11
Refer to the information provided in Figure 4.3 below to answer the question(s) that follow.
Figure 4.3
33) Refer to Figure 4.3. An example of an effective price ceiling would be government setting the price of
pencils at
A) $0.40.
B) $0.45.
C) $0.50.
D) $0.55.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
34) Refer to Figure 4.3. An example of an effective price floor would be the government setting the price
of pencils at
A) $0.00.
B) $0.40.
C) $0.45.
D) $0.50.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
12
35) Refer to Figure 4.3. At an effective price ceiling for pencils,
A) quantity demanded is greater than quantity supplied.
B) quantity demanded is less than quantity supplied.
C) quantity demanded is equal to quantity supplied.
D) price is above equilibrium.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
36) Refer to Figure 4.3. If the government will not allow retailers to charge more than $0.40 for a pencil,
which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $0.40.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $0.40.
C) A nonprice rationing system such as queuing must be used to ration the available supply of pencils.
D) The market will be in equilibrium at a price of $0.40.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
37) Refer to Figure 4.3. If the government will not allow retailers to charge less than $0.50 for a pencil,
which of the following will happen?
A) Demand must eventually increase so that the market will come into equilibrium at a price of $0.50.
B) Supply must eventually decrease so that the market will come into equilibrium at a price of $0.50.
C) Retailers will have an excess supply of pencils.
D) The market will be in equilibrium at a price of $0.50.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Reflective Thinking
Learning Outcome: Micro-4
38) Refer to Figure 4.3. The government setting the price of pencils at $0.40 would be an example of an
effective
A) price floor.
B) price ceiling.
C) market equilibrium.
D) price surplus.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
13
39) Refer to Figure 4.3. The government setting the price of pencils at $0.50 would be an example of an
effective
A) price floor.
B) price ceiling.
C) market equilibrium.
D) price shortage.
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
40) Refer to Figure 4.3. In the market for pencils, the quantity demanded will be greater than the quantity
supplied if the government imposes an effective
A) price floor.
B) price ceiling.
C) market equilibrium price.
D) price surplus.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
41) Refer to Figure 4.3. A nonprice rationing system such as queuing must be used to ration the available
supply of pencils if the government will not allow retailers to charge more than ________ for a pencil.
A) $0.40
B) $0.45
C) $0.50
D) $0.55
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
42) Refer to Figure 4.3. Retailers will have an excess supply of pencils if the government will not allow
retailers to charge less than ________ for a pencil.
A) $0.50
B) $0.45
C) $0.40
D) the equilibrium price
Topic: The Price System: Rationing and Allocating Resources
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
14
43) If a price ceiling is set below the equilibrium price,
A) quantity demanded will equal quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) demand will be less than supply.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
44) If a price floor is set below the equilibrium price,
A) quantity demanded will be less than quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) the floor will be ineffective.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
45) If a price ceiling is set above the equilibrium price,
A) quantity demanded will equal quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) demand will be less than supply.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
46) If a price floor is set above the equilibrium price,
A) quantity demanded will equal quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) the floor will be ineffective.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
15
47) The government imposes a maximum price on apartments that is above the equilibrium price. You
accurately predict that
A) the law will have no economic impact.
B) the law will create a surplus of apartments.
C) renters will find that landlords start offering to furnish the apartments.
D) landlords are less likely to do routine maintenance work in the apartments.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-5
48) The type of nonprice rationing that most closely approaches the market outcome is
A) coupon rationing with coupons that can be resold.
B) coupon rationing with coupons that cannot be resold.
C) first–come, first–served basis or queuing.
D) favored customer rationing.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
49) The government imposes a price ceiling on gasoline that is below the market price. You are asked to
suggest a rationing scheme that will minimize the misallocation of resources. You suggest
A) using rationing coupons that can be resold.
B) using rationing coupons that cannot be resold.
C) using rationing on a first–come, first–served basis.
D) using rationing only on weekdays.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-5
50) The government imposes a price ceiling on sugar that is above the market price. You are asked to
suggest a rationing scheme that will minimize the misallocation of resources. You suggest
A) using rationing coupons that cannot be resold.
B) using rationing on a first–come, first–served basis.
C) using rationing coupons that can be resold.
D) that no rationing system will be necessary.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-5
16
51) People scalping tickets for a rock concert can sell their tickets for at least a normal profit
A) any time the rock group is popular.
B) when the price set by the concert hall 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
52) Related to the Economics in Practice on page 77: If a hurricane results in the supply of hotel rooms
decreasing and the demand for hotel rooms increases, the equilibrium price for hotel rooms ________ and
the equilibrium quantity of hotel rooms ________.
A) will increase; will decrease
B) will increase; may increase, decrease, or stay the same
C) may increase, decrease, or stay the same; will decrease
D) may increase, decrease, or stay the same; may increase, decrease, or stay the same
Topic: The Price System: Rationing and Allocating Resources: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
53) Related to the Economics in Practice on page 77: If a hurricane results in the supply of hotel rooms
decreasing and the equilibrium price for hotel rooms increases, the demand for hotel rooms ________ and
total revenue from the sale of hotel rooms ________.
A) has decreased; will decrease
B) has decreased; may increase, decrease, or stay the same
C) may have increased, decreased, or stayed the same; will decrease
D) may have increased, decreased, or stayed the same; may increase, decrease, or stay the same
Topic: The Price System: Rationing and Allocating Resources: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
17
54) Related to the Economics in Practice on page 81: When acquiring a ticket for a play takes a significant
amount of time, the true economic cost of that ticket would include all of the following factors except
A) the amount of time spent acquiring the ticket.
B) the utility provided by seeing the play.
C) the earning power of the person acquiring the ticket.
D) the purchase price of the ticket.
Topic: The Price System: Rationing and Allocating Resources: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro–10
55) Related to the Economics in Practice on page 81: Which of the following best explains why the people
who wait for hours to acquire tickets to free performances earn less on average than the people who
actually see those performances?
A) The value of time spent waiting in line is less for people who earn less money.
B) People who earn more money are less likely to be aware of the opportunity to acquire free tickets.
C) High–wage individuals are more likely to have schedule conflicts that prevent them from using their
tickets.
D) People interested in live performances are likely to have access to other forms of entertainment, such
as television and radio.
Topic: The Price System: Rationing and Allocating Resources: Economics in Practice
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro–10
56) In the short run, it is necessary to ________ a good whenever excess demand exists.
A) nonprice ration
B) price allocate
C) discontinue distribution of
D) increase production of
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
18
57) Issuing coupons, waiting in line, and catering to favored customers are all methods of
A) unbiased favoritism.
B) exploiting wealth.
C) income distribution.
D) nonprice rationing.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
58) The ________ automatically distributes scarce goods.
A) price system
B) barter system
C) laissez–faire economy
D) command economy
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
59) Queuing means
A) waiting in line.
B) price rationing.
C) favoring customers.
D) issuing ration coupons.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Micro-4
60) The most common of all nonprice rationing systems is
A) ration coupons.
B) queuing.
C) favored customers.
D) price ceilings.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
19
61) A situation where illegal trading at market prices takes place is known in economics as a
A) smuggler’s market.
B) pirate market.
C) black market.
D) command market.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-4
62) When supply is ________ or the product is ________, then price is demand determined.
A) fixed; unique
B) variable; standardized
C) fixed; standardized
D) variable; unique
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
63) A government–imposed maximum price will have no economic impact if
A) it is below the equilibrium price.
B) it is at or below the equilibrium price.
C) it is above the equilibrium price.
D) there is a fixed supply of the good.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
64) If a price is demand determined, then
A) the supply curve must be horizontal.
B) the supply curve must be vertical.
C) the demand curve must be vertical.
D) the demand curve must be upward sloping.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
20
65) An example of an effective price ceiling would be the government setting the price of wheat at
________ per bushel when the market price is at $4.25 per bushel.
A) $3.75
B) $4.25
C) $7.75
D) $12.00
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
66) If the equilibrium price of gasoline is $3.00 per gallon and the government will not allow oil
companies to charge more than $2.00 per gallon of gasoline, which of the following will happen?
A) The market will be in equilibrium at a price of $2.00.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $2.00.
C) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.00.
D) A nonprice rationing system such as ration coupons must be used to ration the available supply of
gasoline.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
67) An example of a ________ would be the government setting the price of coffee below the equilibrium
price.
A) non–income tax
B) rational expenditure
C) black market
D) price ceiling
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4