n):

Accepted Answer

A)  increase in supply and an increase in quantity demanded. 
B)  increase in supply and a decrease in demand. 
C)  decrease in supply and a decrease in quantity demanded. 
D)  increase in demand and an increase in supply. 
A)  increase in supply and an increase in quantity demanded. 
B)  increase in supply and a decrease in demand. 
C)  decrease in supply and a decrease in quantity demanded. 
D)  increase in demand and an increase in supply.

Question 6

The city of Logan Square needs $40 million for a network of streetlights. There are 20,000 residents in the Logan Square neighborhood, meaning the cost for each resident is $2,000. Psychiatrist Denise Miller refuses to donate $2,000 towards the project. This is an example of the problems encountered with:

Accepted Answer

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

Question 7

​Higher gasoline prices would likely raise the price of large, gas-guzzling automobiles.

Accepted Answer

A) True 
 B)False

Question 8

Exhibit 4-10 Supply and demand data for apricots $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Bushels demanded } \
\text { per month }
\end{array} & \begin{array} { c } 
\text { Price per } \
\text { bushel }
\end{array} & \begin{array} { c } 
\text { Bushels supplied } \
\text { per month }
\end{array} \
\hline 50 & \$ 5 & 80 \
55 & 4 & 75 \
60 & 3 & 70 \
65 & 2 & 65 \
70 & 1 & 55 \
\hline
\end{array}$$
-Which of the following would occur if the government sets a price floor of $4 in the market shown in Exhibit 4-10?

Accepted Answer

A)  There would be a shortage of apricots. 
B)  Buyers would not purchase all of the apricots that are grown. 
C)  Buyers would purchase more apricots than are currently being supplied. 
D)  Farmers would reduce the number of acres allocated to the growing of apricots. 
A)  There would be a shortage of apricots. 
B)  Buyers would not purchase all of the apricots that are grown. 
C)  Buyers would purchase more apricots than are currently being supplied. 
D)  Farmers would reduce the number of acres allocated to the growing of apricots.

Question 9

If a price ceiling is imposed, then:

Accepted Answer

A)  the market supply curve will shift to the right. 
B)  the market demand will shift to the left. 
C)  a shortage of product will result. 
D)  the government would be required to buy-up the surplus product. 
E)  the market equilibrium price is below the level the government wishes to achieve. 
A)  the market supply curve will shift to the right. 
B)  the market demand will shift to the left. 
C)  a shortage of product will result. 
D)  the government would be required to buy-up the surplus product. 
E)  the market equilibrium price is below the level the government wishes to achieve.

Question 10

The existence of an externality is proof that there is a(n):

Accepted Answer

A)  market failure. 
B)  undervaluation of a good. 
C)  undervaluation of a cost. 
D)  property dispute. 
E)  free-rider problem 
A)  market failure. 
B)  undervaluation of a good. 
C)  undervaluation of a cost. 
D)  property dispute. 
E)  free-rider problem

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

A price floor that sets the price of a good above market equilibrium will cause:

Accepted Answer

A)  a decrease in quantity demanded of the good. 
B)  an increase in quantity supplied of the good. 
C)  a surplus of the good. 
D)  all of these. 
A)  a decrease in quantity demanded of the good. 
B)  an increase in quantity supplied of the good. 
C)  a surplus of the good. 
D)  all of these.

Question 13

A price floor would be established in cases where the government believed the market equilibrium price would:

Accepted Answer

A)  result in a surplus. 
B)  be too high. 
C)  result in a shortage. 
D)  be too low. 
E)  yield excess profits. 
A)  result in a surplus. 
B)  be too high. 
C)  result in a shortage. 
D)  be too low. 
E)  yield excess profits.

Question 14

Ceteris paribus, an increase in the supply of a good causes which of the following?

Accepted Answer

A)  Lowers the equilibrium price, and reduces the quantity bought and sold. 
B)  Raises the equilibrium price, and raises the quantity bought and sold. 
C)  Raises the equilibrium price, and increases the quantity bought and sold. 
D)  Lowers the equilibrium price, and increases the quantity bought and sold. 
E)  Equilibrium price and equilibrium quantity change are indeterminate. 
A)  Lowers the equilibrium price, and reduces the quantity bought and sold. 
B)  Raises the equilibrium price, and raises the quantity bought and sold. 
C)  Raises the equilibrium price, and increases the quantity bought and sold. 
D)  Lowers the equilibrium price, and increases the quantity bought and sold. 
E)  Equilibrium price and equilibrium quantity change are indeterminate.

Question 15

Albert, Betty, Christine and David are all very good students. When they hold their study sessions, they often discuss very difficult concepts in great detail. Christine's roommate, Elizabeth, who takes completely different classes, still learns from the discussions of the others. This is the case of a(n) ____, which ____ a ____.

Accepted Answer

A)  public good; benefits; third party 
B)  externality; imposes a cost on; free rider 
C)  market failure; results from; third party 
D)  free rider; benefits from; third party 
E)  Externalities; benefits; third party 
A)  public good; benefits; third party 
B)  externality; imposes a cost on; free rider 
C)  market failure; results from; third party 
D)  free rider; benefits from; third party 
E)  Externalities; benefits; third party

Question 16

An increase in consumers' incomes will have what effect on the equilibrium in the restaurant meals market?

Accepted Answer

A)  Price will increase, and quantity will increase. 
B)  Price will decrease, and quantity will increase. 
C)  Price will increase, and quantity will decrease. 
D)  Price will decrease, and quantity will decrease. 
E)  Price will increase, and quantity will stay the same. 
A)  Price will increase, and quantity will increase. 
B)  Price will decrease, and quantity will increase. 
C)  Price will increase, and quantity will decrease. 
D)  Price will decrease, and quantity will decrease. 
E)  Price will increase, and quantity will stay the same.

Question 17

Suppose the government imposes a per unit tax on an item whose production process creates a negative externality. Suppose the tax is exactly the value of the marginal externality cost. If the government now uses the tax revenue to clean up pollution from this process, the market will:

Accepted Answer

A)  have internalized all costs and benefits. 
B)  be inefficient. 
C)  be destroyed. 
D)  not have failed. 
E)  be subject to obligatory controls. 
A)  have internalized all costs and benefits. 
B)  be inefficient. 
C)  be destroyed. 
D)  not have failed. 
E)  be subject to obligatory controls.

Question 18

A public good will:

Accepted Answer

A)  be efficiently provided by the free market as long as its total benefits exceed its total costs. 
B)  be efficiently provided by the free market as long as its marginal benefits exceed its marginal costs. 
C)  be provided in less than efficient quantities by the free market. 
D)  be provided in efficient quantities by voluntary contributions. 
E)  not be provided by the government. 
A)  be efficiently provided by the free market as long as its total benefits exceed its total costs. 
B)  be efficiently provided by the free market as long as its marginal benefits exceed its marginal costs. 
C)  be provided in less than efficient quantities by the free market. 
D)  be provided in efficient quantities by voluntary contributions. 
E)  not be provided by the government.

Question 19

Exhibit 4-10 Supply and demand data for apricots $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Bushels demanded } \
\text { per month }
\end{array} & \begin{array} { c } 
\text { Price per } \
\text { bushel }
\end{array} & \begin{array} { c } 
\text { Bushels supplied } \
\text { per month }
\end{array} \
\hline 50 & \$ 5 & 80 \
55 & 4 & 75 \
60 & 3 & 70 \
65 & 2 & 65 \
70 & 1 & 55 \
\hline
\end{array}$$
-Which of the following would occur if the government set a price ceiling of $1 in the market shown in Exhibit 4-10?

Accepted Answer

A)  There would be a shortage of apricots. 
B)  Buyers would not want to purchase all of the apricots that are supplied. 
C)  There would be a surplus of apricots. 
D)  Farmers would reduce the number of acres allocated to the growing of apricots. 
A)  There would be a shortage of apricots. 
B)  Buyers would not want to purchase all of the apricots that are supplied. 
C)  There would be a surplus of apricots. 
D)  Farmers would reduce the number of acres allocated to the growing of apricots.

Question 20

A decrease in consumer income decreases the demand for compact discs. As a result of the change to a new equilibrium, there is a(n):

Accepted Answer

A)  leftward shift of the supply curve. 
B)  rightward shift of the supply curve. 
C)  upward movement along the supply curve. 
D)  downward movement along the supply curve. 
A)  leftward shift of the supply curve. 
B)  rightward shift of the supply curve. 
C)  upward movement along the supply curve. 
D)  downward movement along the supply curve.

Albert and Betty hire Christine and David to play music at their wedding. Elizabeth, who lives behind the church, cannot study because of the loud music. The third party is:

Ceteris paribus, if consumer tastes change so that more people are eating broccoli, then what will happen to the market equilibrium for cabbage, a substitute good for broccoli?

If the equilibrium price of good X is $4 and a price ceiling is imposed at $5, the result will be a(n):

Exhibit 4-4 Supply and demand curves for good X -An increase in the wage rate paid to workers producing good X would be represented by which of the graphs in Exhibit 4-4?

Exhibit 4-2 Supply and demand curves -The market shown in Exhibit 4-2 is initially in equilibrium at E₁. Changes in market conditions result in a new equilibrium at E₂. This change is stated as a(n):

Higher gasoline prices would likely raise the price of large, gas-guzzling automobiles.

Exhibit 4-10 Supply and demand data for apricots Bushels demanded per month Price per bushel Bushels supplied per month 50 \ 5 80 55 4 75 60 3 70 65 2 65 70 1 55 -Which of the following would occur if the government sets a price floor of $4 in the market shown in Exhibit 4-10?

If a price ceiling is imposed, then:

The existence of an externality is proof that there is a(n):

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

A price floor that sets the price of a good above market equilibrium will cause:

A price floor would be established in cases where the government believed the market equilibrium price would:

Ceteris paribus, an increase in the supply of a good causes which of the following?

An increase in consumers' incomes will have what effect on the equilibrium in the restaurant meals market?

Suppose the government imposes a per unit tax on an item whose production process creates a negative externality. Suppose the tax is exactly the value of the marginal externality cost. If the government now uses the tax revenue to clean up pollution from this process, the market will:

A public good will:

Exhibit 4-10 Supply and demand data for apricots Bushels demanded per month Price per bushel Bushels supplied per month 50 \ 5 80 55 4 75 60 3 70 65 2 65 70 1 55 -Which of the following would occur if the government set a price ceiling of $1 in the market shown in Exhibit 4-10?

A decrease in consumer income decreases the demand for compact discs. As a result of the change to a new equilibrium, there is 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

Albert and Betty hire Christine and David to play music at their wedding. Elizabeth, who lives behind the church, cannot study because of the loud music. The third party is:

Ceteris paribus, if consumer tastes change so that more people are eating broccoli, then what will happen to the market equilibrium for cabbage, a substitute good for broccoli?

If the equilibrium price of good X is $4 and a price ceiling is imposed at $5, the result will be a(n):

Exhibit 4-4 Supply and demand curves for good X -An increase in the wage rate paid to workers producing good X would be represented by which of the graphs in Exhibit 4-4?

Exhibit 4-2 Supply and demand curves ​ -The market shown in Exhibit 4-2 is initially in equilibrium at E1. Changes in market conditions result in a new equilibrium at E2. This change is stated as a(n):

​Higher gasoline prices would likely raise the price of large, gas-guzzling automobiles.

Exhibit 4-10 Supply and demand data for apricots Bushels demanded per month Price per bushel Bushels supplied per month 50 \ 5 80 55 4 75 60 3 70 65 2 65 70 1 55 -Which of the following would occur if the government sets a price floor of $4 in the market shown in Exhibit 4-10?

If a price ceiling is imposed, then:

The existence of an externality is proof that there is a(n):

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

A price floor that sets the price of a good above market equilibrium will cause:

A price floor would be established in cases where the government believed the market equilibrium price would:

Ceteris paribus, an increase in the supply of a good causes which of the following?

An increase in consumers' incomes will have what effect on the equilibrium in the restaurant meals market?

Suppose the government imposes a per unit tax on an item whose production process creates a negative externality. Suppose the tax is exactly the value of the marginal externality cost. If the government now uses the tax revenue to clean up pollution from this process, the market will:

A public good will:

Exhibit 4-10 Supply and demand data for apricots Bushels demanded per month Price per bushel Bushels supplied per month 50 \ 5 80 55 4 75 60 3 70 65 2 65 70 1 55 -Which of the following would occur if the government set a price ceiling of $1 in the market shown in Exhibit 4-10?

A decrease in consumer income decreases the demand for compact discs. As a result of the change to a new equilibrium, there is 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

Exhibit 4-2 Supply and demand curves -The market shown in Exhibit 4-2 is initially in equilibrium at E₁. Changes in market conditions result in a new equilibrium at E₂. This change is stated as a(n):

Higher gasoline prices would likely raise the price of large, gas-guzzling automobiles.

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