67)
For which situation would we expect the adjustment speed to be the fastest?
67)
A)
The demand for office space in downtown Chicago increases.
B)
A large increase in birth rates leads to an increase in elementary school teachers.
C)
The demand for movie videos increases.
D)
The demand for surgeons increases.
68)
If demand increases and supply decreases,
68)
A)
the market clearing price definitely will increase, and the equilibrium quantity definitely will
decrease.
B)
the market clearing price definitely will increase, and the equilibrium quantity definitely will
increase.
C)
the equilibrium quantity definitely will decrease, but the change in the market clearing price
cannot be determined without more information.
D)
the market clearing price definitely will increase, but the change in the equilibrium quantity
cannot be determined without more information.
D
69)
Price floors
69)
A)
create surpluses by setting the price above equilibrium.
B)
are used by advocates of the free market.
C)
create shortages by setting the price above equilibrium.
D)
provide free market incentives for producers.
A
70)
In which of the following situations will market clearing price decrease and the equilibrium
quantity increase?
70)
A)
an increase in supply with no change in demand
B)
a decrease in demand with no change in supply
C)
a decrease in supply with no change in demand
D)
an increase in demand with no change in supply
A
C
71)
Which of the following are ways to ration goods and services?
71)
A)
price
B)
political power
C)
physical force
D)
All of the above are correct.
72)
If one day it was discovered that lime juice caused cancer, which of the following would likely
result?
72)
A)
The supply curve for lime juice would shift to the left.
B)
The demand curve for lime juice would shift to the left.
C)
The supply curve for lime juice would shift to the right.
D)
The demand curve for lime juice would shift to the right.
73)
In a market system, which component conveys information about what is relatively scarce and
what is relatively abundant?
73)
A)
The number of producers
B)
Prices
C)
The number of consumers
D)
The amount of government regulation
74)
The way we know what commodities are relatively scarce or abundant is through
74)
A)
price ceilings.
B)
prices.
C)
transaction costs.
D)
price floors.
75)
A price ceiling is
75)
A)
the lowest price a buyer can pay for a good without having to report the purchase to the
government.
B)
a legal minimum price that can be charged for a particular good or service.
C)
the lowest price a seller can charge for a good without losing all her customers.
D)
a legal maximum price that can be charged for a particular good or service.
76)
An increase in the price of labor used to produce good Y will lead to
76)
A)
an increase in the market clearing price of good Y.
B)
an increase in the demand for good Y.
C)
a decrease in the demand for good Y.
D)
an increase in the supply of good Y.
77)
Suppose that the supply curve remains unchanged. If the demand curve shifts to the right,
77)
A)
the market clearing price definitely will increase.
B)
the market will collapse.
C)
the market clearing price definitely will decrease.
D)
there will be no change in the market clearing price.
A
78)
Because of scarcity, rationing is
78)
A)
not a problem because governments can determine what everybody wants.
B)
necessary because people cannot get everything they want.
C)
unimportant because prices clear markets.
D)
unimportant because people get what they want.
B
79)
A minimum wage is an example of a
79)
A)
price ceiling.
B)
black market.
C)
market clearing price.
D)
price floor.
D
A
80)
Roses are more expensive on Valentine’s Day than at other times of the year, yet sales of roses are
highest on that day. How does economic theory account for this?
80)
A)
Roses are not subject to the law of demand.
B)
Florists know that there are no substitutes for roses, so they take advantage of consumers on
Valentine’s Day.
C)
People buying the roses are irrational.
D)
An increase in demand pushes up the market clearing price of roses.
81)
In a market, the rationing function of prices results in
81)
A)
a price ceiling.
B)
equilibrium.
C)
a shortage or surplus.
D)
long queues or waiting lines.
82)
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
82)
A)
excess demand.
B)
market surplus.
C)
producer surplus.
D)
production excess.
83)
In the housing market, rents serve the purpose of
83)
A)
rationing the availability of existing housing.
B)
increasing tax collections by the community.
C)
providing an entry by the government into the housing market.
D)
making landlords rich.
84)
When rent controls establish a legal maximum rental rate below the equilibrium rental rate,
84)
A)
quantity demanded exceeds quantity supplied.
B)
supply exceeds demand.
C)
demand exceeds supply.
D)
quantity supplied exceeds quantity demanded.
85)
An import quota is
85)
A)
a price floor.
B)
a price ceiling.
C)
a quantity restriction.
D)
something imposed on agricultural goods grown by American farmers.
86)
If the demand for a product falls and the supply stays the same,
86)
A)
the market clearing price will fall and the equilibrium quantity will rise.
B)
the market clearing price will rise and the equilibrium quantity will fall.
C)
both the market clearing price and the equilibrium quantity will rise.
D)
both the market clearing price and the equilibrium quantity will fall.
87)
If demand decreases and supply increases,
87)
A)
the market clearing price will decrease, and the equilibrium quantity will increase.
B)
the equilibrium price will decrease, but the change in the equilibrium quantity cannot be
determined without more information.
C)
the market clearing price will decrease, and equilibrium quantity will decrease.
D)
the equilibrium quantity will decrease, but the change in the market clearing price cannot be
determined without more information.
88)
The textbook suggests that rent controls
88)
A)
actually contribute to the housing shortage in the area where they are applied.
B)
have no effect on the local housing market.
C)
are used in a government kickback scheme.
D)
actually contribute to the housing boom in an area where they are applied.
89)
If the government should decide to legalize marijuana, all other things remaining the same, we
should expect to see
89)
A)
a decrease in the price of marijuana.
B)
a decrease in the demand for marijuana.
C)
an increase in the price of marijuana.
D)
an increase in the use of imported versus domestic marijuana.
90)
Suppose the price of lumber decreases. In the market for new homes, we would expect which of
the following to occur?
90)
A)
the market clearing price will rise and the equilibrium quantity will fall.
B)
the market clearing price will fall and the equilibrium quantity will rise.
C)
both the market clearing price and the equilibrium quantity will rise.
D)
both the market clearing price and the equilibrium quantity will fall.
91)
If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has
happened to either the supply curve or to the demand curve?
91)
A)
Demand increased.
B)
Supply increased.
C)
Demand decreased.
D)
Supply decreased.
92)
Suppose the price of cheese rises. In the market for pizza, one would expect that
92)
A)
the supply of pizza would decrease, and price would rise.
B)
the supply of pizza would increase, and the price would fall.
C)
the demand for pizza would increase, and the price would increase.
D)
the demand for pizza would decrease, and price would fall.
93)
Refer to the above figure. At a price of $2 per gallon, the quantity demanded of gasoline is
93)
A)
100,000 gallons per month.
B)
80,000 gallons per month.
C)
140,000 gallons per month.
D)
60,000 gallons per month.
94)
For a given market demand curve, if the market clearing price decreases, then the amount of
consumer surplus will
94)
A)
become negative.
B)
increase.
C)
decrease.
D)
none of the above due to insufficient information
95)
An example of a quantity restriction is
95)
A)
rent controls.
B)
the minimum wage.
C)
an import quota.
D)
price supports in agriculture.
96)
Refer to the above figure. If the government set a price floor of $3.50 per gallon, there would be
96)
A)
an excess quantity supplied equal to the distance BF.
B)
an excess quantity supplied equal to the distance BD.
C)
an excess quantity supplied equal to 100,000 gallons.
D)
an excess quantity demanded equal to 100,000 gallons.
97)
Which of the following is most likely to generate a surplus?
97)
A)
A price floor
B)
An illegal market
C)
A price ceiling
D)
All of these
98)
Which of the following is NOT a predictable result of a price ceiling set below the market clearing
price?
98)
A)
Lines to purchase the product
B)
An illegal market in the good
C)
Excess quantity demanded
D)
Excess quantity supplied
99)
The minimum wage laws seek to
99)
A)
assure a minimum standard of payment for work.
B)
penalize employers that are not complying with labor laws.
C)
assure that all workers are paid the same wage rate.
D)
help teenagers find work.
100)
All of the following are examples of nonprice rationing devices EXCEPT
100)
A)
price controls.
B)
black markets.
C)
queues.
D)
waiting lists.
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
101)
Suppose that the market for coffee is in equilibrium at a price of $1.50 per pound and a
monthly quantity of 20 million pounds. News of a freeze in Brazil arrives so that people
know that the supply of coffee months from now will be sharply reduced. What, if
anything, will happen in the coffee market now? Explain.
101)
102)
What are the effects of an increase in the minimum wage? Who would be most affected?
102)
103)
Explain how agricultural price supports work and what the effects of the supports are.
103)
104)
In some developing countries and in some former Communist countries ,people exchange
their domestic currencies for foreign currencies such as the dollar in black markets. Why
would this practice go on?
104)
105)
Suppose that initially a market is in equilibrium at a price of $10 and a quantity of 5000
units per day. Several months later, the market is in a new equilibrium at a price of $5 and
a quantity of 5000 units per day. What happened in the market?
105)
106)
The U.S. government imposes import quotas on many agricultural products, especially
products that receive price supports. Offer an economic explanation for this.
106)
107)
What are the terms of exchange and how are these terms related to the price?
107)
108)
Assume that CDs are a normal good and that the price of stereo equipment falls while the
labor costs of producing CDs increase. What will happen in the market for CDs?
108)
109)
“Scarcity implies that some way of rationing goods must be found.” Explain what this
statement means. How is this rationing done?
109)
110)
Using a graph, show a market equilibrium. Suppose the costs of inputs increase. How is
this shown on the graph? Explain what is happening in the market.
110)
111)
Describe the market process that should occur if the price of a product is below its
equilibrium price; now describe what would occur if the price is above its equilibrium
price, assuming no market interference.
111)
112)
Who gains and who loses from rent controls?
112)
113)
Would it take longer for a labor market to move to a new equilibrium for house painters or
architects? Why?
113)
114)
Suppose that the current equilibrium price of gasoline is $5.50 per gallon and that the
government passes a law that requires the price to be no more than $5 per gallon. What
will be the effects?
114)
115)
Suppose local educators argue that teachers’ salaries are too low. At the same time it is said
that the school district received 750 applications for 5 new openings. Are salaries too low?
Explain.
115)
116)
Finding an apartment in New York City is difficult. People even scan the obituaries in the
hopes of finding an apartment. Provide an economic explanation for this.
116)
117)
What are transaction costs? What are some ways in which society reduces transaction
costs?
117)
Answer Key
Testname: C4
Answer Key
Testname: C4
Answer Key
Testname: C4
34
Answer Key
Testname: C4
35