Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1. Colleges and universities use such things as grade point averages and standardized test scores as
a.
a measure of consumer utility.
b.
non-price rationing devices.
c.
a means to shift the supply curve for a college education.
d.
solely to frustrate prospective students.
2. If the purchase and sale of a currently illegal drug (for example, marijuana) were decriminalized, economists would
expect
a.
an increase in demand and supply of this drug.
b.
an increase in demand and a decrease in supply of this drug.
c.
a decrease in demand and an increase in supply of this drug.
d.
a decrease in demand and supply of this drug.
3. If the purchase and sale of marijuana becomes legalized
a.
the equilibrium price and quantity will both rise.
b.
the equilibrium price will fall, but the change in equilibrium quantity depends upon whether the demand curve
shifts rightward more or the supply curve shifts rightward more.
c.
the equilibrium quantity will rise, but the change in equilibrium price depends upon whether the demand curve
shifts rightward more or the supply curve shifts rightward more.
d.
the equilibrium price and quantity will both fall.
4. If the government legalizes the purchase and sale of marijuana, the equilibrium quantity would then _________ and the
price would then ________ if the supply of marijuana increased by _______ than the demand for marijuana increased.
a.
fall; fall; more
b.
fall; rise; more
c.
rise; fall; more
d.
rise; fall; less
e.
fall; fall; less
5. Since most colleges and universities charge the same tuition to every student regardless of what time students choose to
take their classes,
a.
the schools must develop some type of non-price rationing device.
b.
it follows that all classes will have a shortage of seats.
c.
it follows that all classes will have a surplus of seats.
d.
it follows that some classes will likely have a shortage of seats while other classes may have a surplus of seats.
e.
a and d
6. The space on the freeway is fixed at any instant of time. A supply curve that shows this is
a.
perfectly horizontal.
b.
upward sloping.
c.
downward sloping.
d.
perfectly vertical.
7. When congestion occurs on the freeway (because of a shortage of freeway space), the economist would most likely
explain this by saying that it is because
a.
the freeway has too few miles of roadway.
b.
there are too many cars.
c.
the price of driving on the freeway is below the equilibrium price.
d.
a and c
8. If more people join carpools and travel to work together
a.
the demand curve for freeway space shifts leftward.
b.
the supply curve for freeway space shifts rightward.
c.
the supply curve for freeway space shifts leftward.
d.
a and b
e.
none of the above
9. A toll of $1 per car is imposed on a road regardless of time of day. If the toll creates equilibrium travel flows at the
busiest time of day, it will create a __________ at all other times.
a.
surplus of space
b.
shortage of space
c.
zero money price for space
d.
zero opportunity cost for space
Exhibit 5-1
10. Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. At P = $0, there is
a ________ of freeway space at 8 a.m. and ________ at 11 p.m.
a.
shortage; a surplus
b.
surplus; a shortage
c.
surplus; equilibrium
d.
shortage; equilibrium
11. Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Which toll creates
equilibrium at 8 a.m.?
a.
P2
b.
P1
c.
0
d.
It is not constant.
12. Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. A toll of P1
creates __________ at 8 a.m. and __________ at 11 p.m.
a.
a shortage; a surplus
b.
a surplus; a shortage
c.
equilibrium; a surplus
d.
a shortage; equilibrium
13. Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Which toll creates
equilibrium at 11 p.m.?
a.
P2
b.
P1
c.
0
d.
It is not constant.
14. Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. A toll of P2
creates __________ at 8 a.m. and __________ at 11 p.m.
a.
a shortage; a surplus
b.
a surplus; a shortage
c.
equilibrium; a surplus
d.
a shortage; equilibrium
15. Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Suppose that the
government decides to set the money price of driving on the freeway at zero, but builds more freeways to eliminate the
shortage of freeway space at 8 a.m. Graphically, the result of the increase in freeway space would be shown by
a.
shifting the supply of freeway space curve rightward.
b.
shifting the demand for freeway space curve leftward from D8a.m. to D11p.m.
c.
a movement up along D8a.m. to the point where D8a.m. intersects the supply curve.
d.
shifting the supply of freeway space curve leftward.
16. Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Suppose that the
government decides to set the money price of driving on the freeway at zero, but creates programs that encourage drivers
to carpool. If the carpooling program is sufficiently successful to eliminate the shortage of freeway space at 8 a.m.,
graphically the result of the increase in carpooling would be a
a.
rightward shift of the supply of freeway space curve.
b.
leftward shift of the demand for freeway space curve from D8a.m. to D11p.m.
c.
movement up along D8a.m. to the point where D8a.m. intersects the supply curve.
d.
leftward shift of the supply of freeway space curve.
17. The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The
supply of seats is fixed. If the university prices classes at the price required to achieve equilibrium at 10 a.m., there will be
a.
a shortage at 8 a.m.
b.
a surplus at 8 a.m.
c.
equilibrium at 8 a.m.
d.
disequilibrium at 8 a.m., but we cannot determine which type.
18. The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The
supply of seats is fixed. If the university can only charge a single price and wishes to maximize the total number of seats
purchased during the day, it should set the price
a.
at equilibrium for 8 a.m. classes.
b.
at equilibrium for 10 a.m. classes.
c.
midway between the two equilibria.
d.
below either 8 a.m. or 10 a.m. equilibrium price.
Exhibit 5-2
19. Refer to Exhibit 5-2. If the tuition is set at $60 there will be
a.
a shortage at 10 a.m. and a surplus at 8 a.m.
b.
a surplus at 10 a.m. and a shortage at 8 a.m.
c.
equilibrium at both 10 a.m. and 8 a.m. because the price is half-way between their individual equilibria.
d.
none of the above
20. Refer to Exhibit 5-2. If the tuition is set at $40, there will need to be some kind of non-price rationing device used for
a.
8 a.m. classes.
b.
10 a.m. classes.
c.
a and b
d.
none of the above
21. Refer to Exhibit 5-2. If the tuition is set at $70 there will be
a.
a shortage at 10 a.m. and a surplus at 8 a.m.
b.
a surplus at 10 a.m. and a shortage at 8 a.m.
c.
equilibrium at 10 a.m. and a surplus of seats at 8 a.m.
d.
equilibrium at 10 a.m. and a shortage of seats at 8 a.m.
22. Refer to Exhibit 5-2. If the tuition is set at $50 there will be
a.
a shortage at 10 a.m. and a surplus at 8 a.m.
b.
a surplus at 10 a.m. and a shortage at 8 a.m.
c.
equilibrium at 8 a.m. and a surplus of seats at 10 a.m.
d.
equilibrium at 8 a.m. and a shortage of seats at 10 a.m.
23. University A sets tuition at the equilibrium level based on price and then imposes entrance requirements in the form of
minimum high school GPA and SAT scores. Enrollment at this school will likely be
a.
at the equilibrium level.
b.
below the equilibrium level because of the use of non-price rationing devices.
c.
above the equilibrium level because of the combination of price and the use of non-price rationing devices.
d.
none of the above
24. Suppose that there are two laws proposed for eviction notices. Plan A requires landlords to give a renter 30 days to
vacate an apartment once he has been served an eviction notice. Under Plan B, he has 60 days to vacate an apartment once
he has been served an eviction notice. It follows that landlords will find
a.
Plan A more expensive than Plan B.
b.
Plan B more expensive than Plan A.
c.
both plans to be equally expensive.
d.
none of the above
25. Good weather in cities such as San Diego
a.
is absolutely free for the residents of that city.
b.
is allocated using a weather market.
c.
imposes indirect payments for the residents of that city.
d.
b and c
e.
none of the above
26. Residents of cities with a reputation for good weather, ceteris paribus,
a.
pay a higher price for housing because the demand for housing is higher.
b.
pay a higher price for housing because the supply of housing is higher.
c.
pay a higher price for housing because the supply and demand for housing is higher.
d.
pay the same for housing as they would in cities with a reputation for bad weather.
27. Which of the following statements is false?
a.
People who live in cities with good weather receive that benefit for free.
b.
People who own property in cities with good weather receive higher rents, ceteris paribus.
c.
Housing prices are higher in cities with better weather, ceteris paribus.
d.
The demand for housing is higher in cities with good weather, ceteris paribus.
28. To an economist, freeway congestion is a sign that the price to drive on the freeway is
a.
below its equilibrium level.
b.
at its equilibrium level.
c.
above its equilibrium level.
d.
either a or c
e.
none of the above
29. There is no toll charge to drive on freeway A. If there is freeway congestion at 9 a.m., there will be greater freeway
congestion at 11 a.m. if
a.
the demand to drive on the freeway is the same at both times.
b.
the demand to drive on the freeway at 11 a.m. is greater than the demand to drive on the freeway at 9 a.m.
c.
the demand to drive on the freeway at 9 a.m. is greater than the demand to drive on the freeway at 11 a.m.
d.
more people carpool at 11 a.m. than at 9 a.m.
e.
none of the above.
30. If there is freeway congestion at 8 a.m., we can reduce (or eliminate) the congestion by
a.
building more freeways.
b.
raising the price to drive on the freeway at 8 a.m.
c.
encouraging workers to carpool..
d.
a and b
e.
a, b, and c
31. The supply of seats for an economics class at 10 a.m. is the same as the supply of seats for the same class at noon.
Every student who wants to attend this class at noon can, but not every student who wants to attend the 10 a.m. class can.
Tuition does not vary by time. It follows that the demand for the 10 a.m. class is __________ the demand for the noon
class.
a.
lower than
b.
the same as
c.
greater than
d.
either a or b
e.
none of the above
32. The demand to attend a certain college is represented by a downward-sloping demand curve. The supply of spots at
the college is represented by a vertical supply curve. At the tuition that students are charged, there is a shortage of spots at
the college. If the demand to attend the college rises, but the tuition stays constant, it follows that the
a.
GPA required to attend the college will probably rise.
b.
GPA required to attend the college will probably fall.
c.
SAT score required to attend the college will probably not change.
d.
a and c
e.
There is not enough information to answer this question.
33. At college X and at college Y, students pay $3,000 less than the equilibrium tuition. If the supply of openings is the
same at both colleges, it follows that a shortage of openings will be greater at
a.
college X than college Y.
b.
college X than the surplus at college Y.
c.
college Y than the surplus at college X.
d.
college X than college Y if the demand is greater at college X.
e.
college X than college Y if the demand is less at college X.
Exhibit 5-3
34. Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. Suppose that NCAA rules limit the
amount that the college can pay this athlete, such that their payment can not exceed the cost of attending the college
(currently, $8,000). What is the consumers’ surplus for the college (with respect to this one athlete)?
a.
area 1
b.
area 2
c.
area 1 + 2 + 3
d.
area 1 + 2
35. Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. If the college is allowed to pay this
student athlete its market equilibrium wage of $10,000, what is the consumers’ surplus for the college that buys this one
athlete’s services at this wage?
a.
area 1
b.
area 2
c.
area 3
d.
area 1 + 2
36. Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. Suppose that NCAA rules limit the
amount that the college can pay this athlete, such that their payment can not exceed the cost of attending the college
(currently $8,000). The impact of this ruling would be a loss of income to the athlete of __________ and an equal gain in
consumers’ surplus to the college represented by ________________.
a.
$2,000; area 2
b.
$8,000; area 3
c.
$10,000; area 2 + 3
d.
$2,000; area 1 + 2
37. If the government legalizes the purchase and sale of marijuana, the equilibrium quantity would _________ and the
price would ________ if the supply of marijuana increased by _______ than the demand for marijuana increased as a
result of the legalization.
a.
rise; rise; more
b.
fall; rise; more
c.
rise; fall; more
d.
rise; rise; less
e.
none of the above
38. If patients were allowed to sue their HMO, we would expect
a.
the demand curve for health care services provided by the HMO to shift to the left and the price of HMO-
provided health care coverage to fall.
b.
the supply curve for health care services provided by the HMO to shift to the left and the price of HMO-
provided health care coverage to rise.
c.
the supply curve for health care services provided by the HMO to shift to the right and the price of HMO-
provided health care coverage to fall.
d.
a and b
e.
none of the above
39. Suppose that television show A is much more popular than television show B. The equilibrium price for a ticket to
view the taping of show A is $40 and the equilibrium price for a ticket to view the taping of show B is -$30. If free tickets
are offered for the taping of both shows, it is likely that
a.
there will be a shortage of tickets for show A and a surplus of tickets for show B.
b.
there will be a surplus of tickets for show A and a shortage of tickets for show B.
c.
there will be a surplus of tickets for both shows.
d.
there will be a shortage of tickets for both shows.
40. If the supply of aisle seats equals the supply of middle seats on an airplane, and the demand for aisle seats is
_____________ than the demand for middle seats, then the equilibrium price of aisle seats will be ______________ the
equilibrium price of middle seats.
a.
greater; higher than
b.
less; higher than
c.
greater; lower than
d.
less; the same as
41. When the government _____________ mortgage lending standards, the indirect result is likely to be _____________
home prices.
a.
lowers; higher
b.
increases; lower
c.
lowers; lower
d.
increases; higher
e.
a and b
