Question 1

City streets,sewage systems,and police protection are all examples of:

Accepted Answer

A)  public goods. 
B)  private goods. 
C)  exclusive goods. 
D)  rival goods. 
E)  consumer goods. 
A)  public goods. 
B)  private goods. 
C)  exclusive goods. 
D)  rival goods. 
E)  consumer goods.

Question 2

A minimum wage that is set below the equilibrium wage will:

Accepted Answer

A)  cause increased unemployment. 
B)  have no effect on employment. 
C)  cause the overall wage to increase. 
D)  cause the overall wage to decrease. 
E)  create more jobs. 
A)  cause increased unemployment. 
B)  have no effect on employment. 
C)  cause the overall wage to increase. 
D)  cause the overall wage to decrease. 
E)  create more jobs.

Question 3

Exhibit 4-8 Demand and supply curves
  
-In Exhibit 4-8,a movement from A to B is best explained by:

Accepted Answer

A)  an increase in income and in the number of suppliers. 
B)  an increase in the price of other goods. 
C)  an increase in the population. 
D)  a decrease in income and an improvement in the technology used to produce the good. 
E)  equilibrium quantity increases and the equilibrium price change is indeterminate. 
A)  an increase in income and in the number of suppliers. 
B)  an increase in the price of other goods. 
C)  an increase in the population. 
D)  a decrease in income and an improvement in the technology used to produce the good. 
E)  equilibrium quantity increases and the equilibrium price change is indeterminate.

Question 4

In order to avoid the free-rider problem,which of the following goods is best provided by the government and paid for with tax dollars?

Accepted Answer

A)  Automobiles. 
B)  Lighthouses. 
C)  Bread. 
D)  Prescription drugs. 
E)  Windows. 
A)  Automobiles. 
B)  Lighthouses. 
C)  Bread. 
D)  Prescription drugs. 
E)  Windows.

Question 5

Price floors typically improve market efficiency.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a price ceiling is set by the government below the market equilibrium price.Which of the following will result?

Accepted Answer

A)  The demand curve will shift to the left. 
B)  The quantity demanded will exceed the quantity supplied. 
C)  The quantity supplied will exceed the quantity demanded. 
D)  There will be a surplus. 
A)  The demand curve will shift to the left. 
B)  The quantity demanded will exceed the quantity supplied. 
C)  The quantity supplied will exceed the quantity demanded. 
D)  There will be a surplus.

Question 7

The city of Logan Square needs $40 million for a network of streetlights.There are 20,000 residents in the Logan Square neighborhood,meaning the cost for each resident is $2,000.Psychiatrist Denise Miller refuses to donate $2,000 towards the project.This is an example of the problems encountered with:

Accepted Answer

A)  consumer goods. 
B)  capital goods. 
C)  rival goods. 
D)  public goods. 
E)  private goods. 
A)  consumer goods. 
B)  capital goods. 
C)  rival goods. 
D)  public goods. 
E)  private goods.

Question 8

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

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 9

Third-party beneficiaries are called:

Accepted Answer

A)  polluters. 
B)  property owners. 
C)  free riders. 
D)  efficient market. 
E)  losers. 
A)  polluters. 
B)  property owners. 
C)  free riders. 
D)  efficient market. 
E)  losers.

Question 10

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

Accepted Answer

A)  There would be a shortage of apricots. 
B)  Buyers would not purchase all of the apricots that are grown. 
C)  Buyers would purchase more apricots than are currently being supplied. 
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 purchase all of the apricots that are grown. 
C)  Buyers would purchase more apricots than are currently being supplied. 
D)  Farmers would reduce the number of acres allocated to the growing of apricots.

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

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 13

Suppose prices for new homes have risen,yet sales of new homes have also risen.We can conclude that:

Accepted Answer

A)  the demand for new homes has risen. 
B)  the law of demand has been violated. 
C)  new firms have entered the construction industry. 
D)  construction firms must be facing higher costs. 
A)  the demand for new homes has risen. 
B)  the law of demand has been violated. 
C)  new firms have entered the construction industry. 
D)  construction firms must be facing higher costs.

Question 14

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)  streetlights. 
B)  strawberries. 
C)  CDs. 
D)  raincoats. 
E)  televisions. 
A)  streetlights. 
B)  strawberries. 
C)  CDs. 
D)  raincoats. 
E)  televisions.

Question 15

There are apartments in Chicago whose rooftops overlook Wrigley Field.On game day you can find free riders on the roof enjoying ____.

Accepted Answer

A)  free property rights 
B)  an externality 
C)  a public good 
D)  excess utility 
A)  free property rights 
B)  an externality 
C)  a public good 
D)  excess utility

Question 16

Exhibit 4-2 Supply and demand curves
  
-The market shown in Exhibit 4-2 is initially in equilibrium at E₁.Changes in market conditions result in a new equilibrium at E₂.This change is stated as a(n):

Accepted Answer

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

Question 17

A black market may arise when government imposes a price ceiling.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Which of the following would be an external cost to the consumption of cigarettes?

Accepted Answer

A)  Price of a pack of cigarettes. 
B)  Loss of income resulting from extra missed days of work. 
C)  Higher life insurance premiums due the practice of smoking. 
D)  The loss in utility received because the smoker must stand outside her office building in the winter to smoke. 
E)  Increased risk of cancer to the nonsmoking passengers in the smoker's carpool. 
A)  Price of a pack of cigarettes. 
B)  Loss of income resulting from extra missed days of work. 
C)  Higher life insurance premiums due the practice of smoking. 
D)  The loss in utility received because the smoker must stand outside her office building in the winter to smoke. 
E)  Increased risk of cancer to the nonsmoking passengers in the smoker's carpool.

Question 20

Consider the market for chicken.Assuming that chicken and beef are substitutes,an increase in the price of beef will:

Accepted Answer

A)  decrease the demand for chicken creating a lower price and a smaller amount of chicken purchased in the market. 
B)  decrease the supply of chicken creating a higher price and a smaller amount of chicken purchased in the market. 
C)  increase the demand for chicken creating a higher price and a greater amount of chicken purchased in the market. 
D)  increase the supply of chicken creating a lower price and a greater amount of chicken purchased in the market. 
A)  decrease the demand for chicken creating a lower price and a smaller amount of chicken purchased in the market. 
B)  decrease the supply of chicken creating a higher price and a smaller amount of chicken purchased in the market. 
C)  increase the demand for chicken creating a higher price and a greater amount of chicken purchased in the market. 
D)  increase the supply of chicken creating a lower price and a greater amount of chicken purchased in the market.

Exam 4: Markets in Action

City streets,sewage systems,and police protection are all examples of:

A minimum wage that is set below the equilibrium wage will:

Exhibit 4-8 Demand and supply curves -In Exhibit 4-8,a movement from A to B is best explained by:

In order to avoid the free-rider problem,which of the following goods is best provided by the government and paid for with tax dollars?

Price floors typically improve market efficiency.

Suppose a price ceiling is set by the government below the market equilibrium price.Which of the following will result?

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

Third-party beneficiaries are called:

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

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

Suppose prices for new homes have risen,yet sales of new homes have also risen.We can conclude that:

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

There are apartments in Chicago whose rooftops overlook Wrigley Field.On game day you can find free riders on the roof enjoying ____.

Exhibit 4-2 Supply and demand curves -The market shown in Exhibit 4-2 is initially in equilibrium at E₁.Changes in market conditions result in a new equilibrium at E₂.This change is stated as a(n):

A black market may arise when government imposes a price ceiling.

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

Which of the following would be an external cost to the consumption of cigarettes?

Consider the market for chicken.Assuming that chicken and beef are substitutes,an increase in the price of beef will:

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: 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

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

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

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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