Question 1

Which of the below is true?

Accepted Answer

A)  A price ceiling reduces the quantity exchanged on the market, but a price floor increases the quantity exchanged on the market. 
B)  A price ceiling increases the quantity exchanged on the market, but a price floor decreases the quantity exchanged on the market. 
C)  Both price floors and price ceilings reduce the quantity exchanged in the market. 
D)  Both price floors and price ceilings increase the quantity exchanged in the market. 
A)  A price ceiling reduces the quantity exchanged on the market, but a price floor increases the quantity exchanged on the market. 
B)  A price ceiling increases the quantity exchanged on the market, but a price floor decreases the quantity exchanged on the market. 
C)  Both price floors and price ceilings reduce the quantity exchanged in the market. 
D)  Both price floors and price ceilings increase the quantity exchanged in the market.

Question 2

A shortage results when a

Accepted Answer

A)  nonbinding price ceiling is imposed on a market. 
B)  nonbinding price ceiling is removed from a market. 
C)  binding price ceiling is imposed on a market. 
D)  binding price ceiling is removed from a market. 
A)  nonbinding price ceiling is imposed on a market. 
B)  nonbinding price ceiling is removed from a market. 
C)  binding price ceiling is imposed on a market. 
D)  binding price ceiling is removed from a market.

Question 3

Assume a price floor is imposed at the current equilibrium price in the market for lettuce.If the demand for lettuce then increases:

Accepted Answer

A)  a surplus of lettuce will be created. 
B)  a shortage of lettuce will be created. 
C)  the quantity of lettuce traded remains the same. 
D)  the quantity of lettuce supplied will increase. 
A)  a surplus of lettuce will be created. 
B)  a shortage of lettuce will be created. 
C)  the quantity of lettuce traded remains the same. 
D)  the quantity of lettuce supplied will increase.

Question 4

Exhibit 5-5   Refer to Exhibit 5-5.The movement from ____ to ____ is consistent with a decrease in the price of cotton (a substitute).

Accepted Answer

A)  Point A; Point B 
B)  Point A; Point F 
C)  Point A; Point D 
D)  Point A; Point H 
A)  Point A; Point B 
B)  Point A; Point F 
C)  Point A; Point D 
D)  Point A; Point H

Question 5

Exhibit 5-1 The diagram below represents the market for butter.   Refer to Exhibit 5-1.If a price ceiling of $4 is imposed,we would expect that ____ units of butter will be sold.

Accepted Answer

A)  7,000 
B)  5,000 
C)  4,000 
D)  3,000 
A)  7,000 
B)  5,000 
C)  4,000 
D)  3,000

Question 6

An increase in the equilibrium price and the equilibrium quantity would be caused by an increase in supply.

Accepted Answer

A) True 
 B)False

Question 7

A non-binding price ceiling
i.causes a surplus.
ii.causes a shortage.
iii.is set at a price above the equilibrium price.
iv.is set at a price below the equilibrium price.

Accepted Answer

A)  (i) only 
B)  (iii) only 
C)  (i) and (iii) only 
D)  (ii) and (iv) only 
A)  (i) only 
B)  (iii) only 
C)  (i) and (iii) only 
D)  (ii) and (iv) only

Question 8

Suppose there is a reduction in consumer income and an increase in the price of jet fuel,an important resource used to produce air travel.If air travel is a normal good,how will these changes influence the price and quantity of air travel? The price of air travel will (be)____ and quantity purchased will (be)____.

Accepted Answer

A)  decrease; indeterminate 
B)  increase; indeterminate 
C)  decrease; decrease 
D)  indeterminate; decrease 
A)  decrease; indeterminate 
B)  increase; indeterminate 
C)  decrease; decrease 
D)  indeterminate; decrease

Question 9

In 1975 a pocket calculator cost more than $50; in 1990 a calculator of the same quality cost less than $10.Which of the following explanations is most consistent with these facts?

Accepted Answer

A)  Intense competition in the calculator industry caused the supply curve for calculators to shift to the left, depressing the price. 
B)  An increase in the demand for calculators led to the price drop. 
C)  An improvement in technology caused the supply of calculators to increase, depressing their price. 
D)  As the population grew, fewer expensive calculators were needed, causing prices to fall. 
A)  Intense competition in the calculator industry caused the supply curve for calculators to shift to the left, depressing the price. 
B)  An increase in the demand for calculators led to the price drop. 
C)  An improvement in technology caused the supply of calculators to increase, depressing their price. 
D)  As the population grew, fewer expensive calculators were needed, causing prices to fall.

Question 10

An increase in demand for a product and a reduction in the costs of production would:

Accepted Answer

A)  increase the equilibrium quantity and increase the equilibrium price. 
B)  increase the equilibrium quantity and decrease the equilibrium price. 
C)  increase the equilibrium quantity and cause an indeterminate change in the equilibrium price. 
D)  decrease the equilibrium quantity and cause an indeterminate change in the equilibrium price. 
A)  increase the equilibrium quantity and increase the equilibrium price. 
B)  increase the equilibrium quantity and decrease the equilibrium price. 
C)  increase the equilibrium quantity and cause an indeterminate change in the equilibrium price. 
D)  decrease the equilibrium quantity and cause an indeterminate change in the equilibrium price.

Question 11

Exhibit 5-3 Use the following information about demand and supply schedules to answer the question.
  Refer to Exhibit 5-3.Suppose that D2 and S1 are the prevailing demand and supply curves for a product.If the supply schedule changes from S1 to S2,then:

Accepted Answer

A)  equilibrium price decreases from $10 to $8. 
B)  equilibrium quantity decreases from 15 to 12. 
C)  equilibrium quantity increases from 10 to 12. 
D)  equilibrium price increases from $10 to $12. 
A)  equilibrium price decreases from $10 to $8. 
B)  equilibrium quantity decreases from 15 to 12. 
C)  equilibrium quantity increases from 10 to 12. 
D)  equilibrium price increases from $10 to $12.

Question 12

If the price of ice cream increases substantially (ceteris paribus),the equilibrium quantity of hot fudge sauce,a complement,is likely to:

Accepted Answer

A)  increase, and the equilibrium price is likely to decrease. 
B)  increase, and the equilibrium price is likely to increase. 
C)  decrease, and the equilibrium price is likely to decrease. 
D)  decrease, and the equilibrium price is likely to increase. 
A)  increase, and the equilibrium price is likely to decrease. 
B)  increase, and the equilibrium price is likely to increase. 
C)  decrease, and the equilibrium price is likely to decrease. 
D)  decrease, and the equilibrium price is likely to increase.

Question 13

The imposition of a binding price ceiling on a market causes quantity demanded to be

Accepted Answer

A)  greater than quantity supplied. 
B)  less than quantity supplied. 
C)  equal to quantity supplied. 
D)  Both (a) and (b) are possible. 
A)  greater than quantity supplied. 
B)  less than quantity supplied. 
C)  equal to quantity supplied. 
D)  Both (a) and (b) are possible.

Question 14

If a price ceiling is not binding,then it will have no effect on the market.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not likely to result from an increase in the federal minimum wage?

Accepted Answer

A)  an increase in the quantity of low-skilled labor supplied 
B)  a decrease in the quantity of low-skilled labor demanded 
C)  a decrease in teenage unemployment 
D)  an increase in teenage unemployment 
A)  an increase in the quantity of low-skilled labor supplied 
B)  a decrease in the quantity of low-skilled labor demanded 
C)  a decrease in teenage unemployment 
D)  an increase in teenage unemployment

Question 16

If the demand for apples increases at the same time the supply of apples falls,the price of apples will tend to fall.

Accepted Answer

A) True 
 B)False

Question 17

Assuming that the demand and supply of a good have moved in the same direction,and by the same amount,the new equilibrium would represent:

Accepted Answer

A)  an increase in price and an increase in quantity exchanged. 
B)  no change in price and an increase in quantity exchanged. 
C)  a decrease in price and a decrease in quantity exchanged. 
D)  no change in price, and an indeterminate change in quantity exchanged. 
A)  an increase in price and an increase in quantity exchanged. 
B)  no change in price and an increase in quantity exchanged. 
C)  a decrease in price and a decrease in quantity exchanged. 
D)  no change in price, and an indeterminate change in quantity exchanged.

Question 18

Exhibit 5-2   Refer to Exhibit 5-2.A movement from S1 to S3 could occur if:

Accepted Answer

A)  there is a decrease in the price of submarine sandwiches. 
B)  there is an increase in price of ingredients such tomatoes and pickles 
C)  there is a decrease in price of hamburgers, a substitute to submarine sandwiches 
D)  the price of bread used to make submarine sandwiches decreases 
A)  there is a decrease in the price of submarine sandwiches. 
B)  there is an increase in price of ingredients such tomatoes and pickles 
C)  there is a decrease in price of hamburgers, a substitute to submarine sandwiches 
D)  the price of bread used to make submarine sandwiches decreases

Question 19

In general,an increase in price could be caused by either:

Accepted Answer

A)  an increase in demand or a decrease in supply. 
B)  an increase in demand or an increase in supply. 
C)  a decrease in demand or an increase in supply. 
D)  an increase in demand or an increase in supply 
A)  an increase in demand or a decrease in supply. 
B)  an increase in demand or an increase in supply. 
C)  a decrease in demand or an increase in supply. 
D)  an increase in demand or an increase in supply

Question 20

To say that a price ceiling is binding is to say that the price ceiling

Accepted Answer

A)  results in a surplus. 
B)  is set above the equilibrium price. 
C)  causes quantity demanded to exceed quantity supplied. 
D)  All of the above are correct. 
A)  results in a surplus. 
B)  is set above the equilibrium price. 
C)  causes quantity demanded to exceed quantity supplied. 
D)  All of the above are correct.

Exam 5: Markets in Motion and Price Controls

Which of the below is true?

A shortage results when a

Assume a price floor is imposed at the current equilibrium price in the market for lettuce.If the demand for lettuce then increases:

Exhibit 5-5 Refer to Exhibit 5-5.The movement from ____ to ____ is consistent with a decrease in the price of cotton (a substitute).

Exhibit 5-1 The diagram below represents the market for butter. Refer to Exhibit 5-1.If a price ceiling of $4 is imposed,we would expect that ____ units of butter will be sold.

An increase in the equilibrium price and the equilibrium quantity would be caused by an increase in supply.

A non-binding price ceiling i.causes a surplus. ii.causes a shortage. iii.is set at a price above the equilibrium price. iv.is set at a price below the equilibrium price.

In 1975 a pocket calculator cost more than $50; in 1990 a calculator of the same quality cost less than $10.Which of the following explanations is most consistent with these facts?

An increase in demand for a product and a reduction in the costs of production would:

Exhibit 5-3 Use the following information about demand and supply schedules to answer the question. Refer to Exhibit 5-3.Suppose that D2 and S1 are the prevailing demand and supply curves for a product.If the supply schedule changes from S1 to S2,then:

If the price of ice cream increases substantially (ceteris paribus),the equilibrium quantity of hot fudge sauce,a complement,is likely to:

The imposition of a binding price ceiling on a market causes quantity demanded to be

If a price ceiling is not binding,then it will have no effect on the market.

Which of the following is not likely to result from an increase in the federal minimum wage?

If the demand for apples increases at the same time the supply of apples falls,the price of apples will tend to fall.

Assuming that the demand and supply of a good have moved in the same direction,and by the same amount,the new equilibrium would represent:

Exhibit 5-2 Refer to Exhibit 5-2.A movement from S1 to S3 could occur if:

In general,an increase in price could be caused by either:

To say that a price ceiling is binding is to say that the price ceiling

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

Filters

Exhibit 5-5 Refer to Exhibit 5-5.The movement from to is consistent with a decrease in the price of cotton (a substitute).

Exhibit 5-3 Use the following information about demand and supply schedules to answer the question. Refer to Exhibit 5-3.Suppose that D₂ and S₁ are the prevailing demand and supply curves for a product.If the supply schedule changes from S₁ to S₂,then:

Exhibit 5-2 Refer to Exhibit 5-2.A movement from S₁ to S₃ could occur if: