Question 1

Which of the following is NOT a function of prices in a market system?

Accepted Answer

A)  prices have the crucial job of balancing supply and demand 
B)  prices send signals to buyers and sellers to help them make rational economic decisions 
C)  prices coordinate economic activity 
D)  prices make an equitable distribution of goods and services among consumers possible 
A)  prices have the crucial job of balancing supply and demand 
B)  prices send signals to buyers and sellers to help them make rational economic decisions 
C)  prices coordinate economic activity 
D)  prices make an equitable distribution of goods and services among consumers possible

Question 2

A coffee-producing country requires all its growers to sell to a single, government-owned marketing board. This marketing board sells the coffee on behalf of the growers into the world market. Suppose the marketing board puts a price ceiling of $3.00 on the coffee it buys from its growers while the market equilibrium price is $5.00. What effect will this have on coffee production in this country? Quantity is given in kg.

Accepted Answer

In this example, a price of $3.00 would

Question 3

When analysing the economic effects of government policies:

Accepted Answer

A)  supply and demand are the most useful tools of analysis 
B)  one finds that the effects are always those stated in the legislation 
C)  supply and demand are not useful, since they apply only to unregulated markets 
D)  one usually finds them to be the random outcome of economic shocks 
A)  supply and demand are the most useful tools of analysis 
B)  one finds that the effects are always those stated in the legislation 
C)  supply and demand are not useful, since they apply only to unregulated markets 
D)  one usually finds them to be the random outcome of economic shocks

Question 4

If the demand for coffee and the supply of coffee are both elastic then:

Accepted Answer

A)  coffee buyers will bear most of the burden of the tax 
B)  coffee sellers will bear most of the burden of the tax 
C)  the burden of the tax will be shared equally between buyers and sellers 
D)  it is impossible to determine how the burden of the tax will be shared 
A)  coffee buyers will bear most of the burden of the tax 
B)  coffee sellers will bear most of the burden of the tax 
C)  the burden of the tax will be shared equally between buyers and sellers 
D)  it is impossible to determine how the burden of the tax will be shared

Question 5

A tax on the sellers of coffee:

Accepted Answer

A)  increases the size of the coffee market 
B)  reduces the size of the coffee market 
C)  has no effect on the size of the coffee market 
D)  will be paid entirely by sellers of coffee 
A)  increases the size of the coffee market 
B)  reduces the size of the coffee market 
C)  has no effect on the size of the coffee market 
D)  will be paid entirely by sellers of coffee

Question 6

A tax on a good or service:

Accepted Answer

A)  encourages market activity and is paid for by the sellers 
B)  encourages market activity and is shared between buyers and sellers 
C)  discourages market activity and is paid for by the sellers 
D)  discourages market activity and is shared between buyers and sellers 
A)  encourages market activity and is paid for by the sellers 
B)  encourages market activity and is shared between buyers and sellers 
C)  discourages market activity and is paid for by the sellers 
D)  discourages market activity and is shared between buyers and sellers

Question 7

New Zealand is considering a higher tax on RTD (alcopops) to try and stop young people binge drinking. Is this an effective way to raise revenue for the government from the consumers?

Accepted Answer

The price elasticity of demand for certa

Question 8

Graph 6-3
  
-According to Graph 6-3, which panel(s) best represent(s) a binding rent control in the short run?

Accepted Answer

A)  panel a 
B)  panel b 
C)  neither panel 
D)  both panels 
A)  panel a 
B)  panel b 
C)  neither panel 
D)  both panels

Question 9

Graph 6-10
  
-In Graph 6-10, the price that will be paid after the tax is:

Accepted Answer

A)  P0 
B)  P1 
C)  P2 
D)  impossible to determine 
A)  P0 
B)  P1 
C)  P2 
D)  impossible to determine

Question 10

The equilibrium wages of teenagers tend to be:

Accepted Answer

A)  low because teenagers are among the least skilled and least experienced workers 
B)  high because teenagers are among the strongest and most energetic workers 
C)  low because most teenagers live at home and don't require high wages 
D)  high because teenagers tend to join unions 
A)  low because teenagers are among the least skilled and least experienced workers 
B)  high because teenagers are among the strongest and most energetic workers 
C)  low because most teenagers live at home and don't require high wages 
D)  high because teenagers tend to join unions

Question 11

If a price ceiling is non-binding, it will have no effect on the market.

Accepted Answer

A) True 
 B)False

Question 12

Graph 6-8
  
-According to Graph 6-8, the amount of the tax imposed in this market is:

Accepted Answer

A)  $1.00 
B)  $1.50 
C)  $2.50 
D)  $3.50 
A)  $1.00 
B)  $1.50 
C)  $2.50 
D)  $3.50

Question 13

The world price for fuel is a price ceiling mechanism.

Accepted Answer

A) True 
 B)False

Question 14

Graph 6-8
  
-According to Graph 6-8, the price buyers will pay after the tax is imposed is:

Accepted Answer

A)  $1.00 
B)  $3.50 
C)  $5.00 
D)  $6.00 
A)  $1.00 
B)  $3.50 
C)  $5.00 
D)  $6.00

Question 15

When OPEC raised the price of crude oil in the 1970s, this caused the:

Accepted Answer

A)  demand for gasoline to increase 
B)  demand for gasoline to decrease 
C)  supply of gasoline to increase 
D)  supply of gasoline to decrease 
A)  demand for gasoline to increase 
B)  demand for gasoline to decrease 
C)  supply of gasoline to increase 
D)  supply of gasoline to decrease

Question 16

If prices are prevented from rationing a product because of a binding price ceiling, how is the scarce product rationed among potential buyers?

Accepted Answer

Mechanisms for rationing a product subje

Question 17

Graph 6-2
  
-According to Graph 6-2, a binding price ceiling would exist at a price of:

Accepted Answer

A)  $8.00 
B)  $6.00 
C)  $5.00 
D)  none of the above 
A)  $8.00 
B)  $6.00 
C)  $5.00 
D)  none of the above

Question 18

Which of the following is the most correct statement about price controls?

Accepted Answer

A)  Price controls always help those they are designed to help. 
B)  Price controls never help those they are designed to help. 
C)  Price controls often hurt those they are designed to help. 
D)  Price controls always hurt those they are designed to help. 
A)  Price controls always help those they are designed to help. 
B)  Price controls never help those they are designed to help. 
C)  Price controls often hurt those they are designed to help. 
D)  Price controls always hurt those they are designed to help.

Question 19

The consequences of economic policies are often predicted or intended by their advocates.

Accepted Answer

A) True 
 B)False

Question 20

Graph 6-7
  
-According to Graph 6-7, the price buyers will pay after the tax is imposed is:

Accepted Answer

A)  $8.00 
B)  $6.00 
C)  $5.00 
D)  $3.50 
A)  $8.00 
B)  $6.00 
C)  $5.00 
D)  $3.50

Exam 6: Supply, Demand and Government Policies

Which of the following is NOT a function of prices in a market system?

When analysing the economic effects of government policies:

If the demand for coffee and the supply of coffee are both elastic then:

A tax on the sellers of coffee:

A tax on a good or service:

New Zealand is considering a higher tax on RTD (alcopops) to try and stop young people binge drinking. Is this an effective way to raise revenue for the government from the consumers?

Graph 6-3 -According to Graph 6-3, which panel(s) best represent(s) a binding rent control in the short run?

Graph 6-10 -In Graph 6-10, the price that will be paid after the tax is:

The equilibrium wages of teenagers tend to be:

If a price ceiling is non-binding, it will have no effect on the market.

Graph 6-8 -According to Graph 6-8, the amount of the tax imposed in this market is:

The world price for fuel is a price ceiling mechanism.

Graph 6-8 -According to Graph 6-8, the price buyers will pay after the tax is imposed is:

When OPEC raised the price of crude oil in the 1970s, this caused the:

If prices are prevented from rationing a product because of a binding price ceiling, how is the scarce product rationed among potential buyers?

Graph 6-2 -According to Graph 6-2, a binding price ceiling would exist at a price of:

Which of the following is the most correct statement about price controls?

The consequences of economic policies are often predicted or intended by their advocates.

Graph 6-7 -According to Graph 6-7, the price buyers will pay after the tax is imposed is:

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Consumers, Producers and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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