145)
A supply restriction on imported goods, such as the government’s restriction of imported oil for
many years, is referred to as
145)
A)
an import quota.
B)
a price floor.
C)
a price ceiling.
D)
an export quota.
146)
When the supply and/or demand curve shift, the new market clearing price is
146)
A)
reached only after the government intervenes in the market.
B)
reached instantaneously.
C)
never reached.
D)
reached after some period of adjustment.
D
147)
Refer to the above figure. A price ceiling has been set at P1, and a black market has opened. The
equilibrium black market quantity will be
147)
A)
below Q1.
B)
between Q1 and Q3.
C)
Q2.
D)
above Q3.
B
A
148)
In which of the following situations will both market clearing price and the equilibrium quantity
increase?
148)
A)
an increase in demand with 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
149)
In the United States, the minimum wage is defined as
149)
A)
the wage ceiling above which a firm no longer must pay its employees additional benefits.
B)
the lowest wage that a corporation should pay a worker if the corporation wants to ensure
that its employees are well trained.
C)
the wage that the youngest job entrant into the job market makes.
D)
the lowest hourly wage rate a firm may legally pay its workers, as legislated by the U.S.
government.
D
150)
Price controls
150)
A)
exist when consumers boycott a product.
B)
are the benefit of discount stores like Sam’s Club.
C)
are government–mandated minimum or maximum prices that may be charged for goods.
D)
exist when firms decide that they want to charge a higher price for their product.
C
151)
If the demand for a product rises and the supply stays the same
151)
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.
C
A
152)
An effective price ceiling occurs when
152)
A)
the government sets a maximum price for a good above the equilibrium price.
B)
the government sets a minimum price for a good below the equilibrium price.
C)
the government sets a minimum price for a good above the equilibrium price.
D)
the government sets a maximum price for a good below the equilibrium price.
153)
If demand decreases and supply increases
153)
A)
the market clearing price will decrease, and equilibrium quantity will decrease.
B)
the equilibrium price will decrease, but the change in the equilibrium quantity cannot be
determined without more information.
C)
the equilibrium quantity will decrease, but the change in the market clearing price cannot be
determined without more information.
D)
the market clearing price will decrease, and the equilibrium quantity will increase.
B
154)
Another term for intermediaries who specialize in reducing transaction costs is
154)
A)
revenue agents.
B)
service providers.
C)
consultants.
D)
middlemen.
D
155)
For which situation would we expect the adjustment speed to be the fastest?
155)
A)
The demand for surgeons increases.
B)
The demand for office space in downtown Chicago increases.
C)
A large increase in birth rates leads to an increase in elementary school teachers.
D)
The demand for movie videos increases.
D
D
156)
When a market clearing price is determined
156)
A)
the exchange between buyers and sellers benefits only the buyers.
B)
the exchange between buyers and sellers is directed by outside factors such as the
government.
C)
the exchange between buyers and sellers benefits only the sellers.
D)
the exchange between buyers and sellers is voluntary.
157)
If the government imposes a price ceiling that is lower than the market clearing price, then
157)
A)
consumer surplus will decrease while producer surplus will increase.
B)
consumer surplus will increase while producer surplus will decrease.
C)
both consumer surplus and producer surplus will decrease.
D)
both consumer surplus and producer surplus will increase.
158)
Of the following groups, which benefits most from a government price support program that
establishes a floor price for an agricultural product that is higher than the product’s market clearing
price?
158)
A)
the government, which receives subsidy payments from producers that are required to sell
more of the product at a higher price under the government’s program
B)
consumers, who purchase more units of the product than they did before the price support
program was implemented
C)
taxpayers, who no longer must provide funds to purchase surplus units of the product once
the price support program is in place
D)
producers, who earn a higher price on the sale of each unit and also sell more units, thereby
unambiguously earning higher revenues
159)
Refer to the above figure. A minimum wage has been set at WM. The amount of unemployment is
159)
A)
zero.
B)
at Qe.
C)
QS minus QD.
D)
not computable from the information given.
160)
Suppose new research shows that soy milk and other products derived from soybeans provide
more health benefits than previously thought. At the same time, drought conditions result in
extensive damage to the soybean crop. What will be the combined impact of these two factors on
the equilibrium price and quantity of soybeans?
160)
A)
Quantity will decrease, but the effect on price is indeterminate.
B)
Price will decrease, but the effect on quantity is indeterminate.
C)
Price will increase, but the effect on quantity is indeterminate.
D)
Quantity will increase, but the effect on price is indeterminate.
161)
In the automobile industry, workers have just negotiated a new contract giving workers a large
raise. There has also been an increase in the number of licensed drivers who are in the market for a
new car. In the market for new automobiles, the effects that these changes will have on the
equilibrium price and quantity are
161)
A)
price will increase, and quantity will decrease.
B)
price will increase, and the effect on quantity is indeterminate.
C)
price will decrease, and quantity will increase.
D)
price will decrease, and the effect on quantity is indeterminate.
162)
Which one of the following could account for an increase in the market clearing price of iPads?
162)
A)
an increase in supply along with a decrease in demand
B)
an increase in supply of iPads
C)
an increase in demand along with a decrease in supply
D)
a decrease in demand for iPads
163)
If both supply and demand simultaneously decrease
163)
A)
the market clearing price definitely rises, and the equilibrium quantity definitely falls.
B)
the effect on the market clearing price is indeterminate, and the equilibrium quantity
definitely falls.
C)
the market clearing price definitely falls, and the effect on the equilibrium quantity is
indeterminate.
D)
the market clearing price definitely rises, and the effect on the equilibrium quantity is
indeterminate.
B
164)
Suppose that consumer income decreases and that hamburger is an inferior good. Which of the
following will occur in the market for hamburger?
164)
A)
Market clearing price will fall, and equilibrium quantity will fall.
B)
Market clearing price will fall, and equilibrium quantity will rise.
C)
Market clearing price will rise, and equilibrium quantity will rise.
D)
Market clearing price will rise, and equilibrium quantity will fall.
C
165)
When producers would have been willing to accept lower prices at various quantities produced
than the market clearing price, the differences are called
165)
A)
monopoly profits.
B)
opportunity cost.
C)
producer surplus.
D)
deadweight loss.
C
C
166)
If Niki is willing to pay up to $5 for an ice–cream bar but she actually pays $2 for it. The consumer
surplus of the ice–cream bar for Niki
166)
A)
is $2.
B)
is $7.
C)
is $3.
D)
cannot be determined without information about the market structure.
167)
Which of the following statements is NOT true about exchanges in the market system?
167)
A)
Prices indicate what is relatively abundant and what is relatively scarce.
B)
In voluntary exchange both parties are better off because of the exchange.
C)
Transaction costs in exchanges include the cost of enforcing a contract as well as the costs of
information.
D)
Exchanges occur only in situations of barter where the market price is irrelevant.
168)
According to the above figure, if the government imposes a minimum wage equal to Wm, the effect
will be
168)
A)
a decrease in labor supplied, from C to E.
B)
an increase in labor supplied, from A to E.
C)
a reduction in employment from Qe to Qm.
D)
an increase in employment from Qe to Qm.
169)
When supply increases and at the same time demand decreases, we
169)
A)
cannot predict equilibrium quantity, but know that equilibrium price will decrease.
B)
can predict that both equilibrium price and quantity will increase.
C)
cannot predict the change in either the equilibrium quantity or equilibrium price.
D)
can predict that both equilibrium price and quantity will decrease.
170)
A long line at the campus bookstore at the beginning of the term is an example of
170)
A)
a non–price rationing device.
B)
price rationing.
C)
an ineffective price ceiling.
D)
an ineffective price floor.
A
171)
A black market may occur when
171)
A)
the government imposes a price ceiling above the market clearing price.
B)
the government imposes a price ceiling below the market clearing price.
C)
the government does not impose either a price ceiling or a price floor.
D)
the government imposes a price floor below the market clearing price.
B
172)
The signaling aspect of the market system refer to
172)
A)
the voluntary character of the exchange.
B)
legal requirements for contracts and exchanges.
C)
transaction costs of carrying out exchanges.
D)
the price of the good to the consumer and producer.
D
A
173)
When are black markets likely to arise?
173)
A)
when the government enforces a price ceiling
B)
when the quantity supplied of a good exceeds the quantity demanded
C)
when there is a surplus of a good
D)
when the government removes a price floor
174)
Refer to the above figure. A surplus occurs if the government imposes
174)
A)
a price floor at $20.
B)
a price floor at $60.
C)
a price ceiling at $20.
D)
a price ceiling at $60.
175)
Suppose the price of crude oil used to produce gasoline rises significantly. At the same time,
consumers purchase hybrid cars in great numbers. In the market for gasoline, the market clearing
price ________ and the equilibrium quantity ________.
175)
A)
definitely falls, definitely rises
B)
definitely rises, is indeterminate
C)
definitely falls, is indeterminate
D)
is indeterminate, definitely falls
176)
If the government imposes a price floor that is higher than the market clearing price, then
176)
A)
consumer surplus will increase while producer surplus will decrease.
B)
consumer surplus will decrease while producer surplus will increase.
C)
both consumer surplus and producer surplus will decrease.
D)
both consumer surplus and producer surplus will increase.
177)
What would happen in the market for rental housing in your community if the local government
legally mandated rents that were below the market clearing price?
177)
A)
The supply of rental housing would decrease.
B)
There would be a surplus of rental housing.
C)
The demand for rental housing would increase.
D)
There would be a shortage of rental housing.
178)
Many economists estimate that for every 10% increase in relative minimum wage rates, there is a
corresponding decrease in employment of those affected equal to
178)
A)
10–20%.
B)
30–40%.
C)
1–2%.
D)
5–10%.
179)
If demand and supply both decrease
179)
A)
the equilibrium quantity definitely will decrease, and the market clearing price definitely will
increase.
B)
the equilibrium quantity definitely will decrease, but the change in market clearing price
cannot be determined without more information.
C)
the equilibrium quantity definitely will decrease, and the market clearing price definitely will
decrease.
D)
the market clearing price definitely will decrease, but the change in the equilibrium quantity
cannot be determined without more information.
180)
Some oil refineries were damaged by Hurricane Ike of 2008, leading to
180)
A)
a decrease in demand for gasoline.
B)
a decrease in quantity supplied of gasoline.
C)
a decrease in supply of gasoline.
D)
a decrease in quantity demanded for gasoline.
181)
What would happen in the market for bread if its demand increased but the price was NOT
allowed to change?
181)
A)
The supply of bread would increase.
B)
There would be a shortage of bread.
C)
There would be a surplus of bread.
D)
The supply of bread would decrease.
182)
Refer to the above figure. If the government imposes a price ceiling of $20
182)
A)
the quantity of goods that will be traded is 200.
B)
the quantity of goods that will be traded is 0.
C)
the quantity of goods that will be traded is 150.
D)
the quantity of goods that will be traded is 100.
183)
There has recently been an increase in the price of dairy products used in the production of ice
cream. High temperatures have also induced people to consume more ice cream. In the market for
ice cream, the effects these changes will have on equilibrium price and quantity are
183)
A)
price will increase, and quantity will decrease.
B)
price will increase, and the effect on quantity is indeterminate.
C)
price will decrease, and quantity will increase.
D)
price will decrease, and the effect on quantity is indeterminate.
184)
Instituting a rent control program will most likely lead to
184)
A)
an efficient allocation of existing units among consumers.
B)
overly elaborate and expensive construction.
C)
an excess quantity supplied of rental units.
D)
a shortage of rental units.
D
185)
If the demand for a product falls and the supply stays the same
185)
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.
D
186)
In a market system, how are the price signals established?
186)
A)
Industry associations establish an acceptable price range for each commodity sold within the
industry, and member firms are obligated to abide by association guidelines.
B)
The forces underlying supply and demand interact to determine a market clearing price.
C)
Federal legislation establishes maximum prices for most goods, and state governments
regulate the prices of any remaining items.
D)
Consumer advocacy groups establish fair prices for items, and most firms follow these pricing
guidelines because they don‘t want to anger their consumers.
B
B
187)
When import quotas are imposed by a government
187)
A)
the price ceiling for the product has to be lowered.
B)
the domestic producers always lower the prices of their products to ensure that their products
are sold.
C)
the government is trying to discourage consumers from buying foreign–made goods.
D)
the supply of the product on the domestic market increases.
188)
The way we know what commodities are relatively scarce or abundant is through
188)
A)
transaction costs.
B)
prices.
C)
price floors.
D)
price ceilings.
189)
When the government establishes a minimum price for an agricultural product above the
equilibrium price, the government is creating a(n)
189)
A)
surplus price.
B)
price floor.
C)
price ceiling.
D)
elevated price.
190)
Which of the following is NOT a voluntary exchange?
190)
A)
Scott pays $10,000 for tuition and fees this semester.
B)
Emily buys a $1,000 plane ticket to fly from New York to Dallas on short notice.
C)
Marie buys groceries.
D)
Tom’s car is stolen from in front of his house.
191)
Why does an economy need a rationing mechanism?
191)
A)
because it preserves the power of the wealthy
B)
because of scarcity
C)
because it eliminates poverty
D)
All of the above are correct.
192)
The market clearing price of corn has just increased. Which of the following could have caused this
change?
192)
A)
an increase in quantity demanded
B)
a reduction in supply
C)
an increase in quantity supplied
D)
a reduction in demand
193)
Government imposed price controls often lead to
193)
A)
the equilibrium solution in terms of price and quantity.
B)
the most efficient use of resources.
C)
maximization of profits.
D)
illegal trades of the good.
D
Explanation:
194)
Your local grocery store reduces transaction costs to the consumer
194)
A)
by providing a system of justice to enforce contracts.
B)
by reducing the consumer’s need to travel from food producer to food producer (or
manufacturer to manufacturer) to purchase the food staples that the consumer desires.
C)
by providing a system that directs funds from lenders to borrowers.
D)
All of the above are correct.
B
Explanation:
195)
If both the demand for and the supply of computers are increasing, which of the following
statements is TRUE?
195)
A)
The consumer should wait and buy a computer later since the price will be lower in the
future.
B)
It is impossible to know, given only this information, whether the prices of computers will go
up or down in the future.
C)
The price of a computer will be the same in the future as it is now.
D)
The consumer should buy a computer now since the price will be higher in the future.
B
Explanation:
B
Explanation:
196)
A maximum legal price that may be charged for a particular good or service is known as a
196)
A)
price floor.
B)
price support.
C)
price ceiling.
D)
black market.
197)
Which of the following is one of the functions of rental prices?
197)
A)
to ration the use of existing housing for current consumers
B)
to signal to the local government when taxes on rental units should be increased
C)
to redistribute income from renters to landlords
D)
to redistribute income from landlords to renters
198)
A price ceiling set below the market clearing price will tend to cause which of the following?
198)
A)
a surplus
B)
a shortage
C)
a reduction in supply
D)
an increase in demand
199)
Suppose the market clearing price is $20 and the price ceiling is $15. The price that prevails in the
market will be
199)
A)
$20.
B)
less than $15.
C)
$15.
D)
$0.
200)
Refer to the above figure. If the government set a price floor of $3.50 per gallon, there would be
200)
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.
201)
Individuals who specialize in activities that lower transaction costs are
201)
A)
middlemen.
B)
consumers.
C)
bureaucrats.
D)
producers.
202)
A price ceiling set above the equilibrium price will cause which of the following?
202)
A)
an increase in supply
B)
a shortage
C)
no effect on either the price or quantity
D)
a surplus
203)
When the government restricts the quantity of a good to zero
203)
A)
producers stop all production.
B)
there is none of the good available anywhere.
C)
people’s demand for the product evaporates.
D)
an underground market develops.
204)
When the government sets a price floor which is above the equilibrium price
204)
A)
the equilibrium price will be maintained.
B)
a shortage will develop.
C)
a surplus will develop.
D)
a price ceiling will follow.
205)
In recent years, the price of smartphones has fallen, while the quantity exchanged of smartphones
has risen. We can conclude that this is most likely a result of
205)
A)
an increase in demand that exceeded an increase in supply.
B)
an increase in supply that exceeded an increase in demand.
C)
an increase in demand while supply remained constant.
D)
a decrease in supply while demand remained constant.
206)
Government–imposed quantity restrictions
206)
A)
does not affect the price of the good because quantity restrictions always ban sale of the good
completely.
B)
can cause prices to either be higher or lower, but always cause excess quantities supplied to
develop.
C)
generate a higher price for the good than would prevail under freely competitive markets.
D)
generate a lower price for the good than would prevail under freely competitive markets.
207)
Refer to the above figure. A price ceiling of $20 results in
207)
A)
a shortage of 100 units.
B)
a surplus of 100 units.
C)
a shortage of 200 units.
D)
a surplus of 200 units.
208)
In situations in which prices cannot be used to signal relative scarcities of goods, which of the
following can serve as a rationing mechanism?
208)
A)
political power
B)
random assignment
C)
queuing
D)
all of the above
209)
If a producer is willing to receive at least $5 for a pen that she manufactures but she actually
receives $7 for it. The producer surplus of the pen for that producer is
209)
A)
$7.
B)
$5.
C)
–$5.
D)
$2.
210)
An increase in demand and a decrease in supply will lead to an
210)
A)
unambiguous increases in both price and quantity.
B)
unambiguous decreases in both price and quantity.
C)
an unambiguous increase in quantity, but the effect on price is indeterminate.
D)
an unambiguous increase in price, but the effect on quantity is indeterminate.
211)
A black market
211)
A)
was created when after hours trading was permitted on some stock exchanges.
B)
is a market where products with outdated expiration dates are sold.
C)
can arise when government imposes a price ceiling below the market clearing price.
D)
can arise when government imposes a price floor below the market clearing price.
212)
In a market system, the costs associated with exchanging goods are known as
212)
A)
transaction costs.
B)
wholesale costs.
C)
signaling costs.
D)
voluntary costs.
213)
Suppose the market clearing price for gasoline is $3.75 per gallon. Now suppose that policy makers
pass a law requiring that the maximum price that can be charged is $2.75 per gallon. Such a
situation is an example of
213)
A)
a price floor that will lead to a shortage of gasoline on the market.
B)
a price floor that will lead to a surplus of gasoline on the market.
C)
a price ceiling that will lead to a shortage of gasoline on the market.
D)
a price control that will lead to a surplus of gasoline on the market.
214)
When the government sets a price floor which is below the equilibrium price
214)
A)
a price ceiling will follow.
B)
a shortage will develop.
C)
the equilibrium price will be maintained.
D)
a surplus will develop.
215)
Which of the following must occur as a result of ceilings on apartment rents that are set below
market clearing rental rates?
215)
A)
Property owners respond to the ceilings by increasing maintenance and repairs.
B)
There is a decrease in the quantity of apartments that property owners offer for rent.
C)
There is a decrease in the quantity of apartments that prospective tenants wish to rent.
D)
Property owners respond to the ceilings by constructing new apartment buildings.
216)
Which of the following is most likely to generate a surplus?
216)
A)
an illegal market
B)
a price ceiling
C)
a price floor
D)
all of these
C
217)
For a given market demand curve, if the market clearing price increases, then the amount of
producer surplus will
217)
A)
increase.
B)
decrease.
C)
become negative.
D)
none of the above due to insufficient information.
A
218)
Minimum wages are examples of
218)
A)
a price floor.
B)
government increasing the demand for certain products.
C)
a price ceiling.
D)
the rationing function of prices not working.
A
B