70)
If producers must receive a higher price to be induced to produce any quantity, we can conclude
that
70)
A)
both supply and demand increased.
B)
demand increased.
C)
supply decreased.
D)
demand decreased.
71)
Assume that the initial demand and supply curves in the above figure are DA and SA, respectively.
The initial equilibrium price and quantity are
71)
A)
P3 and F.
B)
P1 and E.
C)
P2 and F.
D)
P1 and G.
72)
Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon,
then the $2 limit acts as
72)
A)
a just price.
B)
an equilibrium price.
C)
a price ceiling.
D)
a price floor.
73)
We cannot predict the effect on the market clearing price, but know that the equilibrium quantity
will increase when
73)
A)
supply increases and demand decreases.
B)
supply decreases and demand increases.
C)
supply and demand for a product simultaneously decrease.
D)
supply and demand for a product simultaneously increase.
74)
An effective government imposed price ceiling will result
74)
A)
in prices for the product falling in the future.
B)
in a shortage on the market.
C)
in a surplus on the market.
D)
in additional revenue for the government.
75)
Scalping at major sporting events is an example of
75)
A)
a black market caused by a price ceiling.
B)
a surplus caused by the existence of price ceilings.
C)
a black market caused by a price floor.
D)
the operation of rationing by the market.
76)
Which of the following statements is FALSE?
76)
A)
Price ceilings below the equilibrium price can cause black markets to develop.
B)
The rationing function of prices is not allowed to freely operate when the government
imposes price controls.
C)
Rent controls are examples of price floors.
D)
Price controls may take the form of price ceilings or price floors.
77)
The price system features
77)
A)
exchanges made only on a barter basis.
B)
an exchange in which consumer is made better off and the producer is made worse off.
C)
voluntary exchange that makes both the consumer and producer better off.
D)
exchanges made in currency only.
78)
The minimum wage laws seek to
78)
A)
assure that all workers are paid the same wage rate.
B)
penalize employers that are not complying with labor laws.
C)
help teenagers find work.
D)
assure a minimum standard of payment for work.
79)
Refer to the above figure. If a price floor of $5 was set
79)
A)
there would be a shortage of 20 units.
B)
the quantity sold would be 60 units.
C)
the quantity demanded would be 100 units.
D)
the quantity sold would be 80 units.
80)
If an excess quantity of labor demanded exists in a free market, there is a tendency for
80)
A)
the wage rate to rise.
B)
quantity demanded to fall.
C)
quantity supplied to rise.
D)
the wage rate to fall.
81)
A technological advancement has just occurred in the computer chip industry. In the computer chip
market this will lead to
81)
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.
82)
In the 1970s, the government placed price ceilings on gasoline prices. A shortage of gasoline
occurred, and long lines formed at the pumps. Some gas stations required that in addition to
paying the price on the pump you had to buy a blank will. The action of having to purchase the
will in order to purchase gas is known as
82)
A)
a surplus.
B)
the price system.
C)
a price support.
D)
a black market.
83)
Refer to the above figure. A price floor of $60 results in
83)
A)
a shortage of 200 units.
B)
a surplus of 100 units.
C)
a shortage of 100 units.
D)
a surplus of 200 units.
84)
Suppose you observe that the price of movie admissions decline and that the number of people
attending movies declines as well. If only the demand curve or the supply curve shifts, this
suggests that
84)
A)
movies are a normal good and incomes have increased.
B)
movie theaters have experienced an increase in their operating costs due to increases in the
minimum wage.
C)
high salaries for Hollywood actors have increased the cost of movie making.
D)
admission prices for other types of entertainment, such as live shows and sporting events,
have also declined.
85)
Under rent controls
85)
A)
the number of rental units available for rent is lower than under freely competitive markets.
B)
the quantity demanded of rental units is less than it would be under freely competitive
markets.
C)
landlord–tenant relationships are more harmonious than under freely competitive markets.
D)
apartments tend to be nicer than they would be under freely competitive markets.
86)
Which of the following is a main characteristic of exchanges in the market system?
86)
A)
Sellers hire economists to determine the market clearing price.
B)
Exchanges are part of the legislative imperative.
C)
Exchanges are highly regulated by the government.
D)
Decisions to trade are based on individuals’ self interest.
87)
Federally provided agricultural subsidies in the United States have ________ with the passage of
the 2002 Farm Security Act and the 2007 Food, Security, and Bioenergy Act.
87)
A)
been maintained
B)
increased to the level of EU price supports
C)
been made a function of tax revenues
D)
been abolished
88)
If the government imposed a price ceiling on gasoline above this good’s current market clearing
price, there would be
88)
A)
an increase in the price of gasoline.
B)
a surplus of gasoline at the ceiling price.
C)
a shortage of gasoline. at the ceiling price.
D)
no change in the price of gasoline.
89)
As demand for MP3 music downloads increases, other things being equal, we can expect
89)
A)
a decrease in both the relative price and quantity of MP3 music downloads.
B)
a decrease in the supply of MP3 music downloads.
C)
an excess number of MP3 music downloads in the market.
D)
more MP3 music downloads to be produced.
90)
In a world of scarcity, there has to be some way to ration the available resources. According to
economists, the most efficient use of available resources occurs when rationing occurs via
90)
A)
political power.
B)
queuing.
C)
lotteries.
D)
the price system.
D
91)
One effect of a minimum wage in the market for low–skilled labor is
91)
A)
a surplus of low–skilled labor.
B)
an increase in demand for low–skilled labor.
C)
no effect in the market for low–skilled labor.
D)
a shortage of low–skilled labor.
A
92)
Which of the following will tend to occur when a surplus exists in a market?
92)
A)
supply will increase and demand will decrease until the surplus disappears.
B)
the price will tend to rise over time.
C)
the price will tend to decrease over time.
D)
supply will decrease and demand will increase until the surplus disappears.
C
93)
One result of the agriculture price supports cited in the text is that
93)
A)
food shortages result in most cases.
B)
sometimes surplus food is given away.
C)
small farms receive most of the benefits.
D)
none of the above.
B
D
94)
A price floor above the market clearing price typically results in
I. an excess quantity supplied
II. a shortage
III. an excess quantity demand
94)
A)
I only
B)
II only
C)
III only
D)
II and III only
95)
Suppose the price of cheese rises. In the market for pizza, one would expect that
95)
A)
the supply of pizza would increase, and the price would fall.
B)
the supply of pizza would decrease, and price would rise.
C)
the demand for pizza would decrease, and price would fall.
D)
the demand for pizza would increase, and the price would increase.
B
96)
People often complain about price gouging after a disaster such as a hurricane. Suppose the
government successfully prevented price increases due to the disaster. We would expect
96)
A)
reconstruction never to occur.
B)
reconstruction to take longer because the quantity supplied of new materials would increase
more slowly.
C)
reconstruction to take less time because the demand for materials would increase faster.
D)
reconstruction to take less time because the government could rebuild more quickly when
people are not in the way.
B
97)
The market system is also called the price system because
97)
A)
inflation is a significant problem.
B)
people pay money in markets.
C)
everything has a price tag.
D)
rising prices are the signal to producers to offer more of a particular good.
D
A
98)
What has been the market outcome of government–enforced price floors for agricultural products?
98)
A)
Farmers have been made worse off.
B)
A shortage of agricultural products has resulted.
C)
A surplus of agricultural products has resulted.
D)
Not enough food has been produced.
99)
All of the following result from price floors in agriculture EXCEPT
99)
A)
governmental bureaucracy.
B)
lower prices to consumers for agricultural products that have price floors.
C)
surpluses of agricultural products that have price floors.
D)
higher prices to consumers for agricultural products that have price floors.
100)
Which of the following is NOT a predictable result of a price ceiling set below the market clearing
price?
100)
A)
excess quantity supplied
B)
lines to purchase the product
C)
excess quantity demanded
D)
an illegal market in the good
101)
In a market system, what must take place for quantity demanded to continually be equated with
quantity supplied?
101)
A)
Tastes and preferences of consumers must adjust to eliminate surpluses or shortages.
B)
Relative prices must be able to adjust to market clearing levels.
C)
Price controls must be applied by governments.
D)
Businesses must engage in involuntary, unprofitable exchanges to eliminate surpluses or
shortages.
102)
A change in an equilibrium price can result from
I. A change in demand
II. A change in supply
102)
A)
I only
B)
II only
C)
Both I and II
D)
Neither I nor II
103)
Price ceilings set below the equilibrium price cause
103)
A)
surpluses.
B)
a greater number of exchanges.
C)
a new market equilibrium.
D)
shortages.
D
Explanation:
104)
As compared to the market clearing price, the total amount of consumer surplus and producer
surplus is
104)
A)
greater for a government–imposed price floor that is higher than that market clearing price.
B)
greater for a government–imposed price ceiling that is lower than that market clearing price.
C)
smaller for a government–imposed price ceiling that is lower than that market clearing price.
D)
the same as a government–imposed price floor that is higher than that market clearing price.
C
Explanation:
105)
Market clearing prices in a market system act as
105)
A)
a signaling device.
B)
a direct measure of resource costs.
C)
a legally determined rationing device.
D)
a way for producers to advertise.
A
Explanation:
C
Explanation:
106)
Following adjustments to a new equilibrium in a market, the equilibrium quantity remains
unchanged, but the market clearing price is now lower. Which of the following could definitely
have caused this outcome?
106)
A)
Demand decreased, and supply increased.
B)
Demand and supply both increased.
C)
Demand and supply both decreased.
D)
Demand increased, and supply decreased.
107)
Transaction costs are
107)
A)
regulations on production.
B)
taxes on production.
C)
production costs.
D)
costs associated with exchange.
108)
In the above figure, a shortage could be caused by a government price ceiling set at
108)
A)
$3.00.
B)
$2.50.
C)
$1.00.
D)
$2.00.
109)
All of the following are methods of rationing goods EXCEPT
109)
A)
first come, first served.
B)
the profit motive.
C)
political power.
D)
prices.
110)
The long–run effect of rent control on an area includes
110)
A)
less investment into the real estate market in the area.
B)
many new luxury apartments new luxury apartments will be built.
C)
new investors into the real estate market in the area.
D)
rampant building of new low–income housing.
111)
Some Internet companies like Amazon reduce the transaction costs of many purchases by
111)
A)
providing information about products and firms that supply those products.
B)
paying its employees low wages.
C)
providing misleading information about the quality of products.
D)
advertising sales at local discount stores.
112)
Refer to the above figure. Suppose the government imposes a minimum wage rate of $20.00 per
hour. This will likely result in
112)
A)
a surplus of labor.
B)
an increase in the demand for labor.
C)
an equilibrium in the labor market.
D)
a shortage of labor.
113)
Holding supply constant, an increase in demand leads to
113)
A)
higher prices and higher quantity supplied.
B)
lower prices and lower quantity supplied.
C)
lower prices and higher quantity supplied.
D)
higher prices and lower quantity supplied.
Explanation:
114)
With respect to the market clearing price and the equilibrium quantity for good X, an increase in
the demand for and a decrease in supply of the good definitely will
114)
A)
increase the market clearing price of good X but have an uncertain impact on the equilibrium
quantity of X.
B)
increase the market clearing price and the equilibrium quantity of good X.
C)
decrease the market clearing price and the equilibrium quantity of good X.
D)
increase the market clearing price of good X but lower the equilibrium quantity of X.
Explanation:
Explanation:
115)
If price increases and the quantity purchased increases, we know that
115)
A)
demand increased.
B)
demand decreased.
C)
supply increased.
D)
supply decreased.
116)
If other factors remain unchanged, technological progress in producing good X definitely will lead
to
116)
A)
a decrease in the market clearing price of good X and an increase in the equilibrium quantity
of good X.
B)
an increase in both the market clearing price and the equilibrium quantity of good X.
C)
an increase in the market clearing price of good X and a decrease in the equilibrium quantity
of good X.
D)
a decrease in both the market clearing price and the equilibrium quantity of good X.
117)
Suppose that demand for tablets increases, and simultaneously, the supply of tablets increases.
Which of the following would you conclude definitely will occur in the market for tablets?
117)
A)
The market clearing price will rise.
B)
The market clearing price will fall.
C)
The equilibrium quantity will fall.
D)
The equilibrium quantity will rise.
118)
If demand increases and supply decreases
118)
A)
the equilibrium quantity definitely will decrease, but the change in the market clearing price
cannot be determined without more information.
B)
the market clearing price definitely will increase, but the change in the equilibrium quantity
cannot be determined without more information.
C)
the market clearing price definitely will increase, and the equilibrium quantity definitely will
decrease.
D)
the market clearing price definitely will increase, and the equilibrium quantity definitely will
increase.
119)
If demand increases while supply simultaneously decreases, then the equilibrium quantity
119)
A)
can never change.
B)
always decreases.
C)
always increases.
D)
none of the above
120)
A severe drought has devastated cocoa plants, causing an increase in the price of chocolate. In the
market for chocolate chip cookies
120)
A)
a surplus will arise.
B)
quantity demanded has increased.
C)
supply has decreased and price has increased.
D)
quantity has decreased and price has decreased.
121)
Which of the following statement is FALSE?
121)
A)
Coupons can be used to ration goods.
B)
Random assignment can be a method of rationing.
C)
Only the price system can be used to ration goods.
D)
Queuing can be used for rationing.
122)
The effect of legislation establishing a minimum wage above the market clearing wage is
122)
A)
unemployment.
B)
a shift of the demand for labor curve.
C)
higher wages for all workers.
D)
a shortage of labor.
123)
Who bears the costs of a program to control rents at a maximum level?
123)
A)
consumers who face difficulty moving to a more suitable apartment
B)
homeless who cannot find rental units
C)
landlords or owners of housing units
D)
all of these
124)
When a government imposes price controls, the result is that
124)
A)
scarcity usually disappears.
B)
the price system operates more efficiently.
C)
the rationing function of prices is not allowed to function freely.
D)
all trades are as mutually beneficial to each party as possible.
125)
Which of the following is NOT a function of rental prices?
125)
A)
to ration the existing housing stock
B)
to stimulate the construction of new housing
C)
to allocate existing scarce housing among different people
D)
to provide housing to individuals below market value
D
126)
If supply and demand both simultaneously increase
126)
A)
the market clearing price definitely rises, and the effect on the equilibrium quantity is
indeterminate.
B)
the market clearing price definitely rises, and the equilibrium quantity definitely falls.
C)
the market clearing price definitely falls, and the effect on the equilibrium quantity is
indeterminate.
D)
the effect on the market clearing price is indeterminate, and the equilibrium quantity
definitely rises.
D
127)
If both the demand curve and the supply curve shift to the right, we can unambiguously conclude
that the
127)
A)
market clearing price will increase.
B)
equilibrium quantity will decrease.
C)
equilibrium quantity will increase.
D)
market clearing price will decrease.
C
C
128)
The gains from trade within a price system is
128)
A)
the sum of consumer surplus and producer surplus.
B)
consumer surplus less producer surplus.
C)
consumer surplus multiplied by producer surplus.
D)
consumer surplus divided by producer surplus.
Garbanzo Beans
Price QdQs
$2 5,000 1,000
$4 4,000 2,000
$6 3,000 3,000
$8 2,000 4,000
$10 1,000 5,000
129)
Consider the above table. Assuming the government imposes a price floor on garbanzo beans of $8,
what would be the likely result?
129)
A)
a surplus of 2000 garbanzo beans
B)
No change, equilibrium would prevail.
C)
The quantity demanded of garbanzo beans would fall to zero.
D)
a shortage of 2000 garbanzo beans
A
130)
Which of the following would likely result as a consequence of rent controls?
130)
A)
a reduction in the rate of construction of rental housing units
B)
limits on tenant mobility
C)
unimproved buildings and apartment complexes
D)
All of the above are correct.
D
131)
As a result of establishing a legal minimum wage above the market clearing wage
131)
A)
fewer workers will want to work.
B)
there will be a shortage of workers.
C)
firms will hire fewer workers.
D)
firms will hire more workers.
C
A
132)
In which of the following situations will both market clearing price and the equilibrium quantity
decrease?
132)
A)
an increase in demand and no change in supply
B)
an increase in supply with no change in demand
C)
a decrease in supply with no change in demand
D)
a decrease in demand with no change in supply
133)
An import quota will
133)
A)
leave the equilibrium price unchanged and increase the quantity sold.
B)
lead to a shift of the demand curve.
C)
limit the amount of a foreign good that can be brought into the United States.
D)
limit the amount of a good local producers can make.
C
134)
Of the following groups, who gains from rent controls?
134)
A)
construction workers and their union leaders
B)
poor people who have a hard time earning enough income to pay high rents
C)
high–income people who live in rent–controlled apartments
D)
landlords
C
135)
The difference between the total amount that producers would have been willing to accept for the
total quantity produced in a market and what they actually received at the market clearing price is
called
135)
A)
market surplus.
B)
excess demand.
C)
producer surplus.
D)
production excess.
C
D
136)
The total amount of consumer surplus and producer surplus is at its maximum when
136)
A)
the government imposes a price ceiling that is lower than the market clearing price.
B)
the government imposes a price floor that is higher than the market clearing price.
C)
consumers and producers are allowed to trade at the market clearing price.
D)
free market exchanges do not exist.
137)
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
137)
A)
increase the market clearing price of good X but have an uncertain impact on the equilibrium
quantity of X.
B)
increase the market clearing price and the equilibrium quantity of good X.
C)
reduce 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.
D
138)
The textbook suggests that rent controls
138)
A)
are used in a government kickback scheme.
B)
have no effect on the local housing market.
C)
actually contribute to the housing boom in an area where they are applied.
D)
actually contribute to the housing shortage in the area where they are applied.
D
139)
Price ceilings are adopted in most cases because
139)
A)
the government views the current equilibrium price as too high for consumers.
B)
producers need incentives to produce more of the good or service.
C)
the government wants to create surpluses.
D)
the government favors a non–intervention policy.
A
C
140)
The textbook points out that rent controls have
140)
A)
greatly benefited the homeless.
B)
attracted increases in low–income housing.
C)
had no effect on the market for housing.
D)
benefited upper–income or existing tenants.
141)
When consumers would have been willing to pay higher prices at various quantities consumed
than the market clearing price, the differences are called
141)
A)
deadweight loss.
B)
consumer surplus.
C)
monopoly profits.
D)
opportunity cost.
B
142)
An import quota for sugar results in an increase in
142)
A)
sugar imports.
B)
the domestic demand for sugar.
C)
the domestic market price of sugar.
D)
the domestic market supply of sugar.
C
143)
The objective of rent controls is to
143)
A)
encourage the construction of new rental units.
B)
ensure an adequate supply of rental housing for the poor.
C)
keep rents below levels that would be observed in a freely competitive market.
D)
raise revenue for the local government.
C
144)
Prices provide the rationing function best when
144)
A)
price controls are in place and ration coupons are used too.
B)
prices are flexible.
C)
they are used in conjunction with queuing.
D)
prices are inflexible.
B
D