Question 1

Who is most likely to benefit from rent controls?

Accepted Answer

A)  Consumers who are able to obtain apartments at the controlled rents 
B)  Consumers who are unable to obtain apartments at the controlled rents 
C)  Landowners who can lease the apartments at the controlled rents 
D)  The government that controls the rents 
A)  Consumers who are able to obtain apartments at the controlled rents 
B)  Consumers who are unable to obtain apartments at the controlled rents 
C)  Landowners who can lease the apartments at the controlled rents 
D)  The government that controls the rents

Question 2

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 3

The market for gasoline in May is in equilibrium, at a market clearing price of $4.50 per gallon. After Memorial Day, the demand curve for gasoline increases, which causes

Accepted Answer

A)  the demand curve for gasoline to shift to the right, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to rise. 
B)  the demand curve for gasoline to shift to the right, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to fall. 
C)  the demand curve for gasoline to shift to the left, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to rise. 
D)  the demand curve for gasoline to shift to the left, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to fall. 
A)  the demand curve for gasoline to shift to the right, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to rise. 
B)  the demand curve for gasoline to shift to the right, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to fall. 
C)  the demand curve for gasoline to shift to the left, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to rise. 
D)  the demand curve for gasoline to shift to the left, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to fall.

Question 4

A black market is a market in which

Accepted Answer

A)  goods are traded at prices above their legal maximum prices. 
B)  sales taxes are effectively doubled. 
C)  goods are sold at outlet prices. 
D)  sales take place exclusively at outlet prices. 
A)  goods are traded at prices above their legal maximum prices. 
B)  sales taxes are effectively doubled. 
C)  goods are sold at outlet prices. 
D)  sales take place exclusively at outlet prices.

Question 5

Prices ration goods to

Accepted Answer

A)  the people who most deserve it. 
B)  the people with the lowest opportunity cost of time. 
C)  the people willing and able to pay the highest price. 
D)  the richest people. 
A)  the people who most deserve it. 
B)  the people with the lowest opportunity cost of time. 
C)  the people willing and able to pay the highest price. 
D)  the richest people.

Question 6

-Refer to the above figure. If the government imposes a price ceiling of $20,

Accepted Answer

A)  the quantity of goods that will be traded is 100. 
B)  the quantity of goods that will be traded is 200. 
C)  the quantity of goods that will be traded is 150. 
D)  the quantity of goods that will be traded is 0. 
A)  the quantity of goods that will be traded is 100. 
B)  the quantity of goods that will be traded is 200. 
C)  the quantity of goods that will be traded is 150. 
D)  the quantity of goods that will be traded is 0.

Question 7

Why does a sports car cost more than a mountain bike?

Accepted Answer

A)  because sports car manufacturers are greedier than mountain bike manufacturers 
B)  because sports cars are priced higher in order to make them attractive as status symbols 
C)  because more scarce resources are required to produce a sports car than to produce a mountain bike 
D)  because mountain bike manufacturers know that their customers have relatively low incomes 
A)  because sports car manufacturers are greedier than mountain bike manufacturers 
B)  because sports cars are priced higher in order to make them attractive as status symbols 
C)  because more scarce resources are required to produce a sports car than to produce a mountain bike 
D)  because mountain bike manufacturers know that their customers have relatively low incomes

Question 8

If supply and demand both simultaneously increase,

Accepted Answer

A)  the market clearing price definitely rises, and the equilibrium quantity definitely falls. 
B)  the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. 
C)  the market clearing price definitely falls ,and the effect on the equilibrium quantity is indeterminate. 
D)  the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely rises. 
A)  the market clearing price definitely rises, and the equilibrium quantity definitely falls. 
B)  the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. 
C)  the market clearing price definitely falls ,and the effect on the equilibrium quantity is indeterminate. 
D)  the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely rises.

Question 9

Suppose the price of lumber decreases. In the market for new homes, we would expect which of the following to occur?

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 10

In a market system, intermediaries in the exchange process are known as

Accepted Answer

A)  producers. 
B)  consumers. 
C)  middlemen. 
D)  free agents. 
A)  producers. 
B)  consumers. 
C)  middlemen. 
D)  free agents.

Question 11

Firms that produce 80 percent of all computer chips have shut down their facilities for maintenance. In the computer chip market this will lead to

Accepted Answer

A)  an increase in price and a decrease in quantity. 
B)  an increase in price and an increase in quantity. 
C)  a decrease in price and a decrease in quantity. 
D)  a decrease in price and an increase in quantity. 
A)  an increase in price and a decrease in quantity. 
B)  an increase in price and an increase in quantity. 
C)  a decrease in price and a decrease in quantity. 
D)  a decrease in price and an increase in quantity.

Question 12

A price floor set above a market equilibrium price causes

Accepted Answer

A)  a surplus. 
B)  a shortage. 
C)  producers to receive lower prices. 
D)  consumers to pay lower prices. 
A)  a surplus. 
B)  a shortage. 
C)  producers to receive lower prices. 
D)  consumers to pay lower prices.

Question 13

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

Accepted Answer

A)  below   
B)  between   and   
C)  above   
D)    
A)  below   
B)  between   and   
C)  above   
D)

Question 14

Suppose that an early frost damages the Florida orange crop. As a result, the price of California oranges increases. Ceteris paribus, which one of the following statements best explains this situation?

Accepted Answer

A)  The supply of Florida oranges decreased, causing the supply of California oranges to increase, which resulted in a higher price. 
B)  The supply of Florida oranges decreased, causing the supply of California oranges to decrease, which resulted in a higher price. 
C)  The supply of Florida oranges decreased, causing their price to increase, and thus causing the demand for California oranges to increase. 
D)  The demand for Florida oranges fell because of the freeze, and this led to a higher demand for California oranges. 
A)  The supply of Florida oranges decreased, causing the supply of California oranges to increase, which resulted in a higher price. 
B)  The supply of Florida oranges decreased, causing the supply of California oranges to decrease, which resulted in a higher price. 
C)  The supply of Florida oranges decreased, causing their price to increase, and thus causing the demand for California oranges to increase. 
D)  The demand for Florida oranges fell because of the freeze, and this led to a higher demand for California oranges.

Question 15

Price ceilings set below the equilibrium price cause

Accepted Answer

A)  shortages. 
B)  surpluses. 
C)  a new market equilibrium. 
D)  a greater number of exchanges. 
A)  shortages. 
B)  surpluses. 
C)  a new market equilibrium. 
D)  a greater number of exchanges.

Question 16

Rationing occurs for goods

Accepted Answer

A)  that have a positive price. 
B)  that have a zero price. 
C)  that have a negative price. 
D)  that are not manufactured. 
A)  that have a positive price. 
B)  that have a zero price. 
C)  that have a negative price. 
D)  that are not manufactured.

Question 17

The total gains from trade within a price system is

Accepted Answer

A)  the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price. 
B)  the area beneath the market supply curve and above the market clearing price plus the area above the market demand curve and beneath the market clearing price. 
C)  the area beneath the market demand curve and above the market clearing price minus the area beneath the market supply curve and beneath the market clearing price. 
D)  always equal to zero. 
A)  the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price. 
B)  the area beneath the market supply curve and above the market clearing price plus the area above the market demand curve and beneath the market clearing price. 
C)  the area beneath the market demand curve and above the market clearing price minus the area beneath the market supply curve and beneath the market clearing price. 
D)  always equal to zero.

Question 18

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

Question 19

Suppose local educators argue that teachers' salaries are too low. At the same time it is said that the school district received 750 applications for 5 new openings. Are salaries too low? Explain.

Accepted Answer

It is difficult to claim salaries are to

Question 20

When the government sets a maximum price that can be charged for a good or service, it creates

Accepted Answer

A)  a price support. 
B)  a price floor. 
C)  a white market. 
D)  a price ceiling. 
A)  a price support. 
B)  a price floor. 
C)  a white market. 
D)  a price ceiling.

Exam 4: Extensions of Demand and Supply Analysis

Who is most likely to benefit from rent controls?

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

The market for gasoline in May is in equilibrium, at a market clearing price of $4.50 per gallon. After Memorial Day, the demand curve for gasoline increases, which causes

A black market is a market in which

Prices ration goods to

-Refer to the above figure. If the government imposes a price ceiling of $20,

Why does a sports car cost more than a mountain bike?

If supply and demand both simultaneously increase,

Suppose the price of lumber decreases. In the market for new homes, we would expect which of the following to occur?

In a market system, intermediaries in the exchange process are known as

Firms that produce 80 percent of all computer chips have shut down their facilities for maintenance. In the computer chip market this will lead to

A price floor set above a market equilibrium price causes

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

Suppose that an early frost damages the Florida orange crop. As a result, the price of California oranges increases. Ceteris paribus, which one of the following statements best explains this situation?

Price ceilings set below the equilibrium price cause

Rationing occurs for goods

The total gains from trade within a price system is

A decrease in demand and an increase in supply will lead to

Suppose local educators argue that teachers' salaries are too low. At the same time it is said that the school district received 750 applications for 5 new openings. Are salaries too low? Explain.

When the government sets a maximum price that can be charged for a good or service, it creates

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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