Question 1

If demand increases while supply simultaneously decreases, then the equilibrium quantity

Accepted Answer

A)  always increases. 
B)  always decreases. 
C)  can never change. 
D)  none of the above 
A)  always increases. 
B)  always decreases. 
C)  can never change. 
D)  none of the above

Question 2

Suppose that initially a market is in equilibrium at a price of $10 and a quantity of 5000 units per day. Several months later, the market is in a new equilibrium at a price of $5 and a quantity of 5000 units per day. What happened in the market?

Accepted Answer

For price to fall, either demand had to

Question 3

Price controls

Accepted Answer

A)  do not include black markets. 
B)  are another name for the price system. 
C)  do not include rent controls. 
D)  interfere with the rationing function of prices. 
A)  do not include black markets. 
B)  are another name for the price system. 
C)  do not include rent controls. 
D)  interfere with the rationing function of prices.

Question 4

-Refer to the above figure. A price floor of $60 results in

Accepted Answer

A)  a shortage of 100 units. 
B)  a shortage of 200 units. 
C)  a surplus of 100 units. 
D)  a surplus of 200 units. 
A)  a shortage of 100 units. 
B)  a shortage of 200 units. 
C)  a surplus of 100 units. 
D)  a surplus of 200 units.

Question 5

In 2010, a British Petroleum oil rig exploded in the Gulf of Mexico. The explosion resulted in a major oil spill and a decrease in the supply of oil. At the same time, the average price of gasoline decreased. Which of the following best explains the decrease in the price of gasoline?

Accepted Answer

A)  The quantity demanded of gasoline increased. 
B)  The demand for gasoline decreased, and the effect of the decrease in demand on the gasoline price was greater than the price effect of the decrease in supply. 
C)  The demand for gasoline increased, and the effect of the increase in demand on the gasoline price was less than the price effect of the decrease in supply. 
D)  The demand for gasoline remained unchanged. 
A)  The quantity demanded of gasoline increased. 
B)  The demand for gasoline decreased, and the effect of the decrease in demand on the gasoline price was greater than the price effect of the decrease in supply. 
C)  The demand for gasoline increased, and the effect of the increase in demand on the gasoline price was less than the price effect of the decrease in supply. 
D)  The demand for gasoline remained unchanged.

Question 6

Assume that the market clearing price for a shirt is $20, but that the maximum price that can be charged is $15. This is an example of

Accepted Answer

A)  a price control that will lead to a surplus of shirts on the market. 
B)  a price floor that will lead to a shortage of shirts on the market. 
C)  markets failing to ration a fixed quantity of a good. 
D)  a price ceiling that will likely lead to a shortage of shirts on the market. 
A)  a price control that will lead to a surplus of shirts on the market. 
B)  a price floor that will lead to a shortage of shirts on the market. 
C)  markets failing to ration a fixed quantity of a good. 
D)  a price ceiling that will likely lead to a shortage of shirts on the market.

Question 7

An example of a quantity restriction is

Accepted Answer

A)  the minimum wage. 
B)  an import quota. 
C)  rent controls. 
D)  price supports in agriculture. 
A)  the minimum wage. 
B)  an import quota. 
C)  rent controls. 
D)  price supports in agriculture.

Question 8

Excess quantity demanded may result from

Accepted Answer

A)  a government-imposed minimum price above market equilibrium. 
B)  a government-imposed maximum price below market equilibrium. 
C)  an oversupply of output. 
D)  technological progress. 
A)  a government-imposed minimum price above market equilibrium. 
B)  a government-imposed maximum price below market equilibrium. 
C)  an oversupply of output. 
D)  technological progress.

Question 9

Suppose that there is an improvement in technology in the market for iPhones. Which of the following is true?

Accepted Answer

A)  Supply will increase and the market clearing price will fall. 
B)  Supply will increase and the market clearing price will rise. 
C)  Demand will increase and the market clearing price will rise. 
D)  Demand will increase and the market clearing price will fall. 
A)  Supply will increase and the market clearing price will fall. 
B)  Supply will increase and the market clearing price will rise. 
C)  Demand will increase and the market clearing price will rise. 
D)  Demand will increase and the market clearing price will fall.

Question 10

Other things being equal, a higher price induces

Accepted Answer

A)  buyers to reduce the amount they want to buy and sellers to increase the amount they are willing to sell. 
B)  buyers to increase the amount they want to buy and sellers to reduce the amount they are willing to sell. 
C)  buyers to reduce the amount they want to buy and sellers to reduce the amount they are willing to sell. 
D)  buyers to increase the amount they want to buy and sellers to increase the amount they are willing to sell. 
A)  buyers to reduce the amount they want to buy and sellers to increase the amount they are willing to sell. 
B)  buyers to increase the amount they want to buy and sellers to reduce the amount they are willing to sell. 
C)  buyers to reduce the amount they want to buy and sellers to reduce the amount they are willing to sell. 
D)  buyers to increase the amount they want to buy and sellers to increase the amount they are willing to sell.

Question 11

If the demand for a product remains the same and the supply falls,

Accepted Answer

A)  the market clearing price will fall and the equilibrium quantity will rise. 
B)  the market clearing price will rise and the equilibrium quantity will fall. 
C)  both the market clearing price and the equilibrium quantity will fall. 
D)  both the market clearing price and the equilibrium quantity will rise. 
A)  the market clearing price will fall and the equilibrium quantity will rise. 
B)  the market clearing price will rise and the equilibrium quantity will fall. 
C)  both the market clearing price and the equilibrium quantity will fall. 
D)  both the market clearing price and the equilibrium quantity will rise.

Question 12

Which of the following is a main characteristic of exchanges in the market system?

Accepted Answer

A)  Decisions to trade are based on individuals' self interest. 
B)  Exchanges are highly regulated by the government. 
C)  Sellers hire economists to determine the market clearing price. 
D)  Exchanges are part of the legislative imperative. 
A)  Decisions to trade are based on individuals' self interest. 
B)  Exchanges are highly regulated by the government. 
C)  Sellers hire economists to determine the market clearing price. 
D)  Exchanges are part of the legislative imperative.

Question 13

A limit on the amount of strawberries that can be imported into the United States is an example of

Accepted Answer

A)  the rationing function of prices protecting domestic strawberry farmers. 
B)  a price floor set by the government. 
C)  a price ceiling set by government. 
D)  an import quota. 
A)  the rationing function of prices protecting domestic strawberry farmers. 
B)  a price floor set by the government. 
C)  a price ceiling set by government. 
D)  an import quota.

Question 14

An increase in demand and an increase in supply will lead to

Accepted Answer

A)  unambiguous increases in both price and quantity. 
B)  unambiguous decreases in both price and quantity. 
C)  an unambiguous increase in quantity, but the effect on price is indeterminate. 
D)  an unambiguous increase in price, but the effect on quantity is indeterminate. 
A)  unambiguous increases in both price and quantity. 
B)  unambiguous decreases in both price and quantity. 
C)  an unambiguous increase in quantity, but the effect on price is indeterminate. 
D)  an unambiguous increase in price, but the effect on quantity is indeterminate.

Question 15

Which of the following is NOT an example of a transaction cost?

Accepted Answer

A)  The enjoyment of owning the good. 
B)  The opportunity cost of time spent looking for stores that sold the good desired. 
C)  The cost of returning a defective product. 
D)  Time spent bargaining over the price of a good. 
A)  The enjoyment of owning the good. 
B)  The opportunity cost of time spent looking for stores that sold the good desired. 
C)  The cost of returning a defective product. 
D)  Time spent bargaining over the price of a good.

Question 16

If the federal government sets a minimum price for wheat at $5.00 per bushel when the equilibrium price is $4.50, then

Accepted Answer

A)  a surplus will be created causing the price to fall to the equilibrium price of $4.50. 
B)  a permanent surplus will develop because the government established the minimum price at $5.00. 
C)  a shortage will be created causing the price to rise to the equilibrium price of $4.50. 
D)  a permanent shortage will develop because the government established the minimum price at $5.00. 
A)  a surplus will be created causing the price to fall to the equilibrium price of $4.50. 
B)  a permanent surplus will develop because the government established the minimum price at $5.00. 
C)  a shortage will be created causing the price to rise to the equilibrium price of $4.50. 
D)  a permanent shortage will develop because the government established the minimum price at $5.00.

Question 17

Who benefits primarily from rent controls?

Accepted Answer

A)  Construction workers 
B)  Poor people looking for low-income housing 
C)  All who want to rent 
D)  Only renters who are able to get units at below-market rates 
A)  Construction workers 
B)  Poor people looking for low-income housing 
C)  All who want to rent 
D)  Only renters who are able to get units at below-market rates

Question 18

In a freely operating market system, queuing is most likely to occur when

Accepted Answer

A)  selling necessities. 
B)  the market clearing price increases. 
C)  demand fluctuates unpredictably and quickly. 
D)  demand increases gradually over time. 
A)  selling necessities. 
B)  the market clearing price increases. 
C)  demand fluctuates unpredictably and quickly. 
D)  demand increases gradually over time.

Question 19

The objective of rent controls is to

Accepted Answer

A)  ensure an adequate supply of rental housing for the poor. 
B)  keep rents below levels that would be observed in a freely competitive market. 
C)  encourage the construction of new rental units. 
D)  raise revenue for the local government. 
A)  ensure an adequate supply of rental housing for the poor. 
B)  keep rents below levels that would be observed in a freely competitive market. 
C)  encourage the construction of new rental units. 
D)  raise revenue for the local government.

Question 20

For which situation would we expect the adjustment speed to be the fastest?

Accepted Answer

A)  The demand for surgeons increases. 
B)  A large increase in birth rates leads to an increase in elementary school teachers. 
C)  The demand for movie videos increases. 
D)  The demand for office space in downtown Chicago increases. 
A)  The demand for surgeons increases. 
B)  A large increase in birth rates leads to an increase in elementary school teachers. 
C)  The demand for movie videos increases. 
D)  The demand for office space in downtown Chicago increases.

Exam 4: Extensions of Demand and Supply Analysis

If demand increases while supply simultaneously decreases, then the equilibrium quantity

Suppose that initially a market is in equilibrium at a price of $10 and a quantity of 5000 units per day. Several months later, the market is in a new equilibrium at a price of $5 and a quantity of 5000 units per day. What happened in the market?

Price controls

-Refer to the above figure. A price floor of $60 results in

In 2010, a British Petroleum oil rig exploded in the Gulf of Mexico. The explosion resulted in a major oil spill and a decrease in the supply of oil. At the same time, the average price of gasoline decreased. Which of the following best explains the decrease in the price of gasoline?

Assume that the market clearing price for a shirt is $20, but that the maximum price that can be charged is $15. This is an example of

An example of a quantity restriction is

Excess quantity demanded may result from

Suppose that there is an improvement in technology in the market for iPhones. Which of the following is true?

Other things being equal, a higher price induces

If the demand for a product remains the same and the supply falls,

Which of the following is a main characteristic of exchanges in the market system?

A limit on the amount of strawberries that can be imported into the United States is an example of

An increase in demand and an increase in supply will lead to

Which of the following is NOT an example of a transaction cost?

If the federal government sets a minimum price for wheat at $5.00 per bushel when the equilibrium price is $4.50, then

Who benefits primarily from rent controls?

In a freely operating market system, queuing is most likely to occur when

The objective of rent controls is to

For which situation would we expect the adjustment speed to be the fastest?

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

Measuring the Economys Performance

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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