Question 1

If producers must receive a higher price to be induced to produce any quantity, we can conclude that

Accepted Answer

A) supply decreased. 
B) demand decreased. 
C) both supply and demand increased. 
D) demand increased. 
A) supply decreased. 
B) demand decreased. 
C) both supply and demand increased. 
D) demand increased.

Question 2

Of the following groups, who gains from rent controls?

Accepted Answer

A) landlords 
B) construction workers and their union leaders 
C) poor people who have a hard time earning enough income to pay high rents 
D) high-income people who live in rent-controlled apartments 
A) landlords 
B) construction workers and their union leaders 
C) poor people who have a hard time earning enough income to pay high rents 
D) high-income people who live in rent-controlled apartments

Question 3

A newspaper headline asserts: "Rising Demand Pushes Up Housing Prices." This headline

Accepted Answer

A) incorrectly implies that the demand for housing can change, whereas in fact only the quantity of housing demanded can change. 
B) incorrectly implies that the price of housing will rise when demand increases. 
C) incorrectly implies that more housing will be demanded at higher prices. 
D) correctly implies that an increase in demand will increase the market clearing price. 
A) incorrectly implies that the demand for housing can change, whereas in fact only the quantity of housing demanded can change. 
B) incorrectly implies that the price of housing will rise when demand increases. 
C) incorrectly implies that more housing will be demanded at higher prices. 
D) correctly implies that an increase in demand will increase the market clearing price.

Question 4

The minimum wage laws seek to

Accepted Answer

A) penalize employers that are not complying with labor laws. 
B) assure a minimum standard of payment for work. 
C) assure that all workers are paid the same wage rate. 
D) help teenagers find work. 
A) penalize employers that are not complying with labor laws. 
B) assure a minimum standard of payment for work. 
C) assure that all workers are paid the same wage rate. 
D) help teenagers find work.

Question 5

Which of the following statement is FALSE?

Accepted Answer

A) Only the price system can be used to ration goods. 
B) Random assignment can be a method of rationing. 
C) Coupons can be used to ration goods. 
D) Queuing can be used for rationing. 
A) Only the price system can be used to ration goods. 
B) Random assignment can be a method of rationing. 
C) Coupons can be used to ration goods. 
D) Queuing can be used for rationing.

Question 6

A price ceiling represents

Accepted Answer

A) a maximum price that can be legally charged for a product or service. 
B) a minimum price that can be legally charged for a good or service. 
C) a lottery imposed upon producers by the government. 
D) a first come, first served mechanism for controlling prices. 
A) a maximum price that can be legally charged for a product or service. 
B) a minimum price that can be legally charged for a good or service. 
C) a lottery imposed upon producers by the government. 
D) a first come, first served mechanism for controlling prices.

Question 7

Which of the following statements about markets is correct?
I. A market helps resources move to their highest-valued uses by means of prices changes.
II. A market represents the exchanges of both buyers and sellers.

Accepted Answer

A) I only 
B) II only 
C) Both I and II 
D) Neither I nor II 
A) I only 
B) II only 
C) Both I and II 
D) Neither I nor II

Question 8

The market system is also called the price system because

Accepted Answer

A) rising prices are the signal to producers to offer more of a particular good. 
B) people pay money in markets. 
C) everything has a price tag. 
D) inflation is a significant problem. 
A) rising prices are the signal to producers to offer more of a particular good. 
B) people pay money in markets. 
C) everything has a price tag. 
D) inflation is a significant problem.

Question 9

When prices are used as a rationing device, goods that are relatively more scarce than they used to be will have

Accepted Answer

A) greater demand. 
B) lower excess demands. 
C) higher prices. 
D) long queues. 
A) greater demand. 
B) lower excess demands. 
C) higher prices. 
D) long queues.

Question 10

List prices on new cars do not change very often, so

Accepted Answer

A) the real price of cars is very inflexible. 
B) the prices of new cars can only be flexible if there are changes in the cost of materials. 
C) price flexibility is not an important feature in the auto market. 
D) price flexibility shows up primarily through the negotiations between buyers and sellers. 
A) the real price of cars is very inflexible. 
B) the prices of new cars can only be flexible if there are changes in the cost of materials. 
C) price flexibility is not an important feature in the auto market. 
D) price flexibility shows up primarily through the negotiations between buyers and sellers.

Question 11

The prices of certain goods, such as ice and gasoline, often increase after a natural disaster such as a hurricane. The economic explanation for this observation is that

Accepted Answer

A) people panic in disaster situations. 
B) disasters bring out the worst in people. 
C) the disaster temporarily reduces the supply of the goods and increases the demand for the goods. 
D) the disaster temporarily reduces the supply of the goods and reduces the demand for the goods. 
A) people panic in disaster situations. 
B) disasters bring out the worst in people. 
C) the disaster temporarily reduces the supply of the goods and increases the demand for the goods. 
D) the disaster temporarily reduces the supply of the goods and reduces the demand for the goods.

Question 12

We cannot predict the effect on the equilibrium quantity, but know that the market clearing price will increase when

Accepted Answer

A) supply decreases and at the same time demand increases. 
B) supply increases and demand increases simultaneously. 
C) supply and demand decreases simultaneously. 
D) supply and demand increases simultaneously. 
A) supply decreases and at the same time demand increases. 
B) supply increases and demand increases simultaneously. 
C) supply and demand decreases simultaneously. 
D) supply and demand increases simultaneously.

Question 13

Which of the following will likely occur when price floors in agriculture are implemented?

Accepted Answer

A) Quantity supplied will exceed quantity demanded. 
B) Quantity demanded will exceed quantity supplied. 
C) Farmland will be underutilized. 
D) Supply will decrease. 
A) Quantity supplied will exceed quantity demanded. 
B) Quantity demanded will exceed quantity supplied. 
C) Farmland will be underutilized. 
D) Supply will decrease.

Question 14

-Refer to the above figure. A price ceiling has been set at P₁, and a black market has opened. The equilibrium black market price will be

Accepted Answer

A) below P₁. 
B) between P₁ and P₃. 
C) above P₃. 
D) P₂. 
A) below P₁. 
B) between P₁ and P₃. 
C) above P₃. 
D) P₂.

Question 15

The rationing function of prices means that

Accepted Answer

A) government is responsible for setting the prices of basic foods. 
B) all goods and services are produced by large firms. 
C) businesses determine what goods consumers should purchase. 
D) buyers and sellers synchronize their decisions through the price system. 
A) government is responsible for setting the prices of basic foods. 
B) all goods and services are produced by large firms. 
C) businesses determine what goods consumers should purchase. 
D) buyers and sellers synchronize their decisions through the price system.

Question 16

Under rent controls

Accepted Answer

A) apartments tend to be nicer than they would be under freely competitive markets. 
B) landlord-tenant relationships are more harmonious than under freely competitive markets. 
C) the quantity demanded of rental units is less than it would be under freely competitive markets. 
D) the number of rental units available for rent is lower than under freely competitive markets. 
A) apartments tend to be nicer than they would be under freely competitive markets. 
B) landlord-tenant relationships are more harmonious than under freely competitive markets. 
C) the quantity demanded of rental units is less than it would be under freely competitive markets. 
D) the number of rental units available for rent is lower than under freely competitive markets.

Question 17

-Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as

Accepted Answer

A) a price floor. 
B) a price ceiling. 
C) an equilibrium price. 
D) a just price. 
A) a price floor. 
B) a price ceiling. 
C) an equilibrium price. 
D) a just price.

Question 18

Total consumer surplus in a market is measured as the

Accepted Answer

A) area bounded above the market clearing price and beneath the market demand curve. 
B) area bounded below the market clearing price and above the market supply curve. 
C) vertical distance from the horizontal (quantity)axis to the market clearing price. 
D) horizontal distance from the vertical (price)axis to the equilibrium quantity. 
A) area bounded above the market clearing price and beneath the market demand curve. 
B) area bounded below the market clearing price and above the market supply curve. 
C) vertical distance from the horizontal (quantity)axis to the market clearing price. 
D) horizontal distance from the vertical (price)axis to the equilibrium quantity.

Question 19

Suppose we observe the following two simultaneous events in the market for beef. First, there is a decrease in the demand for beef due to changes in consumer tastes. And second, there is a reduction in supply due to cattle farmers selling their land to real estate developers. We know with certainty that these two simultaneous events will cause which of the following?

Accepted Answer

A) no change in the equilibrium quantity and a reduction in the equilibrium price 
B) an increase in the equilibrium quantity and in the equilibrium price 
C) a decrease in the equilibrium quantity and an indeterminate change in the equilibrium price 
D) a decrease in the equilibrium quantity and an increase in the equilibrium price 
A) no change in the equilibrium quantity and a reduction in the equilibrium price 
B) an increase in the equilibrium quantity and in the equilibrium price 
C) a decrease in the equilibrium quantity and an indeterminate change in the equilibrium price 
D) a decrease in the equilibrium quantity and an increase in the equilibrium price

Question 20

Federally provided agricultural subsidies in the United States have ________ with the passage of the 2002 Farm Security Act and the 2007 Food, Security, and Bioenergy Act.

Accepted Answer

A) been abolished 
B) been maintained 
C) increased to the level of EU price supports 
D) been made a function of tax revenues 
A) been abolished 
B) been maintained 
C) increased to the level of EU price supports 
D) been made a function of tax revenues

If producers must receive a higher price to be induced to produce any quantity, we can conclude that

Of the following groups, who gains from rent controls?

A newspaper headline asserts: "Rising Demand Pushes Up Housing Prices." This headline

The minimum wage laws seek to

Which of the following statement is FALSE?

A price ceiling represents

Which of the following statements about markets is correct? I. A market helps resources move to their highest-valued uses by means of prices changes. II. A market represents the exchanges of both buyers and sellers.

The market system is also called the price system because

When prices are used as a rationing device, goods that are relatively more scarce than they used to be will have

List prices on new cars do not change very often, so

The prices of certain goods, such as ice and gasoline, often increase after a natural disaster such as a hurricane. The economic explanation for this observation is that

We cannot predict the effect on the equilibrium quantity, but know that the market clearing price will increase when

Which of the following will likely occur when price floors in agriculture are implemented?

-Refer to the above figure. A price ceiling has been set at P₁, and a black market has opened. The equilibrium black market price will be

The rationing function of prices means that

Under rent controls

-Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as

Total consumer surplus in a market is measured as the

Federally provided agricultural subsidies in the United States have ________ with the passage of the 2002 Farm Security Act and the 2007 Food, Security, and Bioenergy Act.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 4: Extensions of Demand and Supply Analysis

If producers must receive a higher price to be induced to produce any quantity, we can conclude that

Of the following groups, who gains from rent controls?

A newspaper headline asserts: "Rising Demand Pushes Up Housing Prices." This headline

The minimum wage laws seek to

Which of the following statement is FALSE?

A price ceiling represents

Which of the following statements about markets is correct? I. A market helps resources move to their highest-valued uses by means of prices changes. II. A market represents the exchanges of both buyers and sellers.

The market system is also called the price system because

When prices are used as a rationing device, goods that are relatively more scarce than they used to be will have

List prices on new cars do not change very often, so

The prices of certain goods, such as ice and gasoline, often increase after a natural disaster such as a hurricane. The economic explanation for this observation is that

We cannot predict the effect on the equilibrium quantity, but know that the market clearing price will increase when

Which of the following will likely occur when price floors in agriculture are implemented?

-Refer to the above figure. A price ceiling has been set at P₁, and a black market has opened. The equilibrium black market price will be

The rationing function of prices means that

Under rent controls

-Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as

Total consumer surplus in a market is measured as the

Federally provided agricultural subsidies in the United States have ________ with the passage of the 2002 Farm Security Act and the 2007 Food, Security, and Bioenergy Act.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters