Question 1

With respect to the market clearing price and the equilibrium quantity of good X, increases in the demand for and the supply of good X will definitely

Accepted Answer

A)  increase the market clearing price of good X but have an uncertain impact on the equilibrium quantity of X.
B)  reduce the market clearing price and the equilibrium quantity of good X.
C)  increase the market clearing price and the equilibrium quantity of good X.
D)  increase the equilibrium quantity of good X but have an uncertain impact on the market clearing price of X.

Question 2

-Refer to the above figure. Other things being equal, when the government imposes a price floor at P₂, then we would expect

Accepted Answer

A)  the quantity demanded is Q₂.
B)  a surplus will occur.
C)  price to decline until an equilibrium is achieved at P₀.
D)  consumers to bid against each other for goods and force the price even higher.

Question 3

Price ceilings are adopted in most cases because

Accepted Answer

A)  the government views the current equilibrium price as too high for consumers.
B)  the government wants to create surpluses.
C)  the government favors a non-intervention policy.
D)  producers need incentives to produce more of the good or service.

Question 4

A black market is a market in which

Accepted Answer

A)  goods are traded at prices above their legal maximum prices.
B)  sales taxes are effectively doubled.
C)  goods are sold at outlet prices.
D)  sales take place exclusively at outlet prices.

Question 5

Holding demand constant, an increase in supply leads to

Accepted Answer

A)  lower prices and higher quantity demanded.
B)  lower prices and lower quantity demanded.
C)  higher prices and higher quantity demanded.
D)  higher prices and lower quantity demanded.

Question 6

Other things being equal, a higher price induces

Accepted Answer

A)  buyers to reduce the amount they want to buy and sellers to increase the amount they are willing to sell.
B)  buyers to increase the amount they want to buy and sellers to reduce the amount they are willing to sell.
C)  buyers to reduce the amount they want to buy and sellers to reduce the amount they are willing to sell.
D)  buyers to increase the amount they want to buy and sellers to increase the amount they are willing to sell.

Question 7

A minimum wage is an example of a

Accepted Answer

A)  price ceiling.
B)  price floor.
C)  black market.
D)  market clearing price.

Question 8

The U.S. government imposes import quotas on many agricultural products, especially products that receive price supports. Offer an economic explanation for this.

Accepted Answer

If the price supports generate a price i...

Question 9

Why does a sports car cost more than a mountain bike?

Accepted Answer

A)  because sports car manufacturers are greedier than mountain bike manufacturers
B)  because sports cars are priced higher in order to make them attractive as status symbols
C)  because more scarce resources are required to produce a sports car than to produce a mountain bike
D)  because mountain bike manufacturers know that their customers have relatively low incomes

Question 10

-As a result of establishing a legal minimum wage above the market clearing wage

Accepted Answer

A)  there will be a shortage of workers.
B)  firms will hire fewer workers.
C)  firms will hire more workers.
D)  fewer workers will want to work.

Question 11

-In the above figure, a shortage could be caused by a government price ceiling set at

Accepted Answer

A)  $1.00.
B)  $2.00.
C)  $2.50.
D)  $3.00.

Question 12

Who bears the costs of a program to control rents at a maximum level?

Accepted Answer

A)  landlords or owners of housing units
B)  consumers who face difficulty moving to a more suitable apartment
C)  homeless who cannot find rental units
D)  all of these

Question 13

Price controls may be thought of as

Accepted Answer

A)  a restraint on the rationing function of prices.
B)  useful tools that promote production.
C)  necessary in market economies.
D)  the freeing-up of free market forces.

Question 14

A change in an equilibrium price can result from I. A change in demand
II. A change in supply

Accepted Answer

A)  I only
B)  II only
C)  Both I and II
D)  Neither I nor II

Question 15

If a price ceiling is set above the current market clearing price, then

Accepted Answer

A)  a surplus must immediately occur.
B)  a shortage must immediately occur.
C)  there will be incentives for black markets to develop.
D)  quantity demanded will remain equal to quantity supplied at the current market clearing price.

Question 16

In New York City, apartment rent can be adjusted only when a tenant leaves. This leads

Accepted Answer

A)  people to change apartments often.
B)  landlords to encourage tenants to stay in their apartments.
C)  tenants to stay in apartments longer than they would otherwise.
D)  businesses to build new rental units.

Question 17

A price ceiling is

Accepted Answer

A)  the lowest price a seller can charge for a good without losing all her customers.
B)  a legal minimum price that can be charged for a particular good or service.
C)  a legal maximum price that can be charged for a particular good or service.
D)  the lowest price a buyer can pay for a good without having to report the purchase to the government.

Question 18

An example of a black market is

Accepted Answer

A)  a retail market.
B)  a discount market.
C)  scalping.
D)  barter.

Question 19

Which of the following statements is most accurate regarding who benefits and loses from establishment of a minimum wage above the market clearing wage?

Accepted Answer

A)  Individuals who obtain jobs benefit because they earn a higher wage, but some individuals lose because employers will not hire them at the minimum wage.
B)  All workers benefit equally from the establishment of the minimum wage because just as many workers as before remain employed, and all earn the higher minimum wage.
C)  All employers benefit equally from the establishment of the minimum wage because they are able to hire fewer workers at a lower wage.
D)  All employers lose because they must pay the higher minimum wage to the same number of employees as they did before the minimum wage was established.

Question 20

-Refer to the above figure. A shortage occurs if the government imposes

Accepted Answer

A)  a price floor at $60.
B)  a price floor at $20.
C)  a price ceiling at $60.
D)  a price ceiling at $20.

Exam 4: Extensions of Demand and Supply Analysis

Who bears the costs of a program to control rents at a maximum level?

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Price controls may be thought of as

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Holding demand constant, an increase in supply leads to

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The U.S. government imposes import quotas on many agricultural products, especially products that receive price supports. Offer an economic explanation for this.

Correct AnswerverifiedIf the price supports generate a price i...View AnswerShow Answer

An example of a black market is

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-In the above figure, a shortage could be caused by a government price ceiling set at

Correct AnswerverifiedShow Answer

In New York City, apartment rent can be adjusted only when a tenant leaves. This leads

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Which of the following statements is most accurate regarding who benefits and loses from establishment of a minimum wage above the market clearing wage?

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Other things being equal, a higher price induces

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-Refer to the above figure. A shortage occurs if the government imposes

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A minimum wage is an example of a

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A change in an equilibrium price can result from I. A change in demand II. A change in supply

Correct AnswerverifiedShow Answer

If a price ceiling is set above the current market clearing price, then

Correct AnswerverifiedShow Answer

With respect to the market clearing price and the equilibrium quantity of good X, increases in the demand for and the supply of good X will definitely

Correct AnswerverifiedShow Answer

-Refer to the above figure. Other things being equal, when the government imposes a price floor at P₂, then we would expect

Correct AnswerverifiedShow Answer

-As a result of establishing a legal minimum wage above the market clearing wage

Correct AnswerverifiedShow Answer

Why does a sports car cost more than a mountain bike?

Correct AnswerverifiedShow Answer

A black market is a market in which

Correct AnswerverifiedShow Answer

Price ceilings are adopted in most cases because

Correct AnswerverifiedShow Answer

A price ceiling is

Correct AnswerverifiedShow Answer

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If the price supports generate a price i...
View Answer

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