Question 1

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

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 2

Which of the following is the most likely result of an increase in the minimum wage?

Accepted Answer

A)  An increase in the employment of unskilled workers. 
B)  A decrease in the number of workers seeking minimum wage jobs. 
C)  An increase in the demand for unskilled workers. 
D)  A decrease in the employment of unskilled workers. 
A)  An increase in the employment of unskilled workers. 
B)  A decrease in the number of workers seeking minimum wage jobs. 
C)  An increase in the demand for unskilled workers. 
D)  A decrease in the employment of unskilled workers.

Question 3

Exhibit 4-4  Supply and demand curves for good X   An increase in the price of a complementary good would be represented in which of the graphs in Exhibit 4-4?

Accepted Answer

A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  None of the above. 
A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  None of the above.

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

Assuming supply is held constant, an increase in demand for a product will cause an increase in the equilibrium price and the amount bought and sold.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

A price ceiling that sets the price of a good below market equilibrium will cause:

Accepted Answer

A)  An increase in quantity demanded of the good. 
B)  A decrease in quantity supplied of the good. 
C)  A shortage of the good. 
D)  All of the above. 
A)  An increase in quantity demanded of the good. 
B)  A decrease in quantity supplied of the good. 
C)  A shortage of the good. 
D)  All of the above.

Question 8

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 9

The existence of an externality is proof that there is a(n):

Accepted Answer

A)  market failure. 
B)  undervaluation of a good. 
C)  undervaluation of a cost. 
D)  property dispute. 
E)  free-rider problem 
A)  market failure. 
B)  undervaluation of a good. 
C)  undervaluation of a cost. 
D)  property dispute. 
E)  free-rider problem

Question 10

A price floor would be established in cases where the government believed the market equilibrium price would:

Accepted Answer

A)  result in a surplus. 
B)  be too high. 
C)  result in a shortage. 
D)  be too low. 
E)  yield excess profits. 
A)  result in a surplus. 
B)  be too high. 
C)  result in a shortage. 
D)  be too low. 
E)  yield excess profits.

Question 11

Which of the following are not methods of dealing with externalities?

Accepted Answer

A)  Relying on voluntary compliance. 
B)  Taxing the output of industries that pollute. 
C)  Creating legal environmental standards. 
D)  Increasing public spending on cleanup/reduction. 
A)  Relying on voluntary compliance. 
B)  Taxing the output of industries that pollute. 
C)  Creating legal environmental standards. 
D)  Increasing public spending on cleanup/reduction.

Question 12

Public goods are usually provided by:

Accepted Answer

A)  private industry. 
B)  the government. 
C)  private citizens. 
D)  internal markets 
E)  local industry. 
A)  private industry. 
B)  the government. 
C)  private citizens. 
D)  internal markets 
E)  local industry.

Question 13

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 14

Assume no price floor exists and a market has a given equilibrium. Then a price floor is established, which is above the market equilibrium. A shortage would result.

Accepted Answer

A) True 
 B)False

Question 15

Most economists believe that there are positive externalities in education. One can conclude that a free market would fail to give the socially optimal outcome because the equilibrium:

Accepted Answer

A)  price and quantity would be too high. 
B)  price would be too low and quantity would be too high. 
C)  price and quantity would be too low. 
D)  price would be too high and quantity would be too low. 
E)  price and quantity would be just right. 
A)  price and quantity would be too high. 
B)  price would be too low and quantity would be too high. 
C)  price and quantity would be too low. 
D)  price would be too high and quantity would be too low. 
E)  price and quantity would be just right.

Question 16

​ A decrease in supply leads to an increased equilibrium price.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Which of the following is the best example of an action that imposes an external cost?

Accepted Answer

A)  Wear and tear on your car as the result of frequent use. 
B)  Deterioration in the average quality of a house you own as the result of poor maintenance. 
C)  Water pollution from an upstream factory that increases the cost of providing clean water to downstream residents. 
D)  A rose garden on your property from which your neighbor gets much enjoyment. 
A)  Wear and tear on your car as the result of frequent use. 
B)  Deterioration in the average quality of a house you own as the result of poor maintenance. 
C)  Water pollution from an upstream factory that increases the cost of providing clean water to downstream residents. 
D)  A rose garden on your property from which your neighbor gets much enjoyment.

Question 19

A price ceiling is set at $10, and the equilibrium market price is $8. Consumers will actually pay $8.

Accepted Answer

A) True 
 B)False

Question 20

Assume a ceiling price is set above the equilibrium price. The final result is the equilibrium price.

Accepted Answer

A) True 
 B)False

Exam 4: Markets in Action

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

Which of the following is the most likely result of an increase in the minimum wage?

Exhibit 4-4 Supply and demand curves for good X An increase in the price of a complementary good would be represented in which of the graphs in Exhibit 4-4?

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):

Assuming supply is held constant, an increase in demand for a product will cause an increase in the equilibrium price and the amount bought and sold.

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:

A price ceiling that sets the price of a good below market equilibrium will cause:

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

The existence of an externality is proof that there is a(n):

A price floor would be established in cases where the government believed the market equilibrium price would:

Which of the following are not methods of dealing with externalities?

Public goods are usually provided by:

The positive externality associated with education is:

Assume no price floor exists and a market has a given equilibrium. Then a price floor is established, which is above the market equilibrium. A shortage would result.

Most economists believe that there are positive externalities in education. One can conclude that a free market would fail to give the socially optimal outcome because the equilibrium:

​ A decrease in supply leads to an increased equilibrium price.

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

Which of the following is the best example of an action that imposes an external cost?

A price ceiling is set at $10, and the equilibrium market price is $8. Consumers will actually pay $8.

Assume a ceiling price is set above the equilibrium price. The final result is the equilibrium price.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

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

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

A decrease in supply leads to an increased equilibrium price.