Question 1

Price ceilings sometimes result in some buyers and sellers purchasing the good at prohibited prices.

Accepted Answer

A) True 
 B)False

Question 2

The minimum wage is a good example of a price floor.

Accepted Answer

A) True 
 B)False

Question 3

Exhibit 4-1  
-Refer to Exhibit 4-1.Suppose the good shown is being sold at the $6 price ceiling.At a quantity of 75 units,what is the maximum per-unit price buyers would be willing to pay for a good "tied" to the good shown in the exhibit?

Accepted Answer

A) $10 
B) $8 
C) $6 
D) $4 
E) none of the above 
A) $10 
B) $8 
C) $6 
D) $4 
E) none of the above

Question 4

Suppose that the price of peanut butter is $3 per pound and the price of almond butter is $5 per pound.If the price of peanut butter rises to $3.60 and the price of almond butter rises to $5.50,then the absolute price of peanut butter has _______________ and the relative price of peanut butter has _______________.

Accepted Answer

A) risen;fallen 
B) fallen;risen 
C) risen;risen 
D) fallen;fallen 
A) risen;fallen 
B) fallen;risen 
C) risen;risen 
D) fallen;fallen

Question 5

In order for a price ceiling to have an impact on a market it must be set above the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 6

If the absolute price of a new car is $40,000 and the relative price of a laptop computer in terms of cars is 1/40 of a car,it follows that the absolute price of the laptop is

Accepted Answer

A) $10,000. 
B) $1,000. 
C) $4,000. 
D) $2,000. 
E) $1,500. 
A) $10,000. 
B) $1,000. 
C) $4,000. 
D) $2,000. 
E) $1,500.

Question 7

Exhibit 4-7  
-Refer to Exhibit 4-7.How many fewer persons work in the unskilled labor market at the minimum wage (WM)than at the equilibrium wage (W1)?

Accepted Answer

A) (N2 - N1)persons 
B) (N1 - N3)persons 
C) (N2 - N3)persons 
D) N3 persons 
E) none of the above 
A) (N2 - N1)persons 
B) (N1 - N3)persons 
C) (N2 - N3)persons 
D) N3 persons 
E) none of the above

Question 8

Jake is an excellent barber.However,all customers who come to him for a haircut must buy a bottle of shampoo.This type of arrangement is known as

Accepted Answer

A) a tie-in sale. 
B) a sweetheart deal. 
C) an exclusive contract. 
D) a cross subsidy. 
A) a tie-in sale. 
B) a sweetheart deal. 
C) an exclusive contract. 
D) a cross subsidy.

Question 9

Which of the following would not result from a price ceiling (set below the equilibrium price)?

Accepted Answer

A) a shortage 
B) fewer exchanges 
C) an increase in supply 
D) nonprice rationing devices 
A) a shortage 
B) fewer exchanges 
C) an increase in supply 
D) nonprice rationing devices

Question 10

Price ceilings and price floors

Accepted Answer

A) shift demand and supply curves and therefore have no effect upon the rationing function of prices. 
B) interfere with the rationing function of prices. 
C) make the rationing function of free markets more efficient. 
D) cause surpluses and shortages,respectively. 
A) shift demand and supply curves and therefore have no effect upon the rationing function of prices. 
B) interfere with the rationing function of prices. 
C) make the rationing function of free markets more efficient. 
D) cause surpluses and shortages,respectively.

Question 11

If the price of good X is $90 and the price of good Y is $30,it follows that the relative price of one unit of good Y is ___________ unit(s)of good X.

Accepted Answer

A) 0.33 
B) 1.33 
C) 3.00 
D) 2.00 
E) There is not enough information to answer the question. 
A) 0.33 
B) 1.33 
C) 3.00 
D) 2.00 
E) There is not enough information to answer the question.

Question 12

Exhibit 4-6  
-Refer to Exhibit 4-6.Suppose the minimum wage is set at $5.The result will be

Accepted Answer

A) unemployment. 
B) a shortage of unskilled labor. 
C) no impact on the unskilled labor market. 
D) a prolonged surplus of unskilled labor. 
E) none of the above 
A) unemployment. 
B) a shortage of unskilled labor. 
C) no impact on the unskilled labor market. 
D) a prolonged surplus of unskilled labor. 
E) none of the above

Question 13

A tax placed on a good can make that good relatively more expensive and its substitutes relatively less expensive.

Accepted Answer

A) True 
 B)False

Question 14

If the relative price of one unit of good X is 5 units of good Y,then it follows that the absolute price of good X can be __________ and the absolute price of good Y can be __________.

Accepted Answer

A) $20,000;$10,000 
B) $40,000;$8,000 
C) $30,000;$5,0000 
D) $5,000;$40,000 
E) a and c 
A) $20,000;$10,000 
B) $40,000;$8,000 
C) $30,000;$5,0000 
D) $5,000;$40,000 
E) a and c

Question 15

Exhibit 4-8  
-Refer to Exhibit 4-8.If the wheat market is in competitive equilibrium the producers' surplus will equal

Accepted Answer

A) area 1 + 2 + 3 
B) area 1 + 2 + 4 
C) area 3 + 5 
D) area 1 + 2 + 3 + 4 + 5 
E) area 6 
A) area 1 + 2 + 3 
B) area 1 + 2 + 4 
C) area 3 + 5 
D) area 1 + 2 + 3 + 4 + 5 
E) area 6

Question 16

At the minimum wage (set above the equilibrium wage),

Accepted Answer

A) all individuals who end up working are paid less than if they were paid the equilibrium wage. 
B) none of the workers will lose there jobs or find themselves working fewer hours. 
C) none of the individuals who end up working are paid more than if they were paid the equilibrium wage. 
D) there will be fewer people working (or fewer labor hours demanded)than at the equilibrium wage. 
E) none of the above 
A) all individuals who end up working are paid less than if they were paid the equilibrium wage. 
B) none of the workers will lose there jobs or find themselves working fewer hours. 
C) none of the individuals who end up working are paid more than if they were paid the equilibrium wage. 
D) there will be fewer people working (or fewer labor hours demanded)than at the equilibrium wage. 
E) none of the above

Question 17

Exhibit 4-2  
-Exhibit 4-2 represents the orange juice market.The horizontal line at $2 shows a price ceiling imposed by the government.Which of the following statements is true at this price?

Accepted Answer

A) At the price ceiling the surplus equals 400 units. 
B) At the price ceiling the shortage equals 400 units. 
C) At the price ceiling the surplus equals 300 units. 
D) At the price ceiling the shortage equals 200 units. 
E) none of the above 
A) At the price ceiling the surplus equals 400 units. 
B) At the price ceiling the shortage equals 400 units. 
C) At the price ceiling the surplus equals 300 units. 
D) At the price ceiling the shortage equals 200 units. 
E) none of the above

Question 18

Exhibit 4-3  
-Refer to Exhibit 4-3.If P1 is a price ceiling,the maximum (per-unit)amount buyers are willing to pay to purchase Q1 units is

Accepted Answer

A) P1. 
B) P2. 
C) P3. 
D) P1 + P2. 
E) P3 - P1. 
A) P1. 
B) P2. 
C) P3. 
D) P1 + P2. 
E) P3 - P1.

Question 19

Exhibit 4-1  
-Refer to Exhibit 4-1.How many fewer units are exchanged because of the price ceiling than would have been exchanged at the equilibrium price?

Accepted Answer

A) 50 
B) 60 
C) 65 
D) 100 
A) 50 
B) 60 
C) 65 
D) 100

Question 20

A price floor is a government-mandated

Accepted Answer

A) minimum price below which legal trades cannot be made. 
B) maximum price above which legal trades cannot be made. 
C) minimum price at which all units of the good must be legally sold. 
D) minimum price below which legal trades can be made. 
A) minimum price below which legal trades cannot be made. 
B) maximum price above which legal trades cannot be made. 
C) minimum price at which all units of the good must be legally sold. 
D) minimum price below which legal trades can be made.

Exam 4: Prices: Free, controlled, and Relative

Price ceilings sometimes result in some buyers and sellers purchasing the good at prohibited prices.

The minimum wage is a good example of a price floor.

Exhibit 4-1 -Refer to Exhibit 4-1.Suppose the good shown is being sold at the $6 price ceiling.At a quantity of 75 units,what is the maximum per-unit price buyers would be willing to pay for a good "tied" to the good shown in the exhibit?

In order for a price ceiling to have an impact on a market it must be set above the equilibrium price.

If the absolute price of a new car is $40,000 and the relative price of a laptop computer in terms of cars is 1/40 of a car,it follows that the absolute price of the laptop is

Exhibit 4-7 -Refer to Exhibit 4-7.How many fewer persons work in the unskilled labor market at the minimum wage (WM)than at the equilibrium wage (W1)?

Jake is an excellent barber.However,all customers who come to him for a haircut must buy a bottle of shampoo.This type of arrangement is known as

Which of the following would not result from a price ceiling (set below the equilibrium price)?

Price ceilings and price floors

If the price of good X is $90 and the price of good Y is $30,it follows that the relative price of one unit of good Y is ___________ unit(s)of good X.

Exhibit 4-6 -Refer to Exhibit 4-6.Suppose the minimum wage is set at $5.The result will be

A tax placed on a good can make that good relatively more expensive and its substitutes relatively less expensive.

If the relative price of one unit of good X is 5 units of good Y,then it follows that the absolute price of good X can be __________ and the absolute price of good Y can be __________.

Exhibit 4-8 -Refer to Exhibit 4-8.If the wheat market is in competitive equilibrium the producers' surplus will equal

At the minimum wage (set above the equilibrium wage),

Exhibit 4-2 -Exhibit 4-2 represents the orange juice market.The horizontal line at $2 shows a price ceiling imposed by the government.Which of the following statements is true at this price?

Exhibit 4-3 -Refer to Exhibit 4-3.If P1 is a price ceiling,the maximum (per-unit)amount buyers are willing to pay to purchase Q1 units is

Exhibit 4-1 -Refer to Exhibit 4-1.How many fewer units are exchanged because of the price ceiling than would have been exchanged at the equilibrium price?

A price floor is a government-mandated

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money,banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

Stocks, bonds, futures, and Options

Filters

Exhibit 4-7 -Refer to Exhibit 4-7.How many fewer persons work in the unskilled labor market at the minimum wage (W_M)than at the equilibrium wage (W₁)?

If the relative price of one unit of good X is 5 units of good Y,then it follows that the absolute price of good X can be and the absolute price of good Y can be .

Exhibit 4-3 -Refer to Exhibit 4-3.If P₁ is a price ceiling,the maximum (per-unit)amount buyers are willing to pay to purchase Q₁ units is