Question 1

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 sets a price ceiling of $10 000 for cars. What effect will this price change have?

Accepted Answer

A)  The quality of cars will improve. 
B)  The quantity of cars demanded will fall. 
C)  A black market for cars is likely to develop. 
D)  The price of cars will rise.

Question 2

Assuming supply is held constant, an increase in demand for a product will cause a decrease in the market price and the amount bought and sold.

Accepted Answer

A) True 
 B)False

Question 3

When there is a positive externality associated with the watering of one's lawn, the free market results in:

Accepted Answer

A)  not enough lawn watering. 
B)  too much lawn watering. 
C)  the socially optimal level of lawn watering. 
D)  people watering each other's lawns.

Question 4

Market failure means that:

Accepted Answer

A)  government always has to intervene in all markets. 
B)  markets always produce efficient outcomes for society. 
C)  the market price system fails to operate efficiently, creating a problem for society. 
D)  government should never intervene in markets.

Question 5

One of the ways to deal with external cost is:

Accepted Answer

A)  to rely on a good behaviour. 
B)  to invest in technological development. 
C)  to penalise those who bear the external cost. 
D)  to include the external cost in market price.

Question 6

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the:

Accepted Answer

A)  demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed. 
B)  demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed. 
C)  supply curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and a decrease in the quantity consumed. 
D)  supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed.

Question 7

Demand for a normal good will increase at existing prices if:

Accepted Answer

A)  there is a decrease in the population size. 
B)  there is an increase in income. 
C)  there is a decrease in wealth. 
D)  there is an increase in interest rates.

Question 8

Narrbegin Exhibit 4.4 Demand and supply curves  
-In Exhibit 4.4, a movement from A to B is best described as a/an:

Accepted Answer

A)  increase in the quantity supplied and an increase in the demand. 
B)  increase in the quantity supplied and a decrease in demand. 
C)  decrease in the quantity supplied and an increase in demand. 
D)  decrease in the quantity demanded and a decrease in supply.

Question 9

In 2002 a community in the United States passed a beautification ordinance (law) prohibiting the placement of indoor furniture outside of homes (e.g. no couches on the porch). The law represents a conflict between _____ and _____.

Accepted Answer

A)  the rich; the poor 
B)  third parties; market participants 
C)  victims; criminals 
D)  public goods; private goods

Question 10

Which of the following is not a market failure?

Accepted Answer

A)  A lack of competition in some markets. 
B)  Prices determined in competitive markets, where an individual consumer has no control over price. 
C)  The presence of externalities in some markets. 
D)  A lack of public goods desired by a majority of citizens.

Question 11

Consider the market for apples. Assuming that apples and oranges are substitutes, an increase in the price of oranges will:

Accepted Answer

A)  decrease the demand for apples, creating a lower price and a smaller amount of apples purchased in the market. 
B)  increase the demand for apples, creating a higher price and a greater amount of apples purchased in the market. 
C)  decrease the supply of apples, creating a higher price and a smaller amount of apples purchased in the market. 
D)  increase the supply of apples, creating a lower price and a greater amount of apples purchased in the market.

Question 12

An increase in demand and a decrease in supply cause which of the following?

Accepted Answer

A)  Equilibrium price change is indeterminate. 
B)  Equilibrium quantity decreases. 
C)  Equilibrium price falls. 
D)  Equilibrium price rises.

Question 13

The government would use production taxes to remedy the problem of substantial:

Accepted Answer

A)  internal benefits of production. 
B)  external benefits of production. 
C)  external costs of production. 
D)  external benefits of consumption

Question 14

If the equilibrium price of good X is $15 and a price ceiling is imposed at $14, the result will be:

Accepted Answer

A)  an accumulation of inventories of unsold X. 
B)  difficult to determine. 
C)  a surplus. 
D)  a shortage.

Question 15

Price ceilings are imposed if the government:

Accepted Answer

A)  believes that the market will not achieve an equilibrium price. 
B)  wants to provide 'essential service'. 
C)  wants to spend money. 
D)  wants producers to increase the supply.

Question 16

Price ceiling is:

Accepted Answer

A)  any price above market equilibrium. 
B)  a price above market equilibrium set by the government. 
C)  a price below market equilibrium set by the government. 
D)  any price below market equilibrium.

Question 17

If the equilibrium price of aspirins is $5.50 for 250 tablets and the government imposes a price ceiling at $5.00 for 250 tablets, the eventual result will be:

Accepted Answer

A)  a shift in the demand curve to the right. 
B)  a shift in the supply curve to the right. 
C)  an accumulation of inventories of unsold aspirins. 
D)  a shortage of aspirin.

Question 18

Non-smoking sections in restaurants are designed to remove _____ from a market _____.

Accepted Answer

A)  smoke; with food service 
B)  third parties; for food service 
C)  externalities; with public goods 
D)  third parties; externality

Question 19

If the government imposes a price ceiling below the market equilibrium price, then:

Accepted Answer

A)  there will be no changes to the market equilibrium. 
B)  there will be excess supply. 
C)  there will be more goods to meet the additional demand. 
D)  there will be less goods to meet the demand.

Question 20

Narrbegin Exhibit 4.1 Supply and demand data
 $$\begin{array} { | c | c | c | } 
\hline \text { Price (\$) } & \begin{array} { c } 
\text { Quantity } \
\text { demanded }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { supplied }
\end{array} \
\hline 10 & 500 & 50 \
\hline 15 & 450 & 150 \
\hline 20 & 400 & 250 \
\hline 25 & 300 & 300 \
\hline 30 & 150 & 350 \
\hline
\end{array}$$ 
-Exhibit 4.1 shows that at a price of $30:

Accepted Answer

A)  the market is in equilibrium. 
B)  there will be excess quantity demanded. 
C)  there will be excess quantity supplied. 
D)  there is a price ceiling in effect.

Exam 5: Markets in Action

Assuming supply is held constant, an increase in demand for a product will cause a decrease in the market price and the amount bought and sold.

When there is a positive externality associated with the watering of one's lawn, the free market results in:

Market failure means that:

One of the ways to deal with external cost is:

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the:

Demand for a normal good will increase at existing prices if:

Narrbegin Exhibit 4.4 Demand and supply curves -In Exhibit 4.4, a movement from A to B is best described as a/an:

In 2002 a community in the United States passed a beautification ordinance (law) prohibiting the placement of indoor furniture outside of homes (e.g. no couches on the porch) . The law represents a conflict between _ and _.

Which of the following is not a market failure?

Consider the market for apples. Assuming that apples and oranges are substitutes, an increase in the price of oranges will:

An increase in demand and a decrease in supply cause which of the following?

The government would use production taxes to remedy the problem of substantial:

If the equilibrium price of good X is $15 and a price ceiling is imposed at $14, the result will be:

Price ceilings are imposed if the government:

Price ceiling is:

If the equilibrium price of aspirins is $5.50 for 250 tablets and the government imposes a price ceiling at $5.00 for 250 tablets, the eventual result will be:

Non-smoking sections in restaurants are designed to remove _ from a market _.

If the government imposes a price ceiling below the market equilibrium price, then:

Exam 5: Markets in Action

Assuming supply is held constant, an increase in demand for a product will cause a decrease in the market price and the amount bought and sold.

When there is a positive externality associated with the watering of one's lawn, the free market results in:

Market failure means that:

One of the ways to deal with external cost is:

Consider the market for grapes. An increase in the wage paid to grape pickers will cause the:

Demand for a normal good will increase at existing prices if:

Narrbegin Exhibit 4.4 Demand and supply curves -In Exhibit 4.4, a movement from A to B is best described as a/an:

In 2002 a community in the United States passed a beautification ordinance (law) prohibiting the placement of indoor furniture outside of homes (e.g. no couches on the porch) . The law represents a conflict between _____ and _____.

Which of the following is not a market failure?

Consider the market for apples. Assuming that apples and oranges are substitutes, an increase in the price of oranges will:

An increase in demand and a decrease in supply cause which of the following?

The government would use production taxes to remedy the problem of substantial:

If the equilibrium price of good X is $15 and a price ceiling is imposed at $14, the result will be:

Price ceilings are imposed if the government:

Price ceiling is:

If the equilibrium price of aspirins is $5.50 for 250 tablets and the government imposes a price ceiling at $5.00 for 250 tablets, the eventual result will be:

Non-smoking sections in restaurants are designed to remove _____ from a market _____.

If the government imposes a price ceiling below the market equilibrium price, then:

In 2002 a community in the United States passed a beautification ordinance (law) prohibiting the placement of indoor furniture outside of homes (e.g. no couches on the porch) . The law represents a conflict between _ and _.

Non-smoking sections in restaurants are designed to remove _ from a market _.