Question 1

Which of these would NOT be considered a middleman in a market?

Accepted Answer

A)   a produce wholesaler
B)   a wheat farmer
C)   a cellphone retailer
D)   a meat distributor

Question 2

-Refer to the above figure. At a price of $2 per gallon, the quantity demanded of gasoline is

Accepted Answer

A)   80,000 gallons per month.
B)   100,000 gallons per month.
C)   60,000 gallons per month.
D)   140,000 gallons per month.

Question 3

A price ceiling set below a market equilibrium price causes

Accepted Answer

A)   a shortage.
B)   a surplus.
C)   producers to receive higher prices.
D)   consumers to pay higher prices.

Question 4

If a price ceiling were established above the equilibrium price,

Accepted Answer

A)   it would have no effect on the quantity demanded.
B)   it would create a shortage.
C)   it would create a surplus.
D)   none of the above.

Question 5

Under rent controls

Accepted Answer

A)   there is a shortage of rental units.
B)   the quantity supplied of rental units is greater than it would be under freely competitive markets.
C)   there is less government involvement in rental markets overall because there is a better supply of low-income housing.
D)   all renters are better off than under freely competitive markets.

Question 6

In a market system, which component conveys information about what is relatively scarce and what is relatively abundant?

Accepted Answer

A)   the number of producers
B)   the number of consumers
C)   market price
D)   the amount of resources used in producing the goods and services

Question 7

The rationing function of prices means that

Accepted Answer

A)   government is responsible for setting the prices of basic foods.
B)   all goods and services are produced by large firms.
C)   businesses determine what goods consumers should purchase.
D)   buyers and sellers synchronize their decisions through the price system.

Question 8

The market system is also called the price system because

Accepted Answer

A)   rising prices are the signal to producers to offer more of a particular good.
B)   people pay money in markets.
C)   everything has a price tag.
D)   inflation is a significant problem.

Question 9

Which group of individuals most likely benefits from rent controls?

Accepted Answer

A)   the unemployed who fail to obtain rental housing
B)   low-income wage earners who fail to obtain rental housing
C)   single parent families without savings or other financial assets who fail to obtain rental housing
D)   upper-income professionals who rent apartments at the price ceiling rate

Question 10

A minimum wage is an example of a

Accepted Answer

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

Question 11

-Government imposed price controls often lead to

Accepted Answer

A)   illegal trades of the good.
B)   the most efficient use of resources.
C)   the equilibrium solution in terms of price and quantity.
D)   maximization of profits.

Question 12

Government-imposed quantity restrictions

Accepted Answer

A)   generate a higher price for the good than would prevail under freely competitive markets.
B)   generate a lower price for the good than would prevail under freely competitive markets.
C)   does not affect the price of the good because quantity restrictions always ban sale of the good completely.
D)   can cause prices to either be higher or lower, but always cause excess quantities supplied to develop.

Question 13

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 14

Other things being equal, suppose that the demand for wheat in constant quality units increases. The increase in demand will cause

Accepted Answer

A)   a surplus of wheat.
B)   a higher equilibrium price and higher equilibrium quantity of wheat.
C)   fall in the market clearing price of corn, a substitute for wheat.
D)   a higher equilibrium quantity, but a lower equilibrium price of wheat.

Question 15

-Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve shifts from DA to DB. Which of the following is TRUE about the results of the shifts in the supply and demand curves?

Accepted Answer

A)   The equilibrium price increases while the equilibrium quantity remains unchanged.
B)   Both the equilibrium price and equilibrium quantity increase.
C)   The equilibrium price remains unchanged while the equilibrium quantity increases.
D)   Both the equilibrium price and equilibrium quantity remain unchanged.

Question 16

An increase in the price of labor used to produce good A will lead to

Accepted Answer

A)   an increase in the market clearing price of good A.
B)   an increase in the supply of good A.
C)   a decrease in the demand for good A.
D)   an increase in the demand for good A.

Question 17

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 18

An effective price ceiling usually generates

Accepted Answer

A)   fire sales as firms try to unload their excess inventories.
B)   higher nominal prices.
C)   the use of nonprice rationing devices.
D)   happy sellers and dissatisfied buyers.

Question 19

An increase in demand and an increase in supply will lead to

Accepted Answer

A)   unambiguous increases in both price and quantity.
B)   unambiguous decreases in both price and quantity.
C)   an unambiguous increase in quantity, but the effect on price is indeterminate.
D)   an unambiguous increase in price, but the effect on quantity is indeterminate.

Question 20

Goods A and B are complementary goods. An increase in the 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.

Exam 4: Extensions of Demand and Supply Analysis

-Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve shifts from DA to DB. Which of the following is TRUE about the results of the shifts in the supply and demand curves?

Correct AnswerverifiedShow Answer

A price ceiling set below a market equilibrium price causes

Correct AnswerverifiedShow Answer

The market system is also called the price system because

Correct AnswerverifiedShow Answer

Other things being equal, suppose that the demand for wheat in constant quality units increases. The increase in demand will cause

Correct AnswerverifiedShow Answer

An increase in the price of labor used to produce good A will lead to

Correct AnswerverifiedShow Answer

Which group of individuals most likely benefits from rent controls?

Correct AnswerverifiedShow Answer

Which of these would NOT be considered a middleman in a market?

Correct AnswerverifiedShow Answer

-Government imposed price controls often lead to

Correct AnswerverifiedShow Answer

The rationing function of prices means that

Correct AnswerverifiedShow Answer

An increase in demand and an increase in supply will lead to

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Government-imposed quantity restrictions

Correct AnswerverifiedShow Answer

An effective price ceiling usually generates

Correct AnswerverifiedShow Answer

If a price ceiling were established above the equilibrium price,

Correct AnswerverifiedShow Answer

Under rent controls

Correct AnswerverifiedShow Answer

In a market system, which component conveys information about what is relatively scarce and what is relatively abundant?

Correct AnswerverifiedShow Answer

A minimum wage is an example of a

Correct AnswerverifiedShow Answer

-Refer to the above figure. At a price of $2 per gallon, the quantity demanded of gasoline is

Correct AnswerverifiedShow Answer

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If the price supports generate a price i...
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