Question 1

If the government imposes a price floor that is higher than the market clearing price, then

Accepted Answer

A)  consumer surplus will increase while producer surplus will decrease. 
B)  consumer surplus will decrease while producer surplus will increase. 
C)  both consumer surplus and producer surplus will decrease. 
D)  both consumer surplus and producer surplus will increase. 
A)  consumer surplus will increase while producer surplus will decrease. 
B)  consumer surplus will decrease while producer surplus will increase. 
C)  both consumer surplus and producer surplus will decrease. 
D)  both consumer surplus and producer surplus will increase.

Question 2

Suppose a hurricane causes a great deal of destruction in Texas. After the hurricane, it takes much longer than usual for the reconstruction of homes to take place. A possible explanation for this is

Accepted Answer

A)  greed by suppliers of construction materials increased. 
B)  government prevented price gouging during the reconstruction period. 
C)  prices of construction materials fell in the rest of the nation 
D)  environmental restrictions on lumbering in the Pacific Northwest were relaxed. 
A)  greed by suppliers of construction materials increased. 
B)  government prevented price gouging during the reconstruction period. 
C)  prices of construction materials fell in the rest of the nation 
D)  environmental restrictions on lumbering in the Pacific Northwest were relaxed.

Question 3

Which of the following statements is NOT true about the rationing of goods?

Accepted Answer

A)  Goods can only be rationed by price. 
B)  Goods can be rationed on a first come first serve basis. 
C)  Goods can be rationed by random. 
D)  Goods can be rationed by the use of coupons. 
A)  Goods can only be rationed by price. 
B)  Goods can be rationed on a first come first serve basis. 
C)  Goods can be rationed by random. 
D)  Goods can be rationed by the use of coupons.

Question 4

The signals in markets are determined

Accepted Answer

A)  by supply and demand. 
B)  for all goods by the government through the use of price controls. 
C)  in an unfair manner that ends up hurting the poor. 
D)  by nonprice rationing devices. 
A)  by supply and demand. 
B)  for all goods by the government through the use of price controls. 
C)  in an unfair manner that ends up hurting the poor. 
D)  by nonprice rationing devices.

Question 5

Goods A and B are complementary goods. A decrease in price of good A has occurred. In the market for good B, 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 6

A market in which a price-controlled good is sold at an illegally high price is known as

Accepted Answer

A)  a flooring market. 
B)  a ceiling market. 
C)  a black market. 
D)  a supermarket. 
A)  a flooring market. 
B)  a ceiling market. 
C)  a black market. 
D)  a supermarket.

Question 7

The way we know what commodities are relatively scarce or abundant is through

Accepted Answer

A)  transaction costs. 
B)  prices. 
C)  price ceilings. 
D)  price floors. 
A)  transaction costs. 
B)  prices. 
C)  price ceilings. 
D)  price floors.

Question 8

In some developing countries and in some former Communist countries, people exchange their domestic currencies for foreign currencies such as the dollar in black markets. Why would this practice go on?

Accepted Answer

The country must have some restrictions

Question 9

During the 2016 Summer Olympics in the city of Rio, some Rio residents rented rooms to visitors. This behavior

Accepted Answer

A)  helped reduce the shortage of hotel rooms caused by the high demand during the Olympics. 
B)  reduced the demand for tickets to the Olympics since many local residents left town while they rented out space in their homes. 
C)  helped raise the prices that visitors paid for hotel rooms in Rio. 
D)  raised the demand for hotel rooms in Rio and should have been prevented by the city of Rio. 
A)  helped reduce the shortage of hotel rooms caused by the high demand during the Olympics. 
B)  reduced the demand for tickets to the Olympics since many local residents left town while they rented out space in their homes. 
C)  helped raise the prices that visitors paid for hotel rooms in Rio. 
D)  raised the demand for hotel rooms in Rio and should have been prevented by the city of Rio.

Question 10

When import quotas are imposed by a government

Accepted Answer

A)  the domestic producers always lower the prices of their products to ensure that their products are sold. 
B)  the government is trying to discourage consumers from buying foreign-made goods. 
C)  the supply of the product on the domestic market increases. 
D)  the price ceiling for the product has to be lowered. 
A)  the domestic producers always lower the prices of their products to ensure that their products are sold. 
B)  the government is trying to discourage consumers from buying foreign-made goods. 
C)  the supply of the product on the domestic market increases. 
D)  the price ceiling for the product has to be lowered.

Question 11

What will happen when there is a rightward shift in the demand curve?

Accepted Answer

A)  The product price will instantaneously adjust downward. 
B)  Product prices do not change in this situation. 
C)  Producers will decrease the product price. 
D)  A new, higher price is not instantaneously achieved, but the price will rise over time. 
A)  The product price will instantaneously adjust downward. 
B)  Product prices do not change in this situation. 
C)  Producers will decrease the product price. 
D)  A new, higher price is not instantaneously achieved, but the price will rise over time.

Question 12

-According to the above figure, if the government imposes a minimum wage equal to Wm, the effect will be

Accepted Answer

A)  a reduction in employment from Qe to Qm. 
B)  an increase in employment from Qe to Qm. 
C)  a decrease in labor supplied, from C to E. 
D)  an increase in labor supplied, from A to E. 
A)  a reduction in employment from Qe to Qm. 
B)  an increase in employment from Qe to Qm. 
C)  a decrease in labor supplied, from C to E. 
D)  an increase in labor supplied, from A to E.

Question 13

Which of the following is NOT an example of a transaction cost?

Accepted Answer

A)  the enjoyment of owning the good 
B)  the opportunity cost of time spent looking for stores that sold the good desired 
C)  the cost of returning a defective product 
D)  time spent bargaining over the price of a good 
A)  the enjoyment of owning the good 
B)  the opportunity cost of time spent looking for stores that sold the good desired 
C)  the cost of returning a defective product 
D)  time spent bargaining over the price of a good

Question 14

Suppose the market clearing price for gasoline is $2.25 per gallon. Now suppose that policy makers pass a law requiring that the maximum price that can be charged is $2.0 per gallon. Such a situation is an example of

Accepted Answer

A)  a price control that will lead to a surplus of gasoline on the market. 
B)  a price floor that will lead to a shortage of gasoline on the market. 
C)  a price ceiling that will lead to a shortage of gasoline on the market. 
D)  a price floor that will lead to a surplus of gasoline on the market. 
A)  a price control that will lead to a surplus of gasoline on the market. 
B)  a price floor that will lead to a shortage of gasoline on the market. 
C)  a price ceiling that will lead to a shortage of gasoline on the market. 
D)  a price floor that will lead to a surplus of gasoline on the market.

Question 15

Which of the following is most likely to generate a surplus?

Accepted Answer

A)  a price floor 
B)  a price ceiling 
C)  an illegal market 
D)  all of these 
A)  a price floor 
B)  a price ceiling 
C)  an illegal market 
D)  all of these

Question 16

Governments may intervene in private markets through

Accepted Answer

A)  rationing by political power. 
B)  price floors. 
C)  price ceilings. 
D)  all of the above. 
A)  rationing by political power. 
B)  price floors. 
C)  price ceilings. 
D)  all of the above.

Question 17

Rationing goods on the basis of price is a direct result of

Accepted Answer

A)  scarcity. 
B)  queuing. 
C)  government intervention. 
D)  the profit motive. 
A)  scarcity. 
B)  queuing. 
C)  government intervention. 
D)  the profit motive.

Question 18

-Refer to the above figure. If the government set a price floor of $3.50 per gallon, there would be

Accepted Answer

A)  an excess quantity demanded equal to 100,000 gallons. 
B)  an excess quantity supplied equal to the distance BD. 
C)  an excess quantity supplied equal to the distance BF. 
D)  an excess quantity supplied equal to 100,000 gallons. 
A)  an excess quantity demanded equal to 100,000 gallons. 
B)  an excess quantity supplied equal to the distance BD. 
C)  an excess quantity supplied equal to the distance BF. 
D)  an excess quantity supplied equal to 100,000 gallons.

Question 19

An import quota will

Accepted Answer

A)  lead to a shift of the demand curve. 
B)  leave the equilibrium price unchanged and increase the quantity sold. 
C)  limit the amount of a foreign good that can be brought into the United States. 
D)  limit the amount of a good local producers can make. 
A)  lead to a shift of the demand curve. 
B)  leave the equilibrium price unchanged and increase the quantity sold. 
C)  limit the amount of a foreign good that can be brought into the United States. 
D)  limit the amount of a good local producers can make.

Question 20

The market clearing price of computer modems has just decreased. Which of the following could have caused this change?

Accepted Answer

A)  a decrease in supply at the same time that demand increases 
B)  an increase in supply at the same time that demand decreases 
C)  a decrease in supply with demand unchanged 
D)  an increase in demand with supply unchanged 
A)  a decrease in supply at the same time that demand increases 
B)  an increase in supply at the same time that demand decreases 
C)  a decrease in supply with demand unchanged 
D)  an increase in demand with supply unchanged

Exam 4: Extensions of Demand and Supply Analysis

If the government imposes a price floor that is higher than the market clearing price, then

Suppose a hurricane causes a great deal of destruction in Texas. After the hurricane, it takes much longer than usual for the reconstruction of homes to take place. A possible explanation for this is

Which of the following statements is NOT true about the rationing of goods?

The signals in markets are determined

Goods A and B are complementary goods. A decrease in price of good A has occurred. In the market for good B, this will lead to

A market in which a price-controlled good is sold at an illegally high price is known as

The way we know what commodities are relatively scarce or abundant is through

In some developing countries and in some former Communist countries, people exchange their domestic currencies for foreign currencies such as the dollar in black markets. Why would this practice go on?

During the 2016 Summer Olympics in the city of Rio, some Rio residents rented rooms to visitors. This behavior

When import quotas are imposed by a government

What will happen when there is a rightward shift in the demand curve?

-According to the above figure, if the government imposes a minimum wage equal to Wm, the effect will be

Which of the following is NOT an example of a transaction cost?

Suppose the market clearing price for gasoline is $2.25 per gallon. Now suppose that policy makers pass a law requiring that the maximum price that can be charged is $2.0 per gallon. Such a situation is an example of

Which of the following is most likely to generate a surplus?

Governments may intervene in private markets through

Rationing goods on the basis of price is a direct result of

-Refer to the above figure. If the government set a price floor of $3.50 per gallon, there would be

An import quota will

The market clearing price of computer modems has just decreased. Which of the following could have caused this change?

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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