Question 1

Exhibit 4-10 Supply and demand data for apricots   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 2

Suppose that X and Y are substitutes. If the price of Y increases, equilibrium price and quantity for X both rise.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not a common effect of imposing a rent control?

Accepted Answer

A) Discriminatory practices by landlords. 
B) More time on waiting lists and searching for housing. 
C) A "black market" for rentals. 
D) An excess supply of rentals at the controlled price. 
A) Discriminatory practices by landlords. 
B) More time on waiting lists and searching for housing. 
C) A "black market" for rentals. 
D) An excess supply of rentals at the controlled price.

Question 4

Exhibit 4-6 Demand and supply curves   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 5

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 6

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 7

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 8

The possibility of a free rider exists:

Accepted Answer

A) in the presence of external costs and benefits. 
B) only in the presence of external costs. 
C) only in the presence of external benefits. 
D) only in the presence of internal costs. 
E) only in the presence of a government-produced good. 
A) in the presence of external costs and benefits. 
B) only in the presence of external costs. 
C) only in the presence of external benefits. 
D) only in the presence of internal costs. 
E) only in the presence of a government-produced good.

Question 9

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 10

Exhibit 4-1 Supply and demand data   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 11

Voluntary recycling is available in many parts of the country. If citizens of these areas have collected recyclable material at home, they can bring it to a recycling center. These materials reduce landfill space, reduce the need for virgin material extraction, and provide an inexpensive input in many production processes. The information in this question suggests what about areas without voluntary recycling?

Accepted Answer

A) Externalities exist. 
B) There is mandatory recycling. 
C) Raw materials are less expensive. 
D) The cost of production is higher. 
E) Nothing. 
A) Externalities exist. 
B) There is mandatory recycling. 
C) Raw materials are less expensive. 
D) The cost of production is higher. 
E) Nothing.

Question 12

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 13

An increased equilibrium price and a decreased equilibrium quantity results from a(an):

Accepted Answer

A) decrease in demand. 
B) increase in supply. 
C) decrease in supply. 
D) increase in demand. 
A) decrease in demand. 
B) increase in supply. 
C) decrease in supply. 
D) increase in demand.

Question 14

A technological breakthrough lowers the cost of manufacturing DVDs. As a result, the market changes to a new equilibrium because of a(n):

Accepted Answer

A) upward movement along the demand curve for DVDs. 
B) rightward shift in the demand curve for DVDs. 
C) rightward shift in the supply curve for DVDs. 
D) shortage of DVDs. 
A) upward movement along the demand curve for DVDs. 
B) rightward shift in the demand curve for DVDs. 
C) rightward shift in the supply curve for DVDs. 
D) shortage of DVDs.

Question 15

When there is a positive externality associated with the watering of one's lawn, the free market results in:

Accepted Answer

A) not enough lawn watering. 
B) too much lawn watering. 
C) the socially optimal level of lawn watering. 
D) people watering each other's lawns. 
E) government subsidies for lawn watering. 
A) not enough lawn watering. 
B) too much lawn watering. 
C) the socially optimal level of lawn watering. 
D) people watering each other's lawns. 
E) government subsidies for lawn watering.

Question 16

If the equilibrium price of aspirins is $2.50 and a price ceiling is imposed at $3.00, the eventual result after market adjustment will be a(n):

Accepted Answer

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

Question 17

The former Soviet Union was known for black markets. An explanation for the existence of these illegal markets is that:

Accepted Answer

A) goods were not subject to price controls. 
B) the government imposed a price ceiling below the equilibrium price. 
C) the government imposed a price ceiling above the equilibrium price. 
D) all of these. 
A) goods were not subject to price controls. 
B) the government imposed a price ceiling below the equilibrium price. 
C) the government imposed a price ceiling above the equilibrium price. 
D) all of these.

Question 18

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 19

Noise pollution is a serious problem. One major contributor is the recent development of very powerful amplification equipment for automobile radios. Many people complain that the windows in their home vibrate when some cars drive by. Others complain that loud car radios set off very sensitive alarms in nearby parked cars. What do we know about the drivers of cars with loud stereos?

Accepted Answer

A) b, c, and e. 
B) It would be very expensive for them to engage in this behavior if individuals had a right to a nonvibrating home. 
C) The cost of their own hearing loss is less than the benefit they receive from cranking it up. 
D) They realize that there are no ordinances prohibiting loud noise. 
E) Their private costs fall short of the social costs. 
A) b, c, and e. 
B) It would be very expensive for them to engage in this behavior if individuals had a right to a nonvibrating home. 
C) The cost of their own hearing loss is less than the benefit they receive from cranking it up. 
D) They realize that there are no ordinances prohibiting loud noise. 
E) Their private costs fall short of the social costs.

Question 20

Exhibit 4-2 Supply and demand curves   In Exhibit 4-2, which of the following might cause a shift from S1 to S2?

Accepted Answer

A) A decrease in input prices. 
B) A decrease in consumer prices. 
C) An increase in input prices. 
D) An increase in consumer income. 
A) A decrease in input prices. 
B) A decrease in consumer prices. 
C) An increase in input prices. 
D) An increase in consumer income.

Exam 4: Markets in Action

Exhibit 4-10 Supply and demand data for apricots Which of the following would occur if the government set a price ceiling of $1 in the market shown in Exhibit 4-10?

Suppose that X and Y are substitutes. If the price of Y increases, equilibrium price and quantity for X both rise.

Which of the following is not a common effect of imposing a rent control?

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

External benefits cause the market to:

The positive externality associated with education is:

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 possibility of a free rider exists:

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?

Exhibit 4-1 Supply and demand data Exhibit 4-1 shows that at a price of $3.00,

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

An increased equilibrium price and a decreased equilibrium quantity results from a(an):

A technological breakthrough lowers the cost of manufacturing DVDs. As a result, the market changes to a new equilibrium because of a(n):

When there is a positive externality associated with the watering of one's lawn, the free market results in:

If the equilibrium price of aspirins is $2.50 and a price ceiling is imposed at $3.00, the eventual result after market adjustment will be a(n):

The former Soviet Union was known for black markets. An explanation for the existence of these illegal markets is that:

Exhibit 4-2 Supply and demand curves In Exhibit 4-2, which of the following might cause a shift from S1 to S2?

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 In Exhibit 4-2, which of the following might cause a shift from S₁ to S₂?