Question 1

Which of the following would be an example of a public good?

Accepted Answer

A) A candy bar. 
B) A painting by Monet. 
C) A taxi cab. 
D) A sunset. 
E) The beach. 
A) A candy bar. 
B) A painting by Monet. 
C) A taxi cab. 
D) A sunset. 
E) The beach.

Question 2

An increase in the demand for tattoos will lead to a:

Accepted Answer

A) higher price and a larger quantity sold. 
B) lower price and a larger quantity sold. 
C) higher price and a smaller quantity sold. 
D) lower price and a smaller quantity sold 
A) higher price and a larger quantity sold. 
B) lower price and a larger quantity sold. 
C) higher price and a smaller quantity sold. 
D) lower price and a smaller quantity sold

Question 3

The minimum price for a good set by the government above the equilibrium price is called a:

Accepted Answer

A) price ceiling. 
B) price floor. 
C) parity price ratio. 
D) market-generated price. 
E) deficiency price. 
A) price ceiling. 
B) price floor. 
C) parity price ratio. 
D) market-generated price. 
E) deficiency price.

Question 4

An increase in the price of plastic raises the cost of manufacturing DVDs. As a result, the market changes to a new equilibrium because of a(n):

Accepted Answer

A) surplus of DVDs. 
B) increase in the demand for DVDs. 
C) leftward shift in the demand curve for DVDs. 
D) leftward shift in the supply curve for DVDs. 
A) surplus of DVDs. 
B) increase in the demand for DVDs. 
C) leftward shift in the demand curve for DVDs. 
D) leftward shift in the supply curve for DVDs.

Question 5

When the government imposes a price ceiling on a good whose price is too high,

Accepted Answer

A) surpluses are created. 
B) supply will increase to meet the demand. 
C) rationing is not necessary. 
D) quantity demanded of the good will fall. 
E) chronic excess demand occurs. 
A) surpluses are created. 
B) supply will increase to meet the demand. 
C) rationing is not necessary. 
D) quantity demanded of the good will fall. 
E) chronic excess demand occurs.

Question 6

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 7

Exhibit 4-4 Supply and demand curves for good X   Which of the graphs in Exhibit 4-4 illustrates an increase in buyers' income, assuming that good X is a normal good?

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 8

Exhibit 4-3 Supply and demand curves   In Exhibit 4-3, which of the following might cause a shift from S2 to S1?

Accepted Answer

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

Question 9

If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread, then:

Accepted Answer

A) more bread will be produced. 
B) there will be a shortage of bread. 
C) the demand for bread will decrease. 
D) producers will charge $0.50 for bread. 
E) $0.50 in tax revenue will be paid for each unit of bread. 
A) more bread will be produced. 
B) there will be a shortage of bread. 
C) the demand for bread will decrease. 
D) producers will charge $0.50 for bread. 
E) $0.50 in tax revenue will be paid for each unit of bread.

Question 10

A good example of a price floor is:

Accepted Answer

A) rent controls on apartments in major cities. 
B) general admission tickets to concerts. 
C) the minimum wage law. 
D) food stamp regulations. 
E) rock concert tickets. 
A) rent controls on apartments in major cities. 
B) general admission tickets to concerts. 
C) the minimum wage law. 
D) food stamp regulations. 
E) rock concert tickets.

Question 11

Much of the nation's coal is extracted by strip mining. This process leaves a huge barren hole in the ground when complete, and the cost of replanting the trees is approximately $10 per ton of coal. Burning the coal for electricity causes air pollution. No one knows how much damage the air pollution causes, but we know that for another $10 per ton the power plant can be outfitted with a pollution control device. What is one measure of the true social cost of coal fired electricity, in dollars per ton?

Accepted Answer

A) Private marginal cost plus the $10 replanting charge. 
B) Private marginal cost plus the $10 emission control charge. 
C) Only the $20 of replanting and emission control charges, because the other costs are private, not social. 
D) Private marginal cost plus the $20 of replanting and emission control charges. 
E) In order to answer this question we need to know the dollar value of the pollution. 
A) Private marginal cost plus the $10 replanting charge. 
B) Private marginal cost plus the $10 emission control charge. 
C) Only the $20 of replanting and emission control charges, because the other costs are private, not social. 
D) Private marginal cost plus the $20 of replanting and emission control charges. 
E) In order to answer this question we need to know the dollar value of the pollution.

Question 12

When airplanes take off and land at Logan airport, residents of East Boston complain about the noise. The same planes make the same noise during the trip to Boston from Paris, but there are no ____ for most of the trip because ____.

Accepted Answer

A) jet sounds; noise doesn't travel at high altitudes 
B) third parties; there are no externalities 
C) externalities; there are no third parties 
D) complaints; airplanes are insulated 
E) free riders; passengers must pay to board the plane 
A) jet sounds; noise doesn't travel at high altitudes 
B) third parties; there are no externalities 
C) externalities; there are no third parties 
D) complaints; airplanes are insulated 
E) free riders; passengers must pay to board the plane

Question 13

If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by a(an):

Accepted Answer

A) increase in the supply of the good. 
B) increase in the demand for the good. 
C) decrease in the demand for the good. 
D) decrease in the supply of the good. 
A) increase in the supply of the good. 
B) increase in the demand for the good. 
C) decrease in the demand for the good. 
D) decrease in the supply of the good.

Question 14

Unintended costs that are imposed in third parties as a result of an economic activity are called:

Accepted Answer

A) marginal costs. 
B) direct costs. 
C) negative externalities. 
D) positive externalities. 
E) positive costs. 
A) marginal costs. 
B) direct costs. 
C) negative externalities. 
D) positive externalities. 
E) positive costs.

Question 15

Exhibit 4-3 Supply and demand curves   Initially the market shown in Exhibit 4-3 is in equilibrium at P3, Q3 (E3). Changes in market conditions result in a new equilibrium at P2, Q2 (E2). This change is stated as a:

Accepted Answer

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

Question 16

Which of the following statements is true of a market?

Accepted Answer

A) An increase in demand, with no change in supply, will increase the equilibrium price and quantity. 
B) An increase in supply, with no change in demand, will decrease the equilibrium price and the equilibrium quantity. 
C) A decrease in supply, with no change in demand, will decrease the equilibrium price and increase the equilibrium quantity. 
D) All of these. 
A) An increase in demand, with no change in supply, will increase the equilibrium price and quantity. 
B) An increase in supply, with no change in demand, will decrease the equilibrium price and the equilibrium quantity. 
C) A decrease in supply, with no change in demand, will decrease the equilibrium price and increase the equilibrium quantity. 
D) All of these.

Question 17

If the government imposes a price floor above the market equilibrium price, then:

Accepted Answer

A) b and e. 
B) there will be excess supply. 
C) there will be excess demand. 
D) consumers will benefit. 
E) producers will benefit. 
A) b and e. 
B) there will be excess supply. 
C) there will be excess demand. 
D) consumers will benefit. 
E) producers will benefit.

Question 18

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 19

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 20

If the equilibrium price of natural gas is $4 per thousand cubic feet and a price ceiling is imposed at $3 per thousand cubic feet, the result will be:

Accepted Answer

A) a surplus of natural gas. 
B) a shortage of natural gas. 
C) an accumulation of inventories of unsold gas. 
D) None of these. 
A) a surplus of natural gas. 
B) a shortage of natural gas. 
C) an accumulation of inventories of unsold gas. 
D) None of these.

Exam 4: Markets in Action

Which of the following would be an example of a public good?

An increase in the demand for tattoos will lead to a:

The minimum price for a good set by the government above the equilibrium price is called a:

An increase in the price of plastic raises the cost of manufacturing DVDs. As a result, the market changes to a new equilibrium because of a(n):

When the government imposes a price ceiling on a good whose price is too high,

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:

Exhibit 4-4 Supply and demand curves for good X Which of the graphs in Exhibit 4-4 illustrates an increase in buyers' income, assuming that good X is a normal good?

Exhibit 4-3 Supply and demand curves In Exhibit 4-3, which of the following might cause a shift from S2 to S1?

If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread, then:

A good example of a price floor is:

When airplanes take off and land at Logan airport, residents of East Boston complain about the noise. The same planes make the same noise during the trip to Boston from Paris, but there are no ____ for most of the trip because ____.

If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by a(an):

Unintended costs that are imposed in third parties as a result of an economic activity are called:

Exhibit 4-3 Supply and demand curves Initially the market shown in Exhibit 4-3 is in equilibrium at P3, Q3 (E3). Changes in market conditions result in a new equilibrium at P2, Q2 (E2). This change is stated as a:

Which of the following statements is true of a market?

If the government imposes a price floor above the market equilibrium price, then:

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:

If the equilibrium price of natural gas is $4 per thousand cubic feet and a price ceiling is imposed at $3 per thousand cubic feet, the result will be:

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 4-3 Supply and demand curves In Exhibit 4-3, which of the following might cause a shift from S₂ to S₁?

When airplanes take off and land at Logan airport, residents of East Boston complain about the noise. The same planes make the same noise during the trip to Boston from Paris, but there are no for most of the trip because .

Exhibit 4-3 Supply and demand curves Initially the market shown in Exhibit 4-3 is in equilibrium at P₃, Q₃ (E₃). Changes in market conditions result in a new equilibrium at P₂, Q₂ (E₂). This change is stated as a: