Question 1

Exhibit 4-9 Data on supply and demand   Suppose a price floor is set by the government above the market equilibrium price. Which of the following will result?

Accepted Answer

A) There will be a surplus. 
B) The quantity demanded will exceed the quantity supplied. 
C) The demand curve will shift to the left. 
D) None of these. 
A) There will be a surplus. 
B) The quantity demanded will exceed the quantity supplied. 
C) The demand curve will shift to the left. 
D) None of these.

Question 2

Which of the following is a property of a public good?

Accepted Answer

A) It is established by legislation. 
B) Free riders are excluded. 
C) Users collectively consume benefits. 
D) It is determined by positive economics. 
A) It is established by legislation. 
B) Free riders are excluded. 
C) Users collectively consume benefits. 
D) It is determined by positive economics.

Question 3

If the government imposes a price ceiling below the market equilibrium price, then:

Accepted Answer

A) c and d. 
B) there will be excess supply. 
C) there will be excess demand. 
D) the intent is to benefit consumers. 
E) the intent is to benefit producers. 
A) c and d. 
B) there will be excess supply. 
C) there will be excess demand. 
D) the intent is to benefit consumers. 
E) the intent is to benefit producers.

Question 4

A competitive market economy is unlikely to provide an efficient quantity of some public goods because:

Accepted Answer

A) only the government has the vast resources necessary to produce public goods. 
B) the nature of public goods makes it difficult for producers to withhold them from nonpaying consumers. 
C) the technology involved in the production of public goods makes it difficult for private firms to produce them even though, once produced, they could be marketed efficiently. 
D) private production of public goods generally results in a large amount of profit, which is difficult for a firm to effectively pay out to shareholders. 
A) only the government has the vast resources necessary to produce public goods. 
B) the nature of public goods makes it difficult for producers to withhold them from nonpaying consumers. 
C) the technology involved in the production of public goods makes it difficult for private firms to produce them even though, once produced, they could be marketed efficiently. 
D) private production of public goods generally results in a large amount of profit, which is difficult for a firm to effectively pay out to shareholders.

Question 5

Which of the following would be an external cost to the consumption of cigarettes?

Accepted Answer

A) Price of a pack of cigarettes. 
B) Loss of income resulting from extra missed days of work. 
C) Higher life insurance premiums due the practice of smoking. 
D) The loss in utility received because the smoker must stand outside her office building in the winter to smoke. 
E) Increased risk of cancer to the nonsmoking passengers in the smoker's carpool. 
A) Price of a pack of cigarettes. 
B) Loss of income resulting from extra missed days of work. 
C) Higher life insurance premiums due the practice of smoking. 
D) The loss in utility received because the smoker must stand outside her office building in the winter to smoke. 
E) Increased risk of cancer to the nonsmoking passengers in the smoker's carpool.

Question 6

Exhibit 4-11 Data on supply and demand
  In Exhibit 4-11, the equilibrium price per bushel of wheat is:

Accepted Answer

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

Question 7

An equilibrium price is unaffected by nonprice factors.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 4-5 Supply and demand curves for computers   Which of the following changes could cause the computer market to change as shown in Exhibit 4-5?

Accepted Answer

A) Lower costs for computer chips and motherboards. 
B) The failure of several computer manufacturers. 
C) Higher prices for computer software. 
D) More features and greater ease of use. 
A) Lower costs for computer chips and motherboards. 
B) The failure of several computer manufacturers. 
C) Higher prices for computer software. 
D) More features and greater ease of use.

Question 10

Which of the following would be an external cost associated with the manufacture of cigarettes?

Accepted Answer

A) Price of a pack of cigarettes. 
B) Price of leaf tobacco. 
C) Cost to the government of the hospital expenses of indigent smokers. 
D) Cost to the employer of the higher health insurance premiums due to the hiring of a smoker. 
E) Cost to the employer of the extra effort lost due to the increased missed days of work as a result of smoking. 
A) Price of a pack of cigarettes. 
B) Price of leaf tobacco. 
C) Cost to the government of the hospital expenses of indigent smokers. 
D) Cost to the employer of the higher health insurance premiums due to the hiring of a smoker. 
E) Cost to the employer of the extra effort lost due to the increased missed days of work as a result of smoking.

Question 11

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 12

If Congress decides to reduce the tax per pack paid by sellers of cigarettes, other things being equal, the equilibrium price of cigarettes will fall. This fall in the equilibrium price can be attributed to a(n):

Accepted Answer

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

Question 13

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 14

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 15

A community in a Southeastern state passed a beautification ordinance (law)prohibiting the placement of indoor furniture outside of homes (i.e., no couches on the porch). The law represents a conflict between ____ and ____.

Accepted Answer

A) the rich; the poor 
B) third parties; market participants 
C) victims; criminals 
D) public goods; private goods 
E) residents; visitors 
A) the rich; the poor 
B) third parties; market participants 
C) victims; criminals 
D) public goods; private goods 
E) residents; visitors

Question 16

What are market failures? Discuss examples of market failures. What can government do to improve the results of market failures?

Accepted Answer

Market failures are undesirable social r

Question 17

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 18

An externality is an unintended ____ imposed on ____ as a result of the ____.

Accepted Answer

A) c or d 
B) cost; sellers; negligence of others 
C) cost; third parties; economic activity of others 
D) benefit; third parties; economic activity of others 
E) benefit; sellers; beneficence of others 
A) c or d 
B) cost; sellers; negligence of others 
C) cost; third parties; economic activity of others 
D) benefit; third parties; economic activity of others 
E) benefit; sellers; beneficence of others

Question 19

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 20

If a good gives rise to substantial external benefits to society that are associated with its production and\or consumption, then the good likely has too many resources devoted to its production.

Accepted Answer

A) True 
 B)False

Exam 4: Markets in Action

Exhibit 4-9 Data on supply and demand Suppose a price floor is set by the government above the market equilibrium price. Which of the following will result?

Which of the following is a property of a public good?

If the government imposes a price ceiling below the market equilibrium price, then:

A competitive market economy is unlikely to provide an efficient quantity of some public goods because:

Which of the following would be an external cost to the consumption of cigarettes?

Exhibit 4-11 Data on supply and demand In Exhibit 4-11, the equilibrium price per bushel of wheat is:

An equilibrium price is unaffected by nonprice factors.

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

Exhibit 4-5 Supply and demand curves for computers Which of the following changes could cause the computer market to change as shown in Exhibit 4-5?

Which of the following would be an external cost associated with the manufacture of cigarettes?

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):

If Congress decides to reduce the tax per pack paid by sellers of cigarettes, other things being equal, the equilibrium price of cigarettes will fall. This fall in the equilibrium price can be attributed to a(n):

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

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

A community in a Southeastern state passed a beautification ordinance (law)prohibiting the placement of indoor furniture outside of homes (i.e., no couches on the porch). The law represents a conflict between ____ and ____.

What are market failures? Discuss examples of market failures. What can government do to improve the results of market failures?

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

An externality is an unintended ____ imposed on ____ as a result of the ____.

If the government imposes a price ceiling, then:

If a good gives rise to substantial external benefits to society that are associated with its production and\or consumption, then the good likely has too many resources devoted to its production.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

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):

A community in a Southeastern state passed a beautification ordinance (law)prohibiting the placement of indoor furniture outside of homes (i.e., no couches on the porch). The law represents a conflict between and .

An externality is an unintended imposed on as a result of the .