293)
All of the following are examples of nonprice rationing devices EXCEPT
293)
A)
queues.
B)
waiting lists.
C)
price controls.
D)
black markets.
294)
We cannot predict the effect on the market clearing price, but know that the equilibrium quantity
will decrease when
294)
A)
supply and demand for a product simultaneously increase.
B)
supply and demand for a product simultaneously decrease.
C)
supply decreases and demand increases.
D)
supply increases and demand decreases
295)
Refer to the above figure. A price ceiling has been set at P1, and a black market has opened. The
equilibrium black market price will be
295)
A)
P2.
B)
above P3.
C)
below P1.
D)
between P1 and P3.
296)
Which of the following statements is most accurate regarding who benefits and loses from
establishment of a minimum wage above the market clearing wage?
296)
A)
All workers benefit equally from the establishment of the minimum wage because just as
many workers as before remain employed, and all earn the higher minimum wage.
B)
All employers lose because they must pay the higher minimum wage to the same number of
employees as they did before the minimum wage was established.
C)
Individuals who obtain jobs benefit because they earn a higher wage, but some individuals
lose because employers will not hire them at the minimum wage.
D)
All employers benefit equally from the establishment of the minimum wage because they are
able to hire fewer workers at a lower wage.
297)
The market for gasoline in May is in equilibrium, at a market clearing price of $4.50 per gallon.
After Memorial Day, the demand curve for gasoline increases, which causes
297)
A)
the demand curve for gasoline to shift to the left, creating a shortage at $4.50 per gallon which
causes the market clearing price of gasoline to fall.
B)
the demand curve for gasoline to shift to the right, creating a shortage at $4.50 per gallon
which causes the market clearing price of gasoline to rise.
C)
the demand curve for gasoline to shift to the right, creating a shortage at $4.50 per gallon
which causes the market clearing price of gasoline to fall.
D)
the demand curve for gasoline to shift to the left, creating a shortage at $4.50 per gallon which
causes the market clearing price of gasoline to rise.
B
298)
The signals in markets are determined
298)
A)
in an unfair manner that ends up hurting the poor.
B)
by supply and demand.
C)
for all goods by the government through the use of price controls.
D)
by nonprice rationing devices.
B
C
299)
If a price ceiling is set above the current market clearing price, then
299)
A)
a surplus must immediately occur.
B)
quantity demanded will remain equal to quantity supplied at the current market clearing
price.
C)
a shortage must immediately occur.
D)
there will be incentives for black markets to develop.
300)
Suppose that the supply curve remains unchanged. If the demand curve shifts to the right
300)
A)
the market will collapse.
B)
the market clearing price definitely will increase.
C)
the market clearing price definitely will decrease.
D)
there will be no change in the market clearing price.
B
Explanation:
301)
Queuing is a way to ration goods
301)
A)
through prices.
B)
through the use of political power.
C)
through markets.
D)
on a first–come, first–serve basis.
D
Explanation:
302)
In which of the following situations will market clearing price decrease and the equilibrium
quantity increase?
302)
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
B
Explanation:
B
Explanation:
303)
Rent controls are
303)
A)
when rents are set above the market clearing level to aid landlords.
B)
used to provide incentives to contractors to build new apartments.
C)
when rents are set below the market clearing level.
D)
used to generate revenue for the local government.
304)
Buyers and sellers receive signals from markets
304)
A)
from their friends and acquaintances.
B)
from the gossip columns in the newspapers.
C)
by listening to the TV news programs.
D)
through the price system.
D
Price Quantity Demanded Quantity Supplied
Per Phone Per Month Per Month
$400 2,000 12,000
375 3,000 11,000
350 4,000 10,000
325 5,000 9,000
300 6,000 8,000
275 7,000 7,000
250 8,000 6,000
225 9,000 5,000
200 10,000 4,000
305)
Refer to the above table. Suppose the demand for smartphones rises because more people use the
Internet with a smartphone. The new equilibrium price will be
305)
A)
more than $275.
B)
$200.
C)
$275.
D)
impossible to be determined given the information.
A
C
306)
Which of the following is NOT an example of a transaction cost?
306)
A)
the cost of returning a defective product
B)
the enjoyment of owning the good
C)
the opportunity cost of time spent looking for stores that sold the good desired
D)
time spent bargaining over the price of a good
307)
An increase in supply, other things being equal, will cause which of the following to occur?
307)
A)
quantity demanded to increase.
B)
quantity supplied to decrease.
C)
a rightward shift in the demand curve as the price falls.
D)
a leftward shift in the demand curves as the price increases.
308)
The difference between quantity restrictions and price ceilings as to their effect on the market is
that
308)
A)
while some consumers gain from price ceilings, no consumers gain from quantity restrictions.
B)
while price ceilings are efficient, quantity restrictions are not.
C)
only price ceilings make the market inefficient.
D)
only quantity restrictions make the market inefficient.
309)
Since the minimum wage rate began it has typically stayed at about what percentage of the average
manufacturing wage?
309)
A)
75–80%
B)
10–20%
C)
40–50%
D)
20–30%
310)
Prices play a role in a market
310)
A)
because they eliminate scarcity.
B)
because when prices are in equilibrium, product shortages or surpluses can occur.
C)
because they help eliminate poverty.
D)
because they distribute scarce goods to those consumers who value them most highly.
311)
Suppose there is a simultaneous increase in the demand for wheat and increase in the supply of
wheat. Which of the following will occur as a result of these simultaneous events?
311)
A)
The market clearing price will fall, but the equilibrium quantity may rise, fall, or stay the
same.
B)
The market clearing price may rise, fall, or stay the same, but the equilibrium quantity will
rise.
C)
The market clearing price will fall, but the equilibrium quantity will rise.
D)
Both the market clearing price and equilibrium quantity will rise.
B
312)
More farmers have recently entered the corn industry. In addition there has been a technological
advancement in the fertilizer industry providing corn farmers with a cheaper and a more effective
fertilizer. In the market for corn, the effects these changes will have on the equilibrium price and
quantity are
312)
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.
C
313)
A minimum wage is an example of a
313)
A)
price ceiling.
B)
black market.
C)
price floor.
D)
market clearing price.
C
D
314)
Price controls often generate
314)
A)
rapid adjustment to market–clearing prices.
B)
greater price flexibility.
C)
more efficient markets.
D)
black markets.
315)
The prices of certain goods, such as ice and gasoline, often increase after a natural disaster such as a
hurricane. The economic explanation for this observation is that
315)
A)
the disaster temporarily reduces the supply of the goods and increases the demand for the
goods.
B)
disasters bring out the worst in people.
C)
people panic in disaster situations.
D)
the disaster temporarily reduces the supply of the goods and reduces the demand for the
goods.
316)
Price controls
316)
A)
do not include rent controls.
B)
interfere with the rationing function of prices.
C)
do not include black markets.
D)
are another name for the price system.
317)
Which of these would NOT be considered a middleman in a market?
317)
A)
a smartphone retailer
B)
a produce wholesaler
C)
an apple farmer
D)
a fruit distributor
318)
Intermediaries, known as middlemen, specialize in
318)
A)
negotiating low prices for buyers.
B)
encouraging consumers to buy goods on credit, rather than with cash.
C)
negotiating high prices for sellers.
D)
reducing transaction costs.
319)
Total consumer surplus in a market is measured as the
319)
A)
area bounded above the market clearing price and beneath the market demand curve.
B)
horizontal distance from the vertical (price) axis to the equilibrium quantity.
C)
area bounded below the market clearing price and above the market supply curve.
D)
vertical distance from the horizontal (quantity) axis to the market clearing price.
320)
Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand
curve shifts from DA to DB. Which of the following is TRUE about the results of the shifts in the
supply and demand curves?
320)
A)
Both the equilibrium price and equilibrium quantity remain unchanged.
B)
The equilibrium price remains unchanged while the equilibrium quantity increases.
C)
Both the equilibrium price and equilibrium quantity increase.
D)
The equilibrium price increases while the equilibrium quantity remains unchanged.
321)
In New York City, apartment rent can be adjusted only when a tenant leaves. This leads
321)
A)
businesses to build new rental units.
B)
people to change apartments often.
C)
landlords to encourage tenants to stay in their apartments.
D)
tenants to stay in apartments longer than they would otherwise.
322)
For a given market demand curve, if the market clearing price decreases, then the amount of
consumer surplus will
322)
A)
increase.
B)
decrease.
C)
become negative.
D)
none of the above due to insufficient information.
A
323)
When the government sets a maximum price that can be charged for a good or service, it creates
323)
A)
a price floor.
B)
a white market.
C)
a price ceiling.
D)
a price support.
C
324)
Suppose that there is an improvement in technology in the market for iPhones. Which of the
following is TRUE?
324)
A)
Demand will increase and the market clearing price will rise.
B)
Supply will increase and the market clearing price will fall.
C)
Demand will increase and the market clearing price will fall.
D)
Supply will increase and the market clearing price will rise.
B
D
325)
Price controls may be thought of as
325)
A)
the freeing–up of free market forces.
B)
a restraint on the rationing function of prices.
C)
useful tools that promote production.
D)
necessary in market economies.
326)
Which of the following is an effect of a minimum wage law that establishes a ceiling wage below
the current market clearing wage?
326)
A)
A decrease in the market clearing wage
B)
Surplus labor, or unemployment
C)
A decrease in the quantity of labor supplied
D)
An increase in the quantity of labor supplied
B
327)
The price of milk increases. Which of the following is NOT part of the likely chain of events that
follows from this price change?
327)
A)
The manufacturers of milking machines lay off some workers.
B)
Milk producers increase their production of milk.
C)
The producers of feed for dairy cows increase production.
D)
Some milk consumers reduce their consumption of milk.
A
328)
Agriculture price supports that establish a price floor at which agricultural products may be
purchased that exceeds the market clearing price
328)
A)
create a shortage of agricultural products.
B)
benefit taxpayers, who receive subsidies from producers that the price support program
forces to sell to the government at an artificially established price.
C)
benefit consumers, who are willing and able to purchase more agricultural products at the
floor price.
D)
result in the quantity of these products supplied exceeding the quantity demanded at the
floor price.
D
B
329)
Firms that produce 80 percent of all computer chips have shut down their facilities for
maintenance. In the computer chip market this will lead to
329)
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.
330)
The gains from consumer surplus and producer surplus occur when
330)
A)
producers are willing to provide a good but consumers are not willing to pay for it.
B)
both consumers and producers engage in voluntary exchange.
C)
consumers are willing to buy a good but producers are not willing to provide it.
D)
the government supplies the good instead of firms.
B
331)
Which group of individuals most likely benefits from rent controls?
331)
A)
low–income wage earners who fail to obtain rental housing
B)
upper–income professionals who rent apartments at the price ceiling rate
C)
the unemployed who fail to obtain rental housing
D)
single parent families without savings or other financial assets who fail to obtain rental
housing
B
332)
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, demand shifts to the
________ and supply shifts to the ________.
332)
A)
left, left
B)
right, left
C)
left, right
D)
right, right
A
A
333)
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?
333)
A)
Supply increased.
B)
Supply decreased.
C)
Demand decreased.
D)
Demand increased.
334)
A price ceiling is
334)
A)
a legal maximum price that can be charged for a particular good or service.
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)
the lowest price a buyer can pay for a good without having to report the purchase to the
government.
335)
In a market system, which component conveys information about what is relatively scarce and
what is relatively abundant?
335)
A)
prices
B)
the number of consumers
C)
the number of producers
D)
the amount of government regulation
336)
In the price system
336)
A)
consumers alone set the price.
B)
prices are set by the interaction of supply and demand.
C)
prices are set by government action.
D)
producers alone set the price.
337)
The price system
337)
A)
is the voluntary exchange system used in the United States.
B)
is old fashioned and is no longer used.
C)
is used to set resource prices only.
D)
is used only in countries that are developing.
338)
Other things being equal, suppose that the demand for wheat in constant quality units increases.
The increase in demand will cause
338)
A)
a surplus of wheat.
B)
fall in the market clearing price of corn, a substitute for wheat.
C)
a higher equilibrium quantity, but a lower equilibrium price of wheat.
D)
a higher equilibrium price and higher equilibrium quantity of wheat.
339)
A supply restriction that restricts the amount of a good that can be imported is a(n)
339)
A)
import quota.
B)
black market.
C)
price ceiling.
D)
price floor.
340)
In the United States, the wage floor legislated by government below which it is generally illegal to
pay workers is known as
340)
A)
the minimum wage.
B)
the wage ceiling.
C)
the going wage.
D)
the employment gap.
341)
In the market for domestic avocados, what would happen to the market clearing price and the
equilibrium quantity if there was a drought in avocado growing areas?
341)
A)
The market clearing price would fall, and the equilibrium quantity would fall.
B)
The market clearing price would fall, and the equilibrium quantity would rise.
C)
The market clearing price would rise, and the equilibrium quantity would fall.
D)
The market clearing price would rise, and the equilibrium quantity would rise.
342)
If demand increases while supply decreases, then the equilibrium price
342)
A)
never changes.
B)
may increase, decrease, or stay the same.
C)
always decreases.
D)
always increases.
D
343)
Ways to ration goods include
343)
A)
political power.
B)
first–come, first–served.
C)
prices.
D)
all of the above.
D
344)
Holding demand constant, a reduction in supply leads to
344)
A)
lower prices and lower quantity demanded.
B)
higher prices and higher quantity demanded.
C)
lower prices and higher quantity demanded.
D)
higher prices and lower quantity demanded.
D
345)
Holding supply constant, a reduction in demand leads to
345)
A)
lower prices and higher quantity supplied.
B)
higher prices and lower quantity supplied.
C)
lower prices and lower quantity supplied.
D)
higher prices and higher quantity supplied.
C
C
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
346)
Consider the above table. Assuming the government imposes a price ceiling on garbanzo beans of
$4, what would be the likely result?
346)
A)
a shortage of 2,000 garbanzo beans
B)
The quantity demanded of garbanzo beans would fall to zero.
C)
a surplus of 2,000 garbanzo beans
D)
No change, equilibrium would prevail.
347)
If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that the
market clearing price ________ and the equilibrium quantity ________.
347)
A)
cannot be predicted, will fall
B)
will fall, cannot be predicted
C)
will rise, cannot be predicted
D)
cannot be predicted, will rise
348)
If the government created a surplus of an agricultural product due to price supports, how might
they dispose of this surplus?
348)
A)
have the farmer destroy the crop
B)
give it away to a foreign country
C)
purchase it and store it away
D)
Any of these answers might be a successful tool in disposing of agricultural surpluses.
349)
In a city that has rent control for apartments, there is
349)
A)
neither a surplus nor a shortage of apartments.
B)
less turnover of apartments.
C)
a surplus of apartments available to rent.
D)
a shortage of renters in the city.
350)
The market clearing price of computer modems has just decreased. Which of the following could
have caused this change?
350)
A)
an increase in supply at the same time that demand decreases
B)
a decrease in supply with demand unchanged
C)
a decrease in supply at the same time that demand increases
D)
an increase in demand with supply unchanged
A
351)
In September 2005, destruction to U.S. gasoline refineries was caused by back–to–back storms
along the U.S. Gulf CoastHurricane Katrina and Hurricane Rita. In one week, the average price of
a gallon of gasoline in the United States increased by about 40 cents. Which of the following best
explains why these events pushed up the price of gasoline?
351)
A)
The supply curve for gasoline shifted to the left along the demand curve for gasoline.
B)
The supply curve for gasoline shifted to the right along the demand curve for gasoline.
C)
The demand curve for gasoline shifted to the right along the supply curve for gasoline.
D)
The demand curve for gasoline shifted to the left along the supply curve for gasoline.
A
352)
A price floor set above a market equilibrium price causes
352)
A)
a surplus.
B)
a shortage.
C)
consumers to pay lower prices.
D)
producers to receive lower prices.
A
B
353)
Why does a sports car cost more than a mountain bike?
353)
A)
because more scarce resources are required to produce a sports car than to produce a
mountain bike
B)
because sports car manufacturers are greedier than mountain bike manufacturers
C)
because mountain bike manufacturers know that their customers have relatively low incomes
D)
because sports cars are priced higher in order to make them attractive as status symbols
354)
In a market system, intermediaries in the exchange process are known as
354)
A)
free agents.
B)
producers.
C)
middlemen.
D)
consumers.
355)
An unexpected import restriction imposed on mangoes by the USDA
355)
A)
will reduce the price of mangoes in the United States.
B)
will discourage American producers of mangoes.
C)
will reduce the price of mango juice in the United States.
D)
will increase the price of mangoes in the United States.
356)
Refer to the above figure. A shortage occurs if the government imposes
356)
A)
a price ceiling at $60.
B)
a price floor at $60.
C)
a price ceiling at $20.
D)
a price floor at $20.
357)
All of the following reduce the transaction costs for consumers EXCEPT
357)
A)
the Supreme Court decisions regarding the Second Amendment.
B)
eBay.
C)
a grocery store.
D)
a shopping mall.
358)
Suppose Brad Pitt and Angelina Jolie wear matching platinum jewelry in their new movie. After
the movie is released, suppose that consumers increase their demand for the jewelry and at the
same time manufacturers increase the supply of the jewelry. As a result
358)
A)
the equilibrium price and quantity will both decrease.
B)
the equilibrium quantity will decrease, and the equilibrium price will increase.
C)
the equilibrium quantity will increase, and there is an indeterminate change in the
equilibrium price.
D)
the equilibrium quantity and price are both indeterminate.
359)
When supply and demand for a product decrease simultaneously, we
359)
A)
cannot predict equilibrium price, but know that equilibrium quantity will decrease.
B)
can predict that both equilibrium price and quantity will decrease.
C)
can predict that both equilibrium price and quantity will increase.
D)
cannot predict the change in either the equilibrium quantity or equilibrium price.
360)
An import quota is an example of
360)
A)
a queuing device.
B)
a price floor.
C)
a quantity restriction.
D)
a price ceiling.
361)
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?
361)
A)
Florists know that there are no substitutes for roses, so they take advantage of consumers on
Valentine’s Day.
B)
People buying the roses are irrational.
C)
An increase in demand pushes up the market clearing price of roses.
D)
Roses are not subject to the law of demand.
362)
A price ceiling below the market clearing price results in
I. excess quantity demand
II. excess quantity supplied
III. entry of new producers
362)
A)
I only
B)
II only
C)
III only
D)
Both I and III
363)
The price rationing mechanism of a freely functioning market leads to the most efficient use of
resources because
363)
A)
of the rise of the legislative apparatus that supports trade.
B)
all gains from mutually beneficial trade are captured.
C)
the Justice Department monitors market activities.
D)
the Federal Trade Commission regulates the market.
364)
A price floor that is set above market equilibrium will cause
364)
A)
queuing on the part of consumers.
B)
a shortage.
C)
an excess quantity demanded.
D)
a surplus.