Question 1

If the market demand and supply curves shift as given in Exhibit 4-6, the resulting new equilibrium will show a(n):

Accepted Answer

A)  increase in market price and a decrease in the quantity exchanged. 
B)  decrease in market price and a decrease in the quantity exchanged. 
C)  increase in market price and an increase in the quantity exchanged. 
D)  decrease in market price and an increase in the quantity exchanged. 
E)  decrease in market price and no change in the quantity exchanged. 
A)  increase in market price and a decrease in the quantity exchanged. 
B)  decrease in market price and a decrease in the quantity exchanged. 
C)  increase in market price and an increase in the quantity exchanged. 
D)  decrease in market price and an increase in the quantity exchanged. 
E)  decrease in market price and no change in the quantity exchanged.

Question 2

Which of the following is an example of a pure public good?

Accepted Answer

A)  A bus. 
B)  A mall. 
C)  A teddy bear. 
D)  An army. 
E)  An automobile. 
A)  A bus. 
B)  A mall. 
C)  A teddy bear. 
D)  An army. 
E)  An automobile.

Question 3

People who enjoy the benefits of a public good without paying for them are called:

Accepted Answer

A)  spillover parties. 
B)  external consumers. 
C)  free riders. 
D)  antitrust violators. 
A)  spillover parties. 
B)  external consumers. 
C)  free riders. 
D)  antitrust violators.

Question 4

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?

Accepted Answer

A)  The price of orange juice will increase, and the quantity purchased will fall. 
B)  The price of orange juice will fall, and the quantity purchased will increase. 
C)  The price of orange juice will increase, and the quantity purchased will increase. 
D)  The price of orange juice will fall, and the quantity purchased will fall. 
A)  The price of orange juice will increase, and the quantity purchased will fall. 
B)  The price of orange juice will fall, and the quantity purchased will increase. 
C)  The price of orange juice will increase, and the quantity purchased will increase. 
D)  The price of orange juice will fall, and the quantity purchased will fall.

Question 5

Which of the following is the best example of a public good?

Accepted Answer

A)  Cars. 
B)  Education. 
C)  Radios. 
D)  Air traffic control. 
A)  Cars. 
B)  Education. 
C)  Radios. 
D)  Air traffic control.

Question 6

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?

Accepted Answer

A)  Take milk from government storage and sell it. 
B)  Encourage farmers to produce more milk. 
C)  Subsidize purchases of dairy equipment. 
D)  Encourage farmers to produce less milk. 
A)  Take milk from government storage and sell it. 
B)  Encourage farmers to produce more milk. 
C)  Subsidize purchases of dairy equipment. 
D)  Encourage farmers to produce less milk.

Question 7

If the government imposes a price ceiling below the market equilibrium price, which of the following will result?

Accepted Answer

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

Question 8

Bobby's neighbor is growing a tree that is blocking Bobby's ocean view. Bobby is considering taking his neighbor to court. This is most likely an example of a:

Accepted Answer

A)  considerate neighbor. 
B)  public good. 
C)  free rider. 
D)  positive externality. 
E)  negative externality. 
A)  considerate neighbor. 
B)  public good. 
C)  free rider. 
D)  positive externality. 
E)  negative externality.

Question 9

Dina is driving to work on an interstate highway at 90 MPH, well in excess of the legal speed of 65 MPH. Sandy is also driving to work at the same time, going 85 MPH. A state trooper pulls Dina over and gives her a speeding ticket. Sandy continues driving, but if Dina had not been speeding, the trooper would have ticketed Sandy instead. In terms of externalities, this story shows that:

Accepted Answer

A)  Sandy's actions gave Dina a positive externality. 
B)  Dina's actions gave Sandy a positive externality. 
C)  Sandy's actions gave Dina a negative externality. 
D)  Dina's actions gave Sandy a negative externality. 
E)  Dina's and Sandy's actions did not create any externalities. 
A)  Sandy's actions gave Dina a positive externality. 
B)  Dina's actions gave Sandy a positive externality. 
C)  Sandy's actions gave Dina a negative externality. 
D)  Dina's actions gave Sandy a negative externality. 
E)  Dina's and Sandy's actions did not create any externalities.

Question 10

An increase in the wages paid to fishermen will have what effect on the fish market equilibrium?

Accepted Answer

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

Question 11

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, which of the following would occur at a price of $2.00?

Accepted Answer

A)  Inventories would put upward pressure on price. 
B)  Quantity demanded exceeds quantity supplied, putting downward pressure on price. 
C)  Inventories would put downward pressure on price. 
D)  The surplus would be so small that there would be only slight downward pressure on price. 
A)  Inventories would put upward pressure on price. 
B)  Quantity demanded exceeds quantity supplied, putting downward pressure on price. 
C)  Inventories would put downward pressure on price. 
D)  The surplus would be so small that there would be only slight downward pressure on price.

Question 12

A legally mandated minimum wage is an example of:

Accepted Answer

A)  the invisible hand principle. 
B)  a price floor. 
C)  a price ceiling. 
D)  a fringe benefit. 
A)  the invisible hand principle. 
B)  a price floor. 
C)  a price ceiling. 
D)  a fringe benefit.

Question 13

Exhibit 4-2 Supply and demand curves   ​
-The market shown in Exhibit 4-2 is initially in equilibrium at E3. Changes in market conditions result in a new equilibrium at E4. This change is stated as a(n):

Accepted Answer

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

Question 14

Goods whose benefits to society are not diminished as more people consume them and whose benefits cannot be withheld from anyone are:

Accepted Answer

A)  impossible since resources are limited. 
B)  examples of negative externalities. 
C)  public goods. 
D)  food and other necessities. 
E)  provided by free markets to free riders. 
A)  impossible since resources are limited. 
B)  examples of negative externalities. 
C)  public goods. 
D)  food and other necessities. 
E)  provided by free markets to free riders.

Question 15

Externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from:

Accepted Answer

A)  poor planning. 
B)  intentional damages. 
C)  excessive costs. 
D)  excessive losses. 
E)  the economic activity of others. 
A)  poor planning. 
B)  intentional damages. 
C)  excessive costs. 
D)  excessive losses. 
E)  the economic activity of others.

Question 16

​An equilibrium price is unaffected by nonprice factors.

Accepted Answer

A) True 
 B)False

Question 17

​ Assume a price floor is set above the equilibrium price. The result is a shortage.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a wallet firm has been dumping its wastes into the local river. The government finds out and insists that the firm pay for the cost of the river cleanup. As a result, we can expect:

Accepted Answer

A)  more wallets to be produced at a lower price. 
B)  more wallets to be produced at a higher price. 
C)  fewer wallets to be produced at a lower price. 
D)  fewer wallets to be produced at a higher price. 
E)  the same number of wallets to be produced at a higher price. 
A)  more wallets to be produced at a lower price. 
B)  more wallets to be produced at a higher price. 
C)  fewer wallets to be produced at a lower price. 
D)  fewer wallets to be produced at a higher price. 
E)  the same number of wallets to be produced at a higher price.

Question 19

Cindy discovers that when she goes to the beach, she does not have to bring her radio. She can put her blanket near someone who has a radio and listen all day (without having to carry her radio, get sand in her speakers, or buy new batteries). This is an example of:

Accepted Answer

A)  private property abuse. 
B)  external costs. 
C)  a negative externality. 
D)  a positive externality. 
A)  private property abuse. 
B)  external costs. 
C)  a negative externality. 
D)  a positive externality.

Question 20

The reason individual homeowners usually do not hire a private contractor to fill the potholes on their street is because:

Accepted Answer

A)  it costs too much. 
B)  the value to the neighborhood exceeds the cost of repair. 
C)  others who use the street will be free riders. 
D)  they do not trust the government. 
E)  there are negative externalities associated with the repair. 
A)  it costs too much. 
B)  the value to the neighborhood exceeds the cost of repair. 
C)  others who use the street will be free riders. 
D)  they do not trust the government. 
E)  there are negative externalities associated with the repair.

If the market demand and supply curves shift as given in Exhibit 4-6, the resulting new equilibrium will show a(n):

Which of the following is an example of a pure public good?

People who enjoy the benefits of a public good without paying for them are called:

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?

Which of the following is the best example of a public good?

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?

If the government imposes a price ceiling below the market equilibrium price, which of the following will result?

Bobby's neighbor is growing a tree that is blocking Bobby's ocean view. Bobby is considering taking his neighbor to court. This is most likely an example of a:

An increase in the wages paid to fishermen will have what effect on the fish market equilibrium?

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, which of the following would occur at a price of $2.00?

A legally mandated minimum wage is an example of:

Exhibit 4-2 Supply and demand curves -The market shown in Exhibit 4-2 is initially in equilibrium at E₃. Changes in market conditions result in a new equilibrium at E₄. This change is stated as a(n):

Goods whose benefits to society are not diminished as more people consume them and whose benefits cannot be withheld from anyone are:

Externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from:

An equilibrium price is unaffected by nonprice factors.

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

Suppose a wallet firm has been dumping its wastes into the local river. The government finds out and insists that the firm pay for the cost of the river cleanup. As a result, we can expect:

Cindy discovers that when she goes to the beach, she does not have to bring her radio. She can put her blanket near someone who has a radio and listen all day (without having to carry her radio, get sand in her speakers, or buy new batteries). This is an example of:

The reason individual homeowners usually do not hire a private contractor to fill the potholes on their street is because:

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

If the market demand and supply curves shift as given in Exhibit 4-6, the resulting new equilibrium will show a(n):

Which of the following is an example of a pure public good?

People who enjoy the benefits of a public good without paying for them are called:

Which of the following is the most likely effect of lower apple juice prices on the price and quantity purchased of orange juice, a substitute product?

Which of the following is the best example of a public good?

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take?

If the government imposes a price ceiling below the market equilibrium price, which of the following will result?

Bobby's neighbor is growing a tree that is blocking Bobby's ocean view. Bobby is considering taking his neighbor to court. This is most likely an example of a:

An increase in the wages paid to fishermen will have what effect on the fish market equilibrium?

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, which of the following would occur at a price of $2.00?

A legally mandated minimum wage is an example of:

Exhibit 4-2 Supply and demand curves ​ -The market shown in Exhibit 4-2 is initially in equilibrium at E3. Changes in market conditions result in a new equilibrium at E4. This change is stated as a(n):

Goods whose benefits to society are not diminished as more people consume them and whose benefits cannot be withheld from anyone are:

Externalities are unintended costs or benefits that are imposed on unsuspecting people and that result from:

​An equilibrium price is unaffected by nonprice factors.

​ Assume a price floor is set above the equilibrium price. The result is a shortage.

Suppose a wallet firm has been dumping its wastes into the local river. The government finds out and insists that the firm pay for the cost of the river cleanup. As a result, we can expect:

Cindy discovers that when she goes to the beach, she does not have to bring her radio. She can put her blanket near someone who has a radio and listen all day (without having to carry her radio, get sand in her speakers, or buy new batteries). This is an example of:

The reason individual homeowners usually do not hire a private contractor to fill the potholes on their street is because:

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 E₃. Changes in market conditions result in a new equilibrium at E₄. This change is stated as a(n):

An equilibrium price is unaffected by nonprice factors.

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