Question 1

What are the effects of shifts in demand on market equilibrium?

Accepted Answer

A)  Increase in demand will result in higher equilibrium price and lower equilibrium
Quantity. 
B)  Increase in demand will result in lower equilibrium price and lower equilibrium quantity. 
C)  Increase in demand will result, in general, in higher equilibrium price and higher equilibrium quantity. 
D)  Increase in demand will result in the same equilibrium price and equilibrium quantity. 
A)  Increase in demand will result in higher equilibrium price and lower equilibrium
Quantity. 
B)  Increase in demand will result in lower equilibrium price and lower equilibrium quantity. 
C)  Increase in demand will result, in general, in higher equilibrium price and higher equilibrium quantity. 
D)  Increase in demand will result in the same equilibrium price and equilibrium quantity.

Question 2

If a farmer chooses not to develop his/her land in order to preserve wildlife, it is an example of:

Accepted Answer

A)  inefficiency. 
B)  positive externality. 
C)  negative externality. 
D)  excess of resources. 
A)  inefficiency. 
B)  positive externality. 
C)  negative externality. 
D)  excess of resources.

Question 3

Suppose a price ceiling is set by the government below the market equilibrium price. Which of the following will result?

Accepted Answer

A)  The demand curve will shift to the left. 
B)  The quantity demanded will exceed the quantity supplied. 
C)  The quantity supplied will exceed the quantity demanded. 
D)  There will be a surplus. 
A)  The demand curve will shift to the left. 
B)  The quantity demanded will exceed the quantity supplied. 
C)  The quantity supplied will exceed the quantity demanded. 
D)  There will be a surplus.

Question 4

Which of the following is not a solution to the problem of negative externalities due to pollution?

Accepted Answer

A)  Create private property rights. 
B)  Levy pollution taxes. 
C)  Create obligatory controls. 
D)  Reward the production of the products through subsidies. 
A)  Create private property rights. 
B)  Levy pollution taxes. 
C)  Create obligatory controls. 
D)  Reward the production of the products through subsidies.

Question 5

When there is market failure due to a negative externality:

Accepted Answer

A)  there are no ways of correcting it. 
B)  setting the price of the good equals to its marginal social cost will solve it. 
C)  the free market produces output at a too high price. 
D)  externalities have been taken into account. 
A)  there are no ways of correcting it. 
B)  setting the price of the good equals to its marginal social cost will solve it. 
C)  the free market produces output at a too high price. 
D)  externalities have been taken into account.

Question 6

Narrbegin Exhibit 4.5 Supply and demand data for cars
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Cars demanded } \
\text { per manth }
\end{array} & \begin{array} { c } 
\text { Price per } \
\text { car (\$) }
\end{array} & \begin{array} { c } 
\text { Cars supplied } \
\text { per manth }
\end{array} \
\hline 50 & 50 \text { 000 } & \text { 80 } \
\hline 55 & 40 \text { 000 } & 75 \
\hline 60 & 30000 & 70 \
\hline 65 & 20000 & 65 \
\hline 70 & 10000 & 55 \
\hline
\end{array}$$ Narrend
-In Exhibit 4.5, assume that the government initially sets a price floor of $30 000 for cars, and then removes this price floor. What effect will this price change have?

Accepted Answer

A)  The price of cars will rise. 
B)  The quantity of cars demanded will fall. 
C)  The quantity of cars supplied will decline. 
D)  Quantity supplied will continue to exceed quantity demanded. 
A)  The price of cars will rise. 
B)  The quantity of cars demanded will fall. 
C)  The quantity of cars supplied will decline. 
D)  Quantity supplied will continue to exceed quantity demanded.

Question 7

A vaccination shot provides a/an:

Accepted Answer

A)  beneficial opportunity cost. 
B)  positive externality. 
C)  out-resourcing benefit. 
D)  managed-care opportunity benefit. 
A)  beneficial opportunity cost. 
B)  positive externality. 
C)  out-resourcing benefit. 
D)  managed-care opportunity benefit.

Question 8

A market consequence of the establishment of a price floor program is that the price will be:

Accepted Answer

A)  too low and an excess supply will result. 
B)  too low and a shortage will result. 
C)  below the market equilibrium price. 
D)  too high and an excess supply will result. 
A)  too low and an excess supply will result. 
B)  too low and a shortage will result. 
C)  below the market equilibrium price. 
D)  too high and an excess supply will result.

Question 9

A market consequence of a price floor program is that:

Accepted Answer

A)  a shortage of the product will develop. 
B)  producers will stop supplying the product. 
C)  some rationing device must then be instituted. 
D)  a surplus of the product will develop. 
A)  a shortage of the product will develop. 
B)  producers will stop supplying the product. 
C)  some rationing device must then be instituted. 
D)  a surplus of the product will develop.

Question 10

Suppose that the equilibrium price is $20 and the government sets the price floor at $30. The result of this price floor is:

Accepted Answer

A)  negligible. 
B)  equilibrium. 
C)  surplus. 
D)  shortage. 
A)  negligible. 
B)  equilibrium. 
C)  surplus. 
D)  shortage.

Question 11

The shortage because of the price ceiling might result in:

Accepted Answer

A)  less waiting times. 
B)  more goods on offer. 
C)  lower quality of the good. 
D)  higher quality of the good. 
A)  less waiting times. 
B)  more goods on offer. 
C)  lower quality of the good. 
D)  higher quality of the good.

Question 12

Suppose prices for new homes have risen, yet sales of new homes have also risen. We can conclude that:

Accepted Answer

A)  the demand for new homes has risen. 
B)  the law of demand has been violated. 
C)  new firms have entered the construction industry. 
D)  construction firms must be facing higher costs. 
A)  the demand for new homes has risen. 
B)  the law of demand has been violated. 
C)  new firms have entered the construction industry. 
D)  construction firms must be facing higher costs.

Question 13

What are the effects of shifts in demand on market equilibrium?

Accepted Answer

A)  Decrease in demand will result in higher equilibrium price and lower equilibrium
Quantity. 
B)  Decrease in demand will result, in general, in lower equilibrium price and lower equilibrium quantity. 
C)  Decrease in demand will result in higher equilibrium price and higher equilibrium
Quantity. 
D)  Decrease in demand will result in the same equilibrium price and equilibrium quantity. 
A)  Decrease in demand will result in higher equilibrium price and lower equilibrium
Quantity. 
B)  Decrease in demand will result, in general, in lower equilibrium price and lower equilibrium quantity. 
C)  Decrease in demand will result in higher equilibrium price and higher equilibrium
Quantity. 
D)  Decrease in demand will result in the same equilibrium price and equilibrium quantity.

Question 14

Narrbegin Exhibit 4.1 Supply and demand data
 $$\begin{array} { | c | c | c | } 
\hline \text { Price (\$) } & \begin{array} { c } 
\text { Quantity } \
\text { demanded }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { supplied }
\end{array} \
\hline 10 & 500 & 50 \
\hline 15 & 450 & 150 \
\hline 20 & 400 & 250 \
\hline 25 & 300 & 300 \
\hline 30 & 150 & 350 \
\hline
\end{array}$$ 
-In Exhibit 4.1, suppose that a reduction in the price of an important input used to produce the good causes an increase in quantity supplied of 300 units at every price level. Assuming that demand does not change, the new equilibrium price will be:

Accepted Answer

A)  $10. 
B)  $15. 
C)  $20. 
D)  $25. 
A)  $10. 
B)  $15. 
C)  $20. 
D)  $25.

Question 15

Higher petrol prices would likely raise the price of large, gas-guzzling automobiles.

Accepted Answer

A) True 
 B)False

Question 16

A severe storm destroyed the banana plantations in northern Queensland. Shortly thereafter the price of bananas rose significantly. These events suggest that a/an:

Accepted Answer

A)  decrease in the supply of bananas caused the price of bananas to rise. 
B)  increase in the supply of bananas caused the price of bananas to rise. 
C)  increase in demand caused the price of bananas to rise. 
D)  decrease in demand caused the price of bananas to rise. 
A)  decrease in the supply of bananas caused the price of bananas to rise. 
B)  increase in the supply of bananas caused the price of bananas to rise. 
C)  increase in demand caused the price of bananas to rise. 
D)  decrease in demand caused the price of bananas to rise.

Question 17

Suppose the government sets a price ceiling. Which of the following will result?

Accepted Answer

A)  The quantity supplied will be greater than quantity demanded. 
B)  There will be a shortage. 
C)  There will be a surplus. 
D)  The quantity supplied will be equal to quantity demanded. 
A)  The quantity supplied will be greater than quantity demanded. 
B)  There will be a shortage. 
C)  There will be a surplus. 
D)  The quantity supplied will be equal to quantity demanded.

Question 18

If the price of fish rises, then the demand for chips will:

Accepted Answer

A)  rise. 
B)  fall assuming that they are a complement to each other. 
C)  remain unchanged. 
D)  react unpredictably. 
A)  rise. 
B)  fall assuming that they are a complement to each other. 
C)  remain unchanged. 
D)  react unpredictably.

Question 19

Which of the following is not an example of an externality?

Accepted Answer

A)  Drunk drivers raise everyone's auto insurance premiums. 
B)  The price of lumber increases as lumberjacks' wages increase. 
C)  The neighbour's beautiful front yard increases your home value. 
D)  Someone drives a car that emits thick black smoke. 
A)  Drunk drivers raise everyone's auto insurance premiums. 
B)  The price of lumber increases as lumberjacks' wages increase. 
C)  The neighbour's beautiful front yard increases your home value. 
D)  Someone drives a car that emits thick black smoke.

Question 20

Suppose a new legislation is introduced and car producers have to pay higher wages to their workers. What will be the effect on the car market?

Accepted Answer

A)  Price will decrease and quantity will decrease. 
B)  Price will increase and quantity will increase. 
C)  Price will decrease and quantity will increase. 
D)  Price will increase and quantity will decrease. 
A)  Price will decrease and quantity will decrease. 
B)  Price will increase and quantity will increase. 
C)  Price will decrease and quantity will increase. 
D)  Price will increase and quantity will decrease.

What are the effects of shifts in demand on market equilibrium?

If a farmer chooses not to develop his/her land in order to preserve wildlife, it is an example of:

Suppose a price ceiling is set by the government below the market equilibrium price. Which of the following will result?

Which of the following is not a solution to the problem of negative externalities due to pollution?

When there is market failure due to a negative externality:

A vaccination shot provides a/an:

A market consequence of the establishment of a price floor program is that the price will be:

A market consequence of a price floor program is that:

Suppose that the equilibrium price is $20 and the government sets the price floor at $30. The result of this price floor is:

The shortage because of the price ceiling might result in:

Suppose prices for new homes have risen, yet sales of new homes have also risen. We can conclude that:

What are the effects of shifts in demand on market equilibrium?

Higher petrol prices would likely raise the price of large, gas-guzzling automobiles.

A severe storm destroyed the banana plantations in northern Queensland. Shortly thereafter the price of bananas rose significantly. These events suggest that a/an:

Suppose the government sets a price ceiling. Which of the following will result?

If the price of fish rises, then the demand for chips will:

Which of the following is not an example of an externality?

Suppose a new legislation is introduced and car producers have to pay higher wages to their workers. What will be the effect on the car market?

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Exam 5: Markets in Action

What are the effects of shifts in demand on market equilibrium?

If a farmer chooses not to develop his/her land in order to preserve wildlife, it is an example of:

Suppose a price ceiling is set by the government below the market equilibrium price. Which of the following will result?

Which of the following is not a solution to the problem of negative externalities due to pollution?

When there is market failure due to a negative externality:

A vaccination shot provides a/an:

A market consequence of the establishment of a price floor program is that the price will be:

A market consequence of a price floor program is that:

Suppose that the equilibrium price is $20 and the government sets the price floor at $30. The result of this price floor is:

The shortage because of the price ceiling might result in:

Suppose prices for new homes have risen, yet sales of new homes have also risen. We can conclude that:

What are the effects of shifts in demand on market equilibrium?

Higher petrol prices would likely raise the price of large, gas-guzzling automobiles.

A severe storm destroyed the banana plantations in northern Queensland. Shortly thereafter the price of bananas rose significantly. These events suggest that a/an:

Suppose the government sets a price ceiling. Which of the following will result?

If the price of fish rises, then the demand for chips will:

Which of the following is not an example of an externality?

Suppose a new legislation is introduced and car producers have to pay higher wages to their workers. What will be the effect on the car market?

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters