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Principles of Microeconomics, 12e (Case/Fair/Oster)
Chapter 4 Demand and Supply Applications
4.1 The Price System: Rationing and Allocating Resources
1) In the short run, it is necessary to nonprice ration a good whenever ________ exists.
A) excess demand
B) excess supply
C) a surplus
D) market equilibrium
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
2) Among the methods of nonprice rationing are
A) coupons.
B) favored customers.
C) waiting in line.
D) all of the above
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
3) The price system
A) automatically distributes scarce goods.
B) is inefficient.
C) requires government help to allocate goods.
D) is the only way to allocate goods.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
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4) Attempts to bypass price rationing in the market
A) are efficient.
B) are easily administered.
C) are costly.
D) always fail.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
5) Favored customers are customers who receive special treatment from dealers during periods of
A) excess demand.
B) excess supply.
C) price above equilibrium.
D) equilibrium.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-4
6) In a “black market,”
A) suppliers take advantage of buyers.
B) price is illegally below market price.
C) illegal trading at market prices takes place.
D) only illegal goods and services are traded.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
7) When supply is fixed or the product is unique, then price is
A) supply determined.
B) demand determined.
C) government determined.
D) indeterminate.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
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8) If the government imposes a maximum price that is above the equilibrium price,
A) this maximum price will have no economic impact.
B) quantity demanded will be less than quantity supplied.
C) demand will be greater than supply.
D) the available supply will have to be rationed with a nonprice rationing mechanism.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
9) People scalping tickets for a jazz festival will be successful at selling the tickets for a profit
A) any time the jazz festival is popular.
B) when the price set by the festival organizers is less than the market equilibrium price.
C) when prices are too high.
D) only when there is excess supply.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
10) People scalping tickets for the Super Bowl will be successful at selling the tickets for a profit
A) any time the Super Bowl is popular.
B) when prices are too high.
C) when the price set by the National Football League is less than the market equilibrium price.
D) only when there is excess supply.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
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Refer to the information provided in Figure 4.1 below to answer the question(s) that follow.
Figure 4.1
11) Refer to Figure 4.1. At the world price of 30 cents per apple the United States imports ________
million apples per day.
A) 2
B) 4
C) 6
D) 10
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-3
12) Refer to Figure 4.1. If a 10–cent–per–apple tax is levied on imported apples, the United States will
A) import 2 million apples per day.
B) import 4 million apples per day.
C) import 6 million apples per day.
D) import 8 million apples per day.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-3
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13) Refer to Figure 4.1. If the United States levies no taxes on apples, the price of apples in the United
States would fall to ________, and the United States would import ________.
A) 20 cents per apple; 10 million apples per day
B) 30 cents per apple; 6 million apples per day
C) 40 cents per apple; 2 million apples per day
D) The price of apples in the United States after the U.S. government eliminated all taxes on imported
apples cannot be determined from this information.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-3
14) Refer to Figure 4.1. Assume that initially there is free trade. If the United States then imposes a 10–cent
tax per apple,
A) the quantity of apples demanded will be reduced by 4 million apples per day.
B) the quantity of apples supplied by U.S. firms will increase by 6 million apples per day.
C) the price of apples in the United States will increase to 40 cents per apple.
D) U.S. imports of apples will increase by 6 million per day.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-3
15) Refer to Figure 4.1. Assume that initially there is free trade. If the United States then imposes a 10–cent
tax per apple,
A) the quantity of apples demanded will be reduced by 2 million apples per day.
B) the quantity of apples supplied by U.S. firms will increase by 2 million apples per day.
C) the price of apples in the United States will increase to 40 cents per apple.
D) all of the above
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-3
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16) Refer to Figure 4.1. At the price of ________ cents per apple, the United States imports 6 million apples
per day.
A) 20
B) 30
C) 40
D) 60
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-3
17) Refer to Figure 4.1. The United States will import 2 million apples per day if a per–apple tax of
________ is levied on imported apples.
A) 10 cents
B) 20 cents
C) 30 cents
D) 40 cents
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-3
18) Refer to Figure 4.1. The United States will import 6 million apples per day if a per–apple tax of
________ is levied on imported apples.
A) 0 cents
B) 10 cents
C) 20 cents
D) 30 cents
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-3
19) Refer to Figure 4.1. Assume that initially there is free trade. The price of apples in the United States
will increase to 40 cents per apple if a ________ per apple tax tax is imposed.
A) 10 cents
B) 20 cents
C) 30 cents
D) 40 cents
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-3
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20) Refer to Figure 4.1. Assume that initially there is free trade. The quantity demanded of apples will be
reduced by 2 million per day if the United States imposes a tax of ________ per apple.
A) 10 cents
B) 20 cents
C) 30 cents
D) 40 cents
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-3
Refer to the information provided in Figure 4.2 below to answer the question(s) that follow.
Figure 4.2
21) Refer to Figure 4.2. The market is initially in equilibrium at Point A and supply shifts from S1 to S2.
Which of the following statements is true?
A) Price will still serve as a rationing device causing quantity supplied to rise from 8 to 11 soft pretzels.
B) There is no need for price to serve as a rationing device in this case because the new equilibrium
quantity is higher than the original equilibrium quantity.
C) Price will still serve as a rationing device causing quantity demanded to fall from 11 to 8 soft pretzels.
D) The market cannot move to a new equilibrium until there is also a change in supply.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
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22) Refer to Figure 4.2. The market is initially in equilibrium at the intersection of S2 and D, and supply
shifts from S2 to S1. Which of the following statements is true?
A) Price will still serve as a rationing device causing quantity demanded to rise from 8 to 11 soft pretzels.
B) There is no need for price to serve as a rationing device in this case because the new equilibrium
quantity is lower than the original equilibrium quantity.
C) Price will still serve as a rationing device causing quantity supplied to fall from 8 to 4 soft pretzels.
D) The market cannot move to a new equilibrium until there is also a change in supply.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
23) An example of an ineffective price ceiling would be the government setting the maximum price of
wheat at ________ per bushel when the market price is at $5.00 per bushel.
A) $2.25
B) $3.00
C) $4.75
D) $6.00
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
24) If the equilibrium price of gasoline is $4.00 per gallon and the government will not allow oil
companies to charge more than $3.00 per gallon of gasoline, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $3.00.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $3.00.
C) A nonprice rationing system such as ration coupons must be used to ration the available supply of
gasoline.
D) The market will be in equilibrium at a price of $3.00.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
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25) An example of a price ceiling would be the government setting the price of sugar
A) above the equilibrium market price.
B) at the equilibrium market price.
C) below the equilibrium market price.
D) none of the above
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
26) If the market price of coffee is $3.00 per pound but the government will not allow coffee growers to
charge more than $2.00 per pound of coffee, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.50.
B) There will be a shortage of coffee.
C) Supply must eventually increase so that the market will come into equilibrium at a price of $2.50.
D) The market will be in equilibrium at a price of $2.00.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
27) It is necessary to ration a good whenever ________ exists.
A) excess demand
B) excess supply
C) a surplus
D) market equilibrium
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
28) The adjustment of ________ is the rationing mechanism in market economies.
A) quantity
B) price
C) supply
D) demand
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
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29) A price ceiling is
A) a minimum price set by government that sellers may charge for a good.
B) a maximum price set by government that sellers may charge for a good.
C) the difference between the initial equilibrium price and the equilibrium price after a decrease in
supply.
D) the minimum price that consumers are willing to pay for a good.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-5
30) A price floor is
A) a minimum price set by government that sellers may charge for a good.
B) a maximum price set by government that sellers may charge for a good.
C) the difference between the initial equilibrium price and the equilibrium price after a decrease in
supply.
D) the minimum price that consumers are willing to pay for a good.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-5
31) A maximum price, set by the government, that sellers may charge for a good is known as
A) a price floor.
B) a price rationing mechanism.
C) a price ceiling.
D) a subsidy.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-4
32) A minimum price, set by the government, that sellers may charge for a good is known as
A) a price floor.
B) a price rationing mechanism.
C) a price ceiling.
D) a subsidy.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-4