21
68) If the market price of green tea is $20.00 per pound and the government will not allow green tea
growers to charge more than $25.00 per pound of green tea, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $17.50.
B) There will be a shortage of green tea.
C) Supply must eventually increase so that the market will come into equilibrium at a price of $17.50.
D) The price ceiling will be ineffective and the market will remain in equilibrium.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
69) In the short run, whenever excess demand exists, it is necessary to
A) ration the good.
B) put the good on sale.
C) increase the supply of the good.
D) impose a price ceiling on the good.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
70) The rationing mechanism in market economies is the adjustment of
A) supply.
B) demand.
C) quantity.
D) price.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
71) An effective price ceiling must be set
A) above the equilibrium price.
B) below the equilibrium price.
C) at the equilibrium price.
D) either at or above the equilibrium price.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-5
22
72) An effective price floor must be set
A) above the equilibrium price.
B) below the equilibrium price.
C) at the equilibrium price.
D) either at or below the equilibrium price.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-5
73) For a particular product, an effective price ceiling results in
A) quantity demanded greater than quantity supplied.
B) quantity supplied greater than quantity demanded.
C) quantity demanded equal to quantity supplied.
D) demand equal to supply.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
74) For a particular product, an effective price floor results in
A) quantity demanded greater than quantity supplied.
B) quantity supplied greater than quantity demanded.
C) quantity demanded equal to quantity supplied.
D) demand equal to supply.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
75) A shortage will occur if a ________ is set ________ the equilibrium price.
A) price floor; below
B) price floor; above
C) price ceiling; above
D) price ceiling; below
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
23
76) The market will be in equilibrium if ________ is set ________ the equilibrium price.
A) a price floor; below
B) a price ceiling; below
C) actual price; above
D) actual price; below
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
77) Quantity demanded will equal quantity supplied if a ________ is set ________ the equilibrium price.
A) price ceiling; above
B) price ceiling; below
C) price floor; above
D) price ceiling; at or below
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
78) A surplus will occur if a ________ is set ________ the equilibrium price.
A) price floor; below
B) price floor; above
C) price ceiling; above
D) price ceiling; below
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
79) The government imposes a maximum price on apartments that is below 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
24
80) The benefit of a price ceiling to ________ is ________.
A) producers; the selling price of the product is above the equilibrium price
B) producers; the ceiling creates excess demand
C) consumers; the selling price of the product is below the equilibrium price
D) consumers; the ceiling creates excess supply
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
81) The benefit of a price floor to ________ is ________.
A) producers; the selling price of the product is above the equilibrium price
B) producers; the floor creates excess demand
C) consumers; the selling price of the product is below the equilibrium price
D) consumers; the floor creates excess supply
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
82) The harmful effect of a price ceiling to ________ is ________.
A) producers; the selling price of the product is above the equilibrium price
B) producers; the ceiling creates a surplus of the product
C) consumers; the selling price of the product is above the equilibrium price
D) consumers; the ceiling creates a shortage of the product
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
83) The harmful effect of a price floor to ________ is ________.
A) producers; the selling price of the product is below the equilibrium price
B) producers; the floor creates a surplus of the product
C) consumers; the selling price of the product is below the equilibrium price
D) consumers; the floor creates a shortage of the product
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
25
84) The government imposes a price floor on wheat 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 cannot be resold.
B) using rationing coupons that can be resold.
C) using a queuing system to compensate for the excess demand.
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
85) Related to the Economics in Practice on p. 77: If the supply of generators increases and the demand for
generators increases, the equilibrium price for generators ________ and the equilibrium quantity of
generators ________.
A) will increase; will decrease
B) will increase; may increase, decrease, or stay the same
C) may increase, decrease, or stay the same; will increase
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
86) Related to the Economics in Practice on p. 77: If the supply of generators decreased and the equilibrium
price of generators decreases, the demand for generators ________ and total revenue from the sale of
generators ________.
A) decreased; will decrease
B) increased; 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
26
87) Related to the Economics in Practice on p. 81: The true cost of the Shakespeare in the Park tickets is
A) zero.
B) $0 plus the opportunity cost of the time spent in line.
C) the cost to put on the performance.
D) the additional cost to the city of extra security.
Topic: The Price System: Rationing and Allocating Resources: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
88) Related to the Economics in Practice on p. 81: The initial price of $0 for the Shakespeare in the Park tickets
is akin to the city of New York ________ the tickets.
A) issuing a price floor on
B) issuing a price ceiling on
C) issuing ration coupons for
D) assigning favored customer status for
Topic: The Price System: Rationing and Allocating Resources: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
89) Goods are allocated in a market system by price rationing.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
90) Nonprice rationing will happen whenever there is excess supply in a market.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
91) When supply is fixed, price is supply determined.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
27
92) With price rationing, those who are both able and willing to pay for a product get it.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
93) Queuing, or waiting in line, is an alternative rationing mechanism to price rationing.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
94) A shortage occurs when there is an excess supply in a market.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-4
95) In a “black market,” goods are traded at market determined prices.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
96) Favored customers receive special treatment from dealers during periods of excess demand.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-4
97) Ration coupons are tickets or coupons that give someone a right to purchase a certain amount of a
product each time period such as a month.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-1
98) The price system ultimately determines the allocation of resources among producers.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
Learning Outcome: Micro-3
28
99) In the short run, nonprice rationing will happen whenever there is excess demand in a market.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
100) An effective price ceiling will be set above the equilibrium price.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
101) An effective price floor results in a shortage.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
102) Establishing a list of favored customers is an alternative rationing mechanism to price rationing.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
103) A surplus exists when there is excess demand in a market.
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-4
104) With an effective price ceiling, quantity demanded exceeds quantity supplied.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
29
105) Queuing is a system of nonprice rationing.
Topic: The Price System: Rationing and Allocating Resources
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
106) Effective price floors prevent the market price from falling to reach equilibrium.
Answer: TRUE
Diff: 2
Topic: The Price System: Rationing and Allocating Resources
Skill: Definition
Learning Outcome: Micro-1
4.2 Supply and Demand Analysis: An Oil Import Fee
Refer to the information provided in Figure 4.4 below to answer the question(s) that follow.
Figure 4.4
1) Refer to Figure 4.4. At the world price of $125 per barrel of oil, the United States imports ________
million barrels of oil per day.
A) 4
B) 6
C) 8
D) 10
Topic: Supply and Demand Analysis: An Oil Import Fee
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
30
2) Refer to Figure 4.4. If a $25 per barrel tax is levied on imported oil, the United States will
A) import 2 million barrels of oil per day.
B) import 6 million barrels of oil per day.
C) import 10 million barrels of oil per day.
D) export 10 million barrels of oil per day.
Topic: Supply and Demand Analysis: An Oil Import Fee
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
3) Refer to Figure 4.4. If the United States levies no taxes on imported oil, which of the following would
occur?
A) The price of oil in the United States would fall to $100 per barrel, and the United States would import
10 million barrels of oil per day.
B) The price of oil in the United States would be $125 per barrel, and the United States would import 6
million barrels of oil per day.
C) The price of oil in the United States would be $150 per barrel, and the United States would import 2
million barrels of oil per day.
D) The price of oil in the United States after the U.S. government eliminated all taxes on imported oil
cannot be determined from this information.
Topic: Supply and Demand Analysis: An Oil Import Fee
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4
4) Refer to Figure 4.4. Assume that initially there is free trade. If the United States then imposes a $25 tax
per barrel of imported oil,
A) the quantity of oil demanded will be reduced by 4 million barrels per day.
B) the quantity of oil supplied by U.S. firms will increase by 8 million barrels per day.
C) U.S. imports of oil will increase by 4 million barrels per day.
D) the price of oil in the U.S. will increase to $150 per barrel.
Topic: Supply and Demand Analysis: An Oil Import Fee
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-4