Question 1

Which of the following is not a solution to the problem of negative externalities due to pollution?

Accepted Answer

A)  Create private property rights. 
B)  Levy pollution taxes. 
C)  Create obligatory controls. 
D)  Reward the production of these products through subsidies. 
E)  Establish strict limits on the amount of pollution allowed. 
A)  Create private property rights. 
B)  Levy pollution taxes. 
C)  Create obligatory controls. 
D)  Reward the production of these products through subsidies. 
E)  Establish strict limits on the amount of pollution allowed.

Question 2

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

Question 3

If a government imposed price ceiling legally sets the price of beef below market equilibrium,which of the following will most likely happen?

Accepted Answer

A)  The quantity of beef demanded will decrease. 
B)  The quantity of beef supplied will increase. 
C)  There will be a surplus of beef. 
D)  There will be a shortage of beef.. 
A)  The quantity of beef demanded will decrease. 
B)  The quantity of beef supplied will increase. 
C)  There will be a surplus of beef. 
D)  There will be a shortage of beef..

Question 4

Which of the following is the best example of a public good?

Accepted Answer

A)  Apples. 
B)  Cars. 
C)  Education. 
D)  National defense. 
A)  Apples. 
B)  Cars. 
C)  Education. 
D)  National defense.

Question 5

If Congress decides to increase the tax per pack paid by sellers of cigarettes,other things being equal,the price of cigarettes will rise.This rise in prices can be attributed to a(n):

Accepted Answer

A)  upward movement along the supply curve for cigarettes. 
B)  rightward shift of the supply curve for cigarettes. 
C)  upward movement along the demand curve for cigarettes. 
D)  leftward shift of the supply curve for cigarettes. 
A)  upward movement along the supply curve for cigarettes. 
B)  rightward shift of the supply curve for cigarettes. 
C)  upward movement along the demand curve for cigarettes. 
D)  leftward shift of the supply curve for cigarettes.

Question 6

Collusive action among producers creates higher prices for consumers because it:

Accepted Answer

A)  causes overproduction and inefficiency. 
B)  creates negative externalities. 
C)  forces producers to be more competitive. 
D)  allows producers to artificially restrict their supply. 
A)  causes overproduction and inefficiency. 
B)  creates negative externalities. 
C)  forces producers to be more competitive. 
D)  allows producers to artificially restrict their supply.

Question 7

Which of the following is the best example of a public good?

Accepted Answer

A)  Cars. 
B)  Education. 
C)  Radios. 
D)  Air traffic control. 
A)  Cars. 
B)  Education. 
C)  Radios. 
D)  Air traffic control.

Question 8

If the demand curve increases while the supply curve remains unchanged,the equilibrium price would decrease.

Accepted Answer

A) True 
 B)False

Question 9

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(n)____,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)  Externalities; 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)  Externalities; benefits; third party

Question 10

Ceteris paribus,if consumer tastes change so that more people are eating broccoli,then what will happen to the market equilibrium for cabbage,a substitute good for broccoli?

Accepted Answer

A)  Price will increase, and quantity will increase. 
B)  Price and quantity will stay the same. 
C)  Price will decrease, and quantity will increase. 
D)  Price will increase, and quantity will decrease. 
E)  Price will decrease, and quantity will decrease. 
A)  Price will increase, and quantity will increase. 
B)  Price and quantity will stay the same. 
C)  Price will decrease, and quantity will increase. 
D)  Price will increase, and quantity will decrease. 
E)  Price will decrease, and quantity will decrease.

Question 11

If there is a decrease in demand for lettuce,we would expect:

Accepted Answer

A)  both the price and quantity sold to increase. 
B)  both the price and quantity sold to decrease. 
C)  the price to decrease and the quantity sold to increase. 
D)  the price to increase and the quantity sold to decrease. 
A)  both the price and quantity sold to increase. 
B)  both the price and quantity sold to decrease. 
C)  the price to decrease and the quantity sold to increase. 
D)  the price to increase and the quantity sold to decrease.

Question 12

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 13

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

Accepted Answer

A)  A Japanese company begins to produce cars, which causes American workers to lose their jobs. 
B)  An employee of a chemical company spills acid on his arm, causing severe damage. 
C)  John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary. 
D)  Sally buys coffee at McDonald's, spills some on her, and burns her arm. 
E)  Jack attempts to fix his roof, falls off, and breaks his leg. 
A)  A Japanese company begins to produce cars, which causes American workers to lose their jobs. 
B)  An employee of a chemical company spills acid on his arm, causing severe damage. 
C)  John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary. 
D)  Sally buys coffee at McDonald's, spills some on her, and burns her arm. 
E)  Jack attempts to fix his roof, falls off, and breaks his leg.

Question 14

Exhibit 4-6 Demand and supply curves
  
-In Exhibit 4-6,the demand curve has shifted from D₁ to D₂ and,simultaneously,the supply curve has shifted from S₁ to S₂.Describe these actions in this market.

Accepted Answer

A)  Market supply has decreased, and market demand has increased. 
B)  Market supply has increased, and market demand has decreased. 
C)  Market supply has decreased, and market demand has decreased. 
D)  The quantity supplied has decreased, and the quantity demanded has increased. 
E)  Market supply has increased, and market demand has increased. 
A)  Market supply has decreased, and market demand has increased. 
B)  Market supply has increased, and market demand has decreased. 
C)  Market supply has decreased, and market demand has decreased. 
D)  The quantity supplied has decreased, and the quantity demanded has increased. 
E)  Market supply has increased, and market demand has increased.

Question 15

Exhibit 4-8 Demand and supply curves
  
-In Exhibit 4-8,a movement from A to C is best described as a(n)

Accepted Answer

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

Question 16

Exhibit 4-2 Supply and demand curves
  
-The market shown in Exhibit 4-2 is initially in equilibrium at point E₂.Union negotiations for workers producing good X result in a wage increase.Other things being equal,which of the following is the new equilibrium after this wage increase is in effect?

Accepted Answer

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

Question 17

From the standpoint of economic efficiency,competitive markets provide:

Accepted Answer

A)  less of a public good than would be efficient. 
B)  more of a public good than would be efficient. 
C)  exactly the amount of a public good that is efficient. 
D)  none of the above. 
A)  less of a public good than would be efficient. 
B)  more of a public good than would be efficient. 
C)  exactly the amount of a public good that is efficient. 
D)  none of the above.

Question 18

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

Accepted Answer

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

Question 19

If the demand curve increases while the supply curve remains unchanged,the equilibrium price would increase.

Accepted Answer

A) True 
 B)False

Question 20

Consider the market for grapes.An increase in the wage paid to grape pickers will cause the:

Accepted Answer

A)  demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed. 
B)  demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed. 
C)  supply curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and a decrease in the quantity consumed. 
D)  supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed. 
A)  demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed. 
B)  demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed. 
C)  supply curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and a decrease in the quantity consumed. 
D)  supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed.

Exam 4: Markets in Action

Which of the following is not a solution to the problem of negative externalities due to pollution?

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?

If a government imposed price ceiling legally sets the price of beef below market equilibrium,which of the following will most likely happen?

Which of the following is the best example of a public good?

If Congress decides to increase the tax per pack paid by sellers of cigarettes,other things being equal,the price of cigarettes will rise.This rise in prices can be attributed to a(n):

Collusive action among producers creates higher prices for consumers because it:

Which of the following is the best example of a public good?

If the demand curve increases while the supply curve remains unchanged,the equilibrium price would decrease.

Ceteris paribus,if consumer tastes change so that more people are eating broccoli,then what will happen to the market equilibrium for cabbage,a substitute good for broccoli?

If there is a decrease in demand for lettuce,we would expect:

A good example of a price floor is:

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

Exhibit 4-6 Demand and supply curves -In Exhibit 4-6,the demand curve has shifted from D₁ to D₂ and,simultaneously,the supply curve has shifted from S₁ to S₂.Describe these actions in this market.

Exhibit 4-8 Demand and supply curves -In Exhibit 4-8,a movement from A to C is best described as a(n)

Exhibit 4-2 Supply and demand curves -The market shown in Exhibit 4-2 is initially in equilibrium at point E₂.Union negotiations for workers producing good X result in a wage increase.Other things being equal,which of the following is the new equilibrium after this wage increase is in effect?

From the standpoint of economic efficiency,competitive markets provide:

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

If the demand curve increases while the supply curve remains unchanged,the equilibrium price would increase.

Consider the market for grapes.An increase in the wage paid to grape pickers will cause the:

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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