47. What events most likely explain the following Wall Street Journal headline, “Cities Couldn’t
Give Away Their Trash; Now They Get Top Dollar?”
A. Quantity supplied initially exceeded quantity demanded, but a subsequent increase in the
demand for trash not only eliminated the surplus, but led to a rise in the price of trash.
B. Supply initially exceeded demand, but a subsequent increase in the quantity of trash
demanded not only eliminated the surplus, but led to a rise in the price of trash.
C. Quantity supplied initially exceeded quantity demanded, but a subsequent increase in the
supply of trash not only eliminated the surplus, but led to a rise in the price of trash.
D. Supply initially exceeded demand, but a subsequent increase in the quantity of trash supplied
not only eliminated the surplus, but led to a rise in the price of trash.
48. When people heard that there was a shortage of Furby dolls, they wanted even more of them.
Because of this effect the pressure on the price of these dolls increased. The price of the dolls
remained the same however. Thus, the shortage of these dolls:
A. increased.
B. decreased.
C. did not change.
D. may have increased or decreased.
49. An effective price ceiling is best defined as a price:
A. imposed by government below equilibrium price.
B. imposed by government above equilibrium price.
C. higher than any consumer is willing to pay.
D. lower than any supplier is willing to sell.
50. Price ceilings and price floors:
A. cause surpluses and shortages in markets respectively.
B. interfere with the allocation function of prices.
C. make the rationing function of markets more efficient.
D. cause demand and supply curves to shift thus having no effect on the rationing function of
prices.
51. To keep the price of gas from rising quickly after Katrina, the government instituted price
ceilings on the price of gasoline in some states. These price ceilings caused ______ in the
gasoline market.
A. surpluses
B. movement of the demand curve
C. movement along the demand curve
D. shortages
52. Some years ago, Stuyvesant Town and Peter Cooper Village in Manhattan were sold for
redevelopment. These villages had been rent controlled, but now that these neighborhoods are no
longer rent controlled, one would expect:
A. the houses to be not as well maintained since rent will be so high.
B. the housing shortage in the neighborhood to worsen.
C. the rent to rise in those neighborhoods.
D. the quantity of rentals demanded to rise.
53. An increase in the Federal minimum wage, assuming the minimum is higher than
equilibrium wage and that all other things remain constant, will:
A. reduce the number of unemployed.
B. increase the number of unemployed.
C. shift the supply of labor to the right.
D. shift the demand of labor to the right.
54. A number of states have a minimum wage that is higher than the federal minimum. In those
states that impose such a minimum wage, it is more likely that the minimum wage acts as a
binding:
A. price floor, causing excess supply in the market.
B. price floor, causing excess demand in the market.
C. price ceiling, causing excess supply in the market.
D. price ceiling, causing excess demand in the market.
55. Refer to the following graph.
A price ceiling would be binding, resulting in a market shortage if it is set at:
A. $3.00.
B. $2.25.
C. $1.50.
D. either $3.00 or $1.50.
56. Suppose the equilibrium price of oranges is $0.79 an orange, but government takes steps to
prevent the price from exceeding $0.60 an orange. The likely result will be a:
A. lower equilibrium price for oranges as the supply curve for oranges shifts to the right.
B. higher equilibrium price for oranges as the demand curve for oranges shifts to the right.
C. shortage of oranges as the price ceiling keeps the market from reaching equilibrium.
D. surplus of oranges as the price ceiling keeps the market from reaching equilibrium.
57. When an effective price ceiling is removed, we would expect the price of the good to:
A. increase and the quantity demanded to decrease.
B. increase and the quantity demanded to increase.
C. decrease and the quantity demanded to decrease.
D. decrease and the quantity demanded to increase.
58. When the polio vaccine first became available in the United States, the government
controlled the price with an effective price ceiling. Production of the vaccine was not sufficient
to fill all orders and the government had to regulate its distribution. Had the vaccine been sold
without government intervention, the shortage would have been eliminated by price:
A. falling, quantity demanded decreasing, and supply increasing.
B. falling, demand decreasing, and supply increasing.
C. rising, demand decreasing, and quantity supplied increasing.
D. rising, quantity demanded decreasing, and quantity supplied increasing.
59. Refer to the following graph.
If the price is set at Pc:
A. a non-price rationing mechanism must determine which producers will be able to sell the
product.
B. a non-price rationing mechanism must determine which buyers will be able to purchase the
product.
C. anyone willing and able to pay the asking price will be able to purchase the product.
D. the demand curve will shift to the left to achieve a new equilibrium.
60. Refer to the following graph.
Which price will create the greatest shortage?
A. P0
B. P1
C. P2
D. P3
61. The most likely impact of an effective price floor is:
A. the supply curve will shift to the right.
B. the demand curve will shift to the left.
C. a surplus will develop.
D. a shortage will develop.
62. A surplus of a good could possibly be eliminated by:
A. the removal of a price floor.
B. the removal of a price ceiling.
C. a sufficient decrease in demand keeping price constant.
D. a sufficient increase in supply keeping price constant.
63. Which price ceiling will cause the greatest excess demand?
A. $1
B. $2
C. $3
D. $4
64. Refer to the following graph.
A government-imposed price floor of $2 will result in:
A. neither excess supply nor excess demand since it is binding.
B. neither excess supply nor excess demand since it is not binding.
C. an excess demand of 2.
D. an excess supply of 2.
65. Suppose a price floor is imposed on eggs above their equilibrium price. The likely result will
be:
A. a lower equilibrium price for eggs as the demand curve for eggs shifts left.
B. a higher equilibrium price for eggs as the supply curve for eggs shifts left.
C. a decrease in the quantity of eggs demanded.
D. an increase in the quantity of eggs demanded.
66. Refer to the following graph.
Suppose this graph represents the market for cheese. In order to keep the price of cheese at Pf,
government must:
A. devise a mechanism to ration cheese to consumers.
B. cause the supply of cheese to increase.
C. cause the demand for cheese to decrease.
D. prevent the excess supply from reaching the market.
67. New York City has been experiencing a housing emergency for quite some time.
Apartments are difficult to come by. In fact, the vacancy rate has been below 5 percent since
World War II. The most likely cause of the housing emergency is:
A. a price floor on rent higher than equilibrium price.
B. a price ceiling on rent lower than equilibrium price.
C. too high incomes in New York City.
D. a lack of a rationing mechanism to distribute existing apartments.
68. Rent control makes apartments:
A. hard to find.
B. easy to find.
C. less desirable.
D. be in excess demand.
69. The invention of a machine that increases milk production is discovered. If farmers were to
decry the effect of this new technology on the price of milk and lobby government to set the
price of milk at the price before the invention, what would be the result?
A. Excess demand for milk
B. Excess supply of milk
C. Neither a shortage nor a surplus of milk
D. A decline in the price of milk
70. Refer to the following graph.
In New York City, the rent on many apartments is set below market rates. As a result, many
people find that the only way to obtain an apartment is to make illegal payments to landlords. If
Pc is the controlled rent, a best estimate of such “key” money is shown as:
A. Pf.
B. Pe.
C. Pe minus Pc.
D. Pf minus Pc.
71. Refer to the graph shown. Without government intervention, market forces would result in:
A. 800 labor hours demanded, 800 labor hours supplied, and a wage rate of $6.50 per hour.
B. 500 labor hours demanded, 900 labor hours supplied, and a wage rate of $7.25 per hour.
C. 1,200 labor hours demanded, 500 labor hours supplied, and a wage rate of $4.50 per hour.
D. 500 labor hours demanded, 500 labor hours supplied, and a wage rate of $7.25 per hour.
72. Refer to the graph shown. Which of the following wage rates would be an effective price
floor?
A. $3.50
B. $4.50
C. $6.50
D. $7.25
73. Refer to the graph shown. If government establishes a minimum wage at $7.25 per hour:
A. employers will be unable to find enough qualified applicants to fill the available positions.
B. the number of job seekers will exceed the number of job vacancies, resulting in some
unemployment.
C. employers will be forced to hire 900 workers, resulting in reduced profits.
D. there will be a shortage in this labor market.
74. Refer to the graph shown. If government establishes a price floor of $7.25 per hour, there
will be a:
A. shortage of 400 labor hours.
B. surplus of 400 labor hours.
C. shortage of 300 labor hours.
D. surplus of 300 labor hours.
75. Which of the following is the best example of an excise tax?
A. A tax on all capital gains (the amount by which the value of an asset has risen between the
time it was purchased and the time it was sold)
B. A tax paid by employers on income paid to workers
C. A tax collected on each gallon of gasoline sold
D. A tax that is levied on the value of land and buildings
76. If the government imposes an excise tax on cars equal to $5,000 per automobile, the supply
of automobiles will shift to the:
A. left and the price of automobiles will increase by $5,000.
B. left and the price of automobiles will increase by an unknown amount.
C. right and the price of automobiles will decrease by $5,000.
D. right and the price of automobiles will decrease by an unknown amount.
77. If the government imposes an excise tax on a good equal to $5 per unit and the demand
curve for this good is vertical, the supply of this good will shift:
A. upward and the price will increase by $5.
B. upward and the price will increase by less than $5.
C. downward and the price will decrease by $5.
D. downward and the price will decrease by less than $5.
78. If the government imposes an excise tax on gasoline equal to $0.25 per gallon and the
demand curve for gasoline is downward-sloping, the supply of gasoline will:
A. shift upward and the price will increase by $0.25 per gallon.
B. shift upward and the price will increase by less than $0.25 per gallon.
C. shift downward and the price will decrease by $0.25 per gallon.
D. shift downward and the price will decrease by less than $0.25 per gallon.
79. A tariff is:
A. a tax that government places on imported goods.
B. a quantity limitation placed on imports
C. an all-out restriction on imports.
D. a government-imposed procedural rule limiting imports.
80. When a country imposes a tariff:
A. the domestic price of the imported good falls.
B. domestic consumption of the imported good falls.
C. domestic production of the good falls.
D. domestic production of the good is unchanged.
81. Tariffs can be thought of as indirect:
A. special taxes on domestic producers.
B. subsidies to domestic producers.
C. subsidies to foreign producers.
D. subsidies to domestic consumers.
82. Refer to the following graph.
Demand and supply are initially D and S1 respectively. Which of the following best describes
the effect of a $0.50 per pound tariff on Danish hams imported into the United States?
A. Supply shifts from S1 to S2; quantity sold rises to 100 thousand pounds and price paid by
consumers declines to $1.75 a pound
B. Neither supply nor demand shift, but price paid by consumers declines to $1.50 a pound
while quantity sold remains at 80 thousand pounds
C. Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by
consumers rises to $2.50 a pound
D. Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by
consumers rises to $2.25 a pound
83. Refer to the graph shown. Given supply, S0, and demand, D, what tariff would the
government have to impose on lumber imported from Canada to reduce imports to 600 tons?
A. $2 a ton
B. $7 a ton
C. $13 a ton
D. $6 a ton
84. Refer to the graph shown. With a tariff on lumber imported from Canada of $6 per ton, the
revenue the government would collect from the import of lumber would be:
A. $0.
B. $3,600.
C. $4,200.
D. $4,800.
85. If the United States imposes tariffs on steel imports:
A. the demand for steel shifts to the left and lowers its market price.
B. the supply of steel shifts to the right and lowers its market price.
C. the supply of the imported steel shifts to the left and raises its market price.
D. the demand for steel shifts to the left and raises its market price.
86. Refer to the following graph.
With a tariff of $10 a blouse on imported silk blouses from China, the revenue the government
would collect from the import of silk blouses from China would be:
A. $0.
B. $2,800.
C. $7,000.
D. $20,000.
87. Refer to the following graph.
Suppose the graph depicted market demand for British cars sold in the United States. A tariff of
$1,000 a car would result in tax revenue of:
A. $10 million.
B. less than $10 million.
C. greater than $10 million.