365)
Prices in a market economy perform a rationing function because they reflect
365)
A)
the strength of the supply curve.
B)
the extent to which the goods are necessities.
C)
the relative scarcity of the goods.
D)
the demand of all buyers in the market.
366)
Price floors in agriculture lead to
366)
A)
more competition in farming.
B)
efficient farming techniques being employed.
C)
surpluses of supported farm products.
D)
the most efficient market solution.
C
367)
The supply of eggs comes from chickens. The price of eggs will decrease if
367)
A)
B)
C)
D)
D
368)
A price ceiling established below the market clearing price will usually cause
368)
A)
B)
C)
D)
A
369)
An import quota is
369)
A)
a price floor.
B)
a quantity restriction.
C)
a price ceiling.
D)
something imposed on agricultural goods grown by American farmers.
B
C
370)
Government intervention in agriculture usually involves
370)
A)
price supports in order to keep agricultural imports low.
B)
price ceilings in order to subsidize U.S. exports.
C)
price ceilings in order to keep food prices low.
D)
price supports in order to keep farm incomes high.
371)
We cannot predict the effect on the equilibrium quantity, but know that the market clearing price
will decrease when
371)
A)
supply increases and at the same time demand decreases.
B)
supply increases and demand increases.
C)
supply decreases and demand decreases.
D)
supply decreases and at the same time demand increases.
372)
Suppose that 20,000 tickets were sold at $120 for an NBA game at Madison Square Garden in New
York. The game was sold out and some fans could not get tickets. This suggests that
372)
A)
the game was advertised too heavily.
B)
selling price was above equilibrium price.
C)
selling price was below equilibrium price.
D)
selling price was at equilibrium.
373)
Refer to the above figure for the corn market. The government wants to set an effective price
support in the corn market. To be effective the price should be set
373)
A)
at P1.
B)
at P3.
C)
below P1.
D)
at P2.
374)
Voluntary exchange
374)
A)
will eliminate scarcity.
B)
never involves transactions costs.
C)
is a nonprice rationing device.
D)
is trading so that the consumer and producers are better off.
Explanation:
375)
Other things being equal, a higher price induces
375)
A)
buyers to increase the amount they want to buy and sellers to reduce the amount they are
willing to sell.
B)
buyers to reduce the amount they want to buy and sellers to reduce the amount they are
willing to sell.
C)
buyers to reduce the amount they want to buy and sellers to increase the amount they are
willing to sell.
D)
buyers to increase the amount they want to buy and sellers to increase the amount they are
willing to sell.
Explanation:
Explanation:
376)
An increase in supply causes
376)
A)
B)
C)
D)
377)
The rationing function of prices means that
377)
A)
government is responsible for setting the prices of basic foods.
B)
all goods and services are produced by large firms.
C)
buyers and sellers synchronize their decisions through the price system.
D)
businesses determine what goods consumers should purchase.
378)
The difference between the total amount that people would have been willing to pay for the total
quantity produced and consumed in a market and what they actually pay at the market clearing
price is called
378)
A)
B)
C)
D)
379)
The adverse effects of rent controls include
379)
A)
excessive construction of new rental housing.
B)
keeping rental rates too high in a normal market.
C)
reduced incentive to construct new rental housing.
D)
increased incentives for people to purchase their own homes.
380)
The price of a good always changes when
380)
A)
quantity demanded and quantity supplied are constant.
B)
there is an increase in demand and an increase in supply.
C)
there is a decrease in demand and a decrease in supply.
D)
either a shortage or a surplus occurs.
381)
The price system has
381)
A)
B)
C)
D)
A
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
382)
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?
383)
What are the effects of an increase in the minimum wage? Who would be most affected?
384)
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.
385)
Explain how agricultural price supports work and what the effects of the supports are.
D
386)
The U.S. government imposes import quotas on many agricultural products, especially products that receive
price supports. Offer an economic explanation for this.
387)
Who gains and who loses from rent controls?
388)
Suppose that the market for coffee is in equilibrium at a price of $9.50 per pound and a monthly quantity of 20
million pounds. News of a drought 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.
389)
What are transaction costs? What are some ways in which society reduces transaction costs?
390)
“Scarcity implies that some way of rationing goods must be found.” Explain what this statement means. How is
this rationing done?
391)
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.
392)
Would it take longer for a labor market to move to a new equilibrium for house painters or architects? Why?
393)
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.
394)
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?
395)
What are the terms of exchange and how are these terms related to the price?
396)
Suppose that the current equilibrium price of gasoline is $3.50 per gallon and that the government passes a law
that requires the price to be no more than $3 per gallon. What will be the effects?
397)
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.
398)
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?
Answer Key
Testname: C4
Answer Key
Testname: C4
109
Answer Key
Testname: C4
Answer Key
Testname: C4
Answer Key
Testname: C4
Answer Key
Testname: C4
115
Answer Key
Testname: C4
116
Answer Key
Testname: C4
117