Question 1

If each of us relied exclusively on the market to determine what to buy,we would probably end up with few,if any:

Accepted Answer

A) cars. 
B) bananas. 
C) national parks. 
D) computers. 
E) t-shirts. 
A) cars. 
B) bananas. 
C) national parks. 
D) computers. 
E) t-shirts. C

Question 2

If two goods A and B are complements,then an increase in price of good A will result in a:

Accepted Answer

A)  temporary surplus of good B. 
B)  temporary surplus of good A. 
C)  temporary shortage of good B. 
D)  temporary shortage of good A. 
A)  temporary surplus of good B. 
B)  temporary surplus of good A. 
C)  temporary shortage of good B. 
D)  temporary shortage of good A. A

Question 3

An increase in demand and a decrease in supply cause which of the following?

Accepted Answer

A) Equilibrium price change is indeterminate. 
B) Equilibrium quantity decreases. 
C) Equilibrium price falls. 
D) Equilibrium price rises. 
E) Equilibrium quantity increases. 
A) Equilibrium price change is indeterminate. 
B) Equilibrium quantity decreases. 
C) Equilibrium price falls. 
D) Equilibrium price rises. 
E) Equilibrium quantity increases. D

Question 4

A public good such as a free clean air is available for all users even those who do not pay for the public good.

Accepted Answer

A) True 
 B)False

Question 5

A price ceiling set below the equilibrium price creates a shortage.

Accepted Answer

A) True 
 B)False

Question 6

If a farmer chooses not to develop his/her land in order to preserve wildlife,it is an example of:

Accepted Answer

A) inefficiency. 
B) positive externality. 
C) negative externality. 
D) excess of resources. 
A) inefficiency. 
B) positive externality. 
C) negative externality. 
D) excess of resources.

Question 7

Which of the following is an example of a positive externality?

Accepted Answer

A) Planting flowers in your front yard. 
B) Talking loudly when others are trying to study economics. 
C) Accidentally pushing someone as you try to cross the street. 
D) Littering on the street. 
A) Planting flowers in your front yard. 
B) Talking loudly when others are trying to study economics. 
C) Accidentally pushing someone as you try to cross the street. 
D) Littering on the street.

Question 8

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 9

An explanation for the existence of black markets is:

Accepted Answer

A) a price ceiling below the equilibrium price. 
B) a price ceiling above the equilibrium price. 
C) a price floor above the equilibrium price. 
D) a price floor below the equilibrium price. 
A) a price ceiling below the equilibrium price. 
B) a price ceiling above the equilibrium price. 
C) a price floor above the equilibrium price. 
D) a price floor below the equilibrium price.

Question 10

Albert,Betty,Christine and David are all very good students.When they hold their study sessions,they often discuss very difficult concepts in great detail.Christine's roommate,Elizabeth,who takes completely different classes,still learns from the discussions of the others.This is the case of a/an _____,which _____ a _____.

Accepted Answer

A) public good; benefits; third party 
B) externality; imposes a cost on; free rider 
C) market failure; results from; third party 
D) free rider; benefits from; third party 
E) externality; benefits; third party 
A) public good; benefits; third party 
B) externality; imposes a cost on; free rider 
C) market failure; results from; third party 
D) free rider; benefits from; third party 
E) externality; benefits; third party

Question 11

Rent controls can result in:

Accepted Answer

A) increasing rents received by landlords. 
B) rising property values. 
C) encouraging landlords to overspend for maintenance. 
D) lower quality of housing. 
E) increasing the supply of housing in the long run. 
A) increasing rents received by landlords. 
B) rising property values. 
C) encouraging landlords to overspend for maintenance. 
D) lower quality of housing. 
E) increasing the supply of housing in the long run.

Question 12

'Safety nets',such as welfare payments,are designed to:

Accepted Answer

A) increase income inequality. 
B) prevent rich people from getting richer. 
C) provide minimum income level for all citizens. 
D) act as an incentive to work. 
A) increase income inequality. 
B) prevent rich people from getting richer. 
C) provide minimum income level for all citizens. 
D) act as an incentive to work.

Question 13

One of the ways to deal with external cost is:

Accepted Answer

A) to rely on a good behaviour. 
B) to invest in technological development. 
C) to penalise those who bear the external cost. 
D) to include the external cost in market price. 
A) to rely on a good behaviour. 
B) to invest in technological development. 
C) to penalise those who bear the external cost. 
D) to include the external cost in market price.

Question 14

Exhibit 4-2 Supply and demand curves
  
-In Exhibit 4-2,a decrease in quantity demanded would cause a move from which equilibrium point to another,other things being equal?

Accepted Answer

A) E₁ to E₂. 
B) E₁ to E₃. 
C) E₄ to E₁. 
D) E₃ to E₄. 
A) E₁ to E₂. 
B) E₁ to E₃. 
C) E₄ to E₁. 
D) E₃ to E₄.

Question 15

If the free market is called upon to provide public goods,then:

Accepted Answer

A) there will more goods provided than is optimal. 
B) there will be fewer goods provided than is optimal. 
C) the market will provide the optimal number of goods. 
D) the market price will be correct, but the optimal amount of output will not be produced. 
E) the firms will earn excess profit. 
A) there will more goods provided than is optimal. 
B) there will be fewer goods provided than is optimal. 
C) the market will provide the optimal number of goods. 
D) the market price will be correct, but the optimal amount of output will not be produced. 
E) the firms will earn excess profit.

Question 16

Competition in the presence of negative externality will result in the following outcome:

Accepted Answer

A) the market price will be lower and output will be lower than socially desirable. 
B) the market price will be lower and output will be higher than socially desirable. 
C) the market price will be higher and output will be lower than socially desirable. 
D) the market price output will be the same as socially desirable. 
A) the market price will be lower and output will be lower than socially desirable. 
B) the market price will be lower and output will be higher than socially desirable. 
C) the market price will be higher and output will be lower than socially desirable. 
D) the market price output will be the same as socially desirable.

Question 17

If the market supply decreases and,simultaneously,market demand increases,the new equilibrium will show:

Accepted Answer

A) market price will increase, decrease or remain the same and quantity exchanged will decrease. 
B) market price will increase and market quantity exchanged will decrease. 
C) market price will decrease and the quantity exchanged could increase, decrease or remain the same. 
D) market price could increase, decrease or remain the same and quantity exchanged will increase. 
E) market price will increase and market quantity exchanged could increase, decrease or remain unchanged. 
A) market price will increase, decrease or remain the same and quantity exchanged will decrease. 
B) market price will increase and market quantity exchanged will decrease. 
C) market price will decrease and the quantity exchanged could increase, decrease or remain the same. 
D) market price could increase, decrease or remain the same and quantity exchanged will increase. 
E) market price will increase and market quantity exchanged could increase, decrease or remain unchanged.

Question 18

Exhibit 4-5 Supply and demand data for cars
  
-In Exhibit 4-5,the equilibrium price is:

Accepted Answer

A) $10 000. 
B) $20 000. 
C) $30 000. 
D) $40 000. 
A) $10 000. 
B) $20 000. 
C) $30 000. 
D) $40 000.

Question 19

External benefits cause the market to:

Accepted Answer

A) under-allocate resources. 
B) be more efficient. 
C) set excessively high prices. 
D) have persistent shortages. 
A) under-allocate resources. 
B) be more efficient. 
C) set excessively high prices. 
D) have persistent shortages.

Question 20

A market consequence of the establishment of a price floor program is that price will be:

Accepted Answer

A) too low and an excess supply will result. 
B) too low and a shortage will result. 
C) below the market equilibrium price. 
D) too high and a shortage will result. 
E) too high and an excess supply will result. 
A) too low and an excess supply will result. 
B) too low and a shortage will result. 
C) below the market equilibrium price. 
D) too high and a shortage will result. 
E) too high and an excess supply will result.

If each of us relied exclusively on the market to determine what to buy,we would probably end up with few,if any:

If two goods A and B are complements,then an increase in price of good A will result in a:

An increase in demand and a decrease in supply cause which of the following?

A public good such as a free clean air is available for all users even those who do not pay for the public good.

A price ceiling set below the equilibrium price creates a shortage.

If a farmer chooses not to develop his/her land in order to preserve wildlife,it is an example of:

Which of the following is an example of a positive externality?

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

An explanation for the existence of black markets is:

Rent controls can result in:

'Safety nets',such as welfare payments,are designed to:

One of the ways to deal with external cost is:

Exhibit 4-2 Supply and demand curves -In Exhibit 4-2,a decrease in quantity demanded would cause a move from which equilibrium point to another,other things being equal?

If the free market is called upon to provide public goods,then:

Competition in the presence of negative externality will result in the following outcome:

If the market supply decreases and,simultaneously,market demand increases,the new equilibrium will show:

Exhibit 4-5 Supply and demand data for cars -In Exhibit 4-5,the equilibrium price is:

External benefits cause the market to:

A market consequence of the establishment of a price floor program is that price will be:

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters

Exam 4: Markets in action

If each of us relied exclusively on the market to determine what to buy,we would probably end up with few,if any:

If two goods A and B are complements,then an increase in price of good A will result in a:

An increase in demand and a decrease in supply cause which of the following?

A public good such as a free clean air is available for all users even those who do not pay for the public good.

A price ceiling set below the equilibrium price creates a shortage.

If a farmer chooses not to develop his/her land in order to preserve wildlife,it is an example of:

Which of the following is an example of a positive externality?

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

An explanation for the existence of black markets is:

Rent controls can result in:

'Safety nets',such as welfare payments,are designed to:

One of the ways to deal with external cost is:

Exhibit 4-2 Supply and demand curves -In Exhibit 4-2,a decrease in quantity demanded would cause a move from which equilibrium point to another,other things being equal?

If the free market is called upon to provide public goods,then:

Competition in the presence of negative externality will result in the following outcome:

If the market supply decreases and,simultaneously,market demand increases,the new equilibrium will show:

Exhibit 4-5 Supply and demand data for cars -In Exhibit 4-5,the equilibrium price is:

External benefits cause the market to:

A market consequence of the establishment of a price floor program is that price will be:

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters