Question 1

The demand curve for a typical good has

Accepted Answer

A)  a negative slope because some consumers switch to other goods as the price of the good rises. 
B)  a negative slope because the supply of the good rises as demand rises. 
C)  a negative slope because the good has less "snob appeal" as its price falls. 
D)  an inverse slope because as the price goes up, the good has more profitability. 
E)  a positive slope because price is a clear indicator of need. 
A)  a negative slope because some consumers switch to other goods as the price of the good rises. 
B)  a negative slope because the supply of the good rises as demand rises. 
C)  a negative slope because the good has less "snob appeal" as its price falls. 
D)  an inverse slope because as the price goes up, the good has more profitability. 
E)  a positive slope because price is a clear indicator of need.

Question 2

Figure 4-15
  
-Recycling of newspapers has been undermined by its success.The supply of old papers, gathered diligently by those concerned with the environment, has increased dramatically, as has the number of firms that convert the material into recycled newsprint.The quantity demanded has remained relatively stable despite falling prices because newspapers consider recycled newsprint an inferior substitute for regular newsprint.Consequently, the price of recycled newsprint has fallen below the cost of production; recycling firms are going out of business; mountains of old newspapers are left behind.Which graph in Figure 4-15 best illustrates this situation?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 3

During the Revolutionary War, the Pennsylvania legislature attempted to help the Continental Army by enacting

Accepted Answer

A)  wage floors for soldiers in the army. 
B)  bonuses for soldiers who re-enlisted. 
C)  laws to buy food for the soldiers stationed in Pennsylvania. 
D)  price controls on essential commodities. 
E)  All of the above are correct. 
A)  wage floors for soldiers in the army. 
B)  bonuses for soldiers who re-enlisted. 
C)  laws to buy food for the soldiers stationed in Pennsylvania. 
D)  price controls on essential commodities. 
E)  All of the above are correct.

Question 4

Economists generally recognize that rent controls cause shortages in housing, yet rent controls tend to persist.Why does this occur?

Accepted Answer

A)  Many people do not understand the effects that controls cause. 
B)  Property owners are politically unpopular. 
C)  Many persons tend to benefit from rent controls. 
D)  All of the above are correct. 
A)  Many people do not understand the effects that controls cause. 
B)  Property owners are politically unpopular. 
C)  Many persons tend to benefit from rent controls. 
D)  All of the above are correct.

Question 5

The most basic investigative tool of economics is the

Accepted Answer

A)  concept of scarcity. 
B)  mechanism of supply and demand. 
C)  coordination and trade syndrome. 
D)  inflation-unemployment trade-off. 
E)  regulation of business. 
A)  concept of scarcity. 
B)  mechanism of supply and demand. 
C)  coordination and trade syndrome. 
D)  inflation-unemployment trade-off. 
E)  regulation of business.

Question 6

In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart.In February, 3,000 quarts are sold at $2.50 a quart.This change in quantity sold and price may have been caused by

Accepted Answer

A)  a reduction in wages in the Boston area. 
B)  the introduction of labor-saving automated ice cream-packing machinery. 
C)  the release of a medical study showing that ice cream consumption improves mental health. 
D)  the decision by Boston ice cream sellers to eliminate discount coupons. 
A)  a reduction in wages in the Boston area. 
B)  the introduction of labor-saving automated ice cream-packing machinery. 
C)  the release of a medical study showing that ice cream consumption improves mental health. 
D)  the decision by Boston ice cream sellers to eliminate discount coupons.

Question 7

After Hurricane Andrew hit Florida and Louisiana, consumers expressed outrage at the high prices being charged for chainsaws, generators, and bottled water.If governments followed the consumers' demands and imposed price ceilings in these markets, what is the likely result?

Accepted Answer

Effective price ceilings (i.e., price ce

Question 8

If supply increases, the equilibrium price will rise and the equilibrium quantity will fall.

Accepted Answer

A) True 
 B)False

Question 9

The demand curve for a good connects points describing how much consumers

Accepted Answer

A)  actually bought at different prices during a particular period. 
B)  actually bought at different prices in different periods. 
C)  would have been willing and able to buy at different prices during a particular period. 
D)  would have been willing and able to buy at different prices in different periods. 
A)  actually bought at different prices during a particular period. 
B)  actually bought at different prices in different periods. 
C)  would have been willing and able to buy at different prices during a particular period. 
D)  would have been willing and able to buy at different prices in different periods.

Question 10

How does rent control tend to cause persistent imbalances in the market for housing?

Accepted Answer

A)  Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B)  Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C)  Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D)  Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus. 
A)  Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B)  Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C)  Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D)  Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Question 11

The U.S.government banned cigarette advertising on radio and television after January, 1971.You would expect to find that after the ban took effect the price of magazine ads for

Accepted Answer

A)  all goods fell. 
B)  only cigarettes fell. 
C)  all goods rose. 
D)  only cigarettes rose. 
A)  all goods fell. 
B)  only cigarettes fell. 
C)  all goods rose. 
D)  only cigarettes rose.

Question 12

Rent controls encourage investment in housing because they bring stability to the market.

Accepted Answer

A) True 
 B)False

Question 13

Economists emphasize the importance of ____ in analyzing demand.

Accepted Answer

A)  quantity 
B)  market potential 
C)  wants and needs 
D)  price 
E)  sales opportunities 
A)  quantity 
B)  market potential 
C)  wants and needs 
D)  price 
E)  sales opportunities

Question 14

Governments of market-oriented economies never tamper with the price mechanism.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following suggests that the "laws" of supply and demand are being disobeyed?

Accepted Answer

A)  outside forces disturbing an equilibrium 
B)  persistent shortages or surpluses 
C)  the market never moving from an equilibrium 
D)  "other things" not always being equal 
A)  outside forces disturbing an equilibrium 
B)  persistent shortages or surpluses 
C)  the market never moving from an equilibrium 
D)  "other things" not always being equal

Question 16

Figure 4-18
  
-In Figure 4-18, there would be a surplus of T-shirts if the price were

Accepted Answer

A)  $10. 
B)  $8. 
C)  below $8. 
D)  between $8 and $6. 
A)  $10. 
B)  $8. 
C)  below $8. 
D)  between $8 and $6.

Question 17

Figure 4-9
  
-"Moonshine" is illegal home brew made by adding sugar to accelerate corn fermentation.Ten pounds of sugar are necessary to make a gallon of moonshine.In the mid-1970s, the price of sugar tripled and the price of moonshine skyrocketed from $6 to $15 a gallon.Which graph in Figure 4-9 best illustrates this?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 18

Figure 4-13
  
-The drug BGH (bovine growth hormone) dramatically increases the milk output of dairy cows.Farmers in Wisconsin, a big dairy state, vigorously oppose licensing the drug, fearing that excess supply and a consumer reaction on the purity of food issue will put many of them out of business.Which graph in Figure 4-13 best illustrates the farmers' fears?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 19

A demand schedule relates prices of a particular good to quantities demanded.

Accepted Answer

A) True 
 B)False

Question 20

The government of Economica announces that it will purchase its farmers' surplus of milk.From this announcement, you can infer that Economica has a

Accepted Answer

A)  free market for milk. 
B)  price ceiling above the equilibrium price for milk. 
C)  price floor above the equilibrium price for milk. 
D)  price floor below the equilibrium price for milk. 
A)  free market for milk. 
B)  price ceiling above the equilibrium price for milk. 
C)  price floor above the equilibrium price for milk. 
D)  price floor below the equilibrium price for milk.

Exam 4: Supply and Demand: An Initial Look

The demand curve for a typical good has

During the Revolutionary War, the Pennsylvania legislature attempted to help the Continental Army by enacting

Economists generally recognize that rent controls cause shortages in housing, yet rent controls tend to persist.Why does this occur?

The most basic investigative tool of economics is the

In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart.In February, 3,000 quarts are sold at $2.50 a quart.This change in quantity sold and price may have been caused by

After Hurricane Andrew hit Florida and Louisiana, consumers expressed outrage at the high prices being charged for chainsaws, generators, and bottled water.If governments followed the consumers' demands and imposed price ceilings in these markets, what is the likely result?

If supply increases, the equilibrium price will rise and the equilibrium quantity will fall.

The demand curve for a good connects points describing how much consumers

How does rent control tend to cause persistent imbalances in the market for housing?

The U.S.government banned cigarette advertising on radio and television after January, 1971.You would expect to find that after the ban took effect the price of magazine ads for

Rent controls encourage investment in housing because they bring stability to the market.

Economists emphasize the importance of ____ in analyzing demand.

Governments of market-oriented economies never tamper with the price mechanism.

Which of the following suggests that the "laws" of supply and demand are being disobeyed?

Figure 4-18 -In Figure 4-18, there would be a surplus of T-shirts if the price were

A demand schedule relates prices of a particular good to quantities demanded.

The government of Economica announces that it will purchase its farmers' surplus of milk.From this announcement, you can infer that Economica has a

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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