Question 1

A black market

Accepted Answer

A)  can arise when government imposes a price ceiling below the market clearing price.
B)  can arise when government imposes a price floor below the market clearing price.
C)  was created when after hours trading was permitted on some stock exchanges.
D)  is a market where products with outdated expiration dates are sold.

Question 2

Suppose the price of cheese rises. In the market for pizza, one would expect that

Accepted Answer

A)  the supply of pizza would increase, and the price would fall.
B)  the demand for pizza would increase, and the price would increase.
C)  the demand for pizza would decrease, and price would fall.
D)  the supply of pizza would decrease, and price would rise.

Question 3

In situations in which prices cannot be used to signal relative scarcities of goods, which of the following can serve as a rationing mechanism?

Accepted Answer

A)  queuing
B)  political power
C)  random assignment
D)  all of the above

Question 4

-Assume that the initial demand and supply curves in the above figure are DA and SA, respectively. The initial equilibrium price and quantity are

Accepted Answer

A)  P₁ and E.
B)  P₃ and F.
C)  P₁ and G.
D)  P₂ and F.

Question 5

Markets tend to

Accepted Answer

A)  exist primarily in towns or cities.
B)  increase transaction costs.
C)  reduce transaction costs.
D)  make exchange more difficult.

Question 6

If demand decreases and supply increases

Accepted Answer

A)  the market clearing price will decrease, and the equilibrium quantity will increase.
B)  the market clearing price will decrease, and equilibrium quantity will decrease.
C)  the equilibrium quantity will decrease, but the change in the market clearing price cannot be determined without more information.
D)  the equilibrium price will decrease, but the change in the equilibrium quantity cannot be determined without more information.

Question 7

Other things being equal, suppose that the demand for wheat in constant quality units increases. The increase in demand will cause

Accepted Answer

A)  a surplus of wheat.
B)  a higher equilibrium price and higher equilibrium quantity of wheat.
C)  fall in the market clearing price of corn, a substitute for wheat.
D)  a higher equilibrium quantity, but a lower equilibrium price of wheat.

Question 8

A price floor represents

Accepted Answer

A)  a maximum price that can be legally charged for a product or service.
B)  a minimum price that can be legally charged for a good or service.
C)  a lottery imposed upon producers by the government.
D)  a first come, first served mechanism for controlling prices.

Question 9

Suppose that there is an improvement in technology in the market for iPhones. Which of the following is TRUE?

Accepted Answer

A)  Supply will increase and the market clearing price will fall.
B)  Supply will increase and the market clearing price will rise.
C)  Demand will increase and the market clearing price will rise.
D)  Demand will increase and the market clearing price will fall.

Question 10

A maximum legal price that may be charged for a particular good or service is known as a

Accepted Answer

A)  price floor.
B)  price ceiling.
C)  black market.
D)  price support.

Question 11

After an increase in the demand for construction workers, the market will attain its new long-run equilibrium faster if

Accepted Answer

A)  wages are flexible.
B)  wages are inflexible, forcing new people to enter the market.
C)  unions restrict the number of new construction workers.
D)  people ignore the shortage in the short run.

Question 12

The price of labor in the agricultural industry has just increased. For agricultural products, this will lead to

Accepted Answer

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.

Question 13

A price ceiling established below the market clearing price will usually cause

Accepted Answer

A)  nonprice rationing.
B)  an excess supply.
C)  no change in the market clearing price.
D)  a decrease in the market clearing price.

Question 14

What are transaction costs?
 What are some ways in which society reduces transaction costs?

Accepted Answer

Transaction costs are costs associated w...

Question 15

-Refer to the above figure. A price control has been set which has led to a surplus. This means that a

Accepted Answer

A)  price ceiling has been set at P₁.
B)  price floor has been set at P₁.
C)  price ceiling has been set at P₂.
D)  price floor has been set at P₂.

Question 16

In a city that has rent control for apartments, there is

Accepted Answer

A)  less turnover of apartments.
B)  a surplus of apartments available to rent.
C)  a shortage of renters in the city.
D)  neither a surplus nor a shortage of apartments.

Question 17

Rationing goods on the basis of price is a direct result of

Accepted Answer

A)  scarcity.
B)  queuing.
C)  government intervention.
D)  the profit motive.

Question 18

A severe drought has devastated cocoa plants, causing an increase in the price of chocolate. In the market for chocolate chip cookies

Accepted Answer

A)  a surplus will arise.
B)  supply has decreased and price has increased.
C)  quantity has decreased and price has decreased.
D)  quantity demanded has increased.

Question 19

In which decade did the U.S. federal government first establish a system of agricultural price supports?

Accepted Answer

A)  1990s
B)  1970s
C)  1950s
D)  1930s

Question 20

Rationing through the price system

Accepted Answer

A)  leads to an inefficient use of available resources.
B)  leads to high prices.
C)  works only with government interference.
D)  leads to an efficient use of available resources.

Exam 4: Extensions of Demand and Supply Analysis

In which decade did the U.S. federal government first establish a system of agricultural price supports?

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A black market

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-Refer to the above figure. A price control has been set which has led to a surplus. This means that a

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Markets tend to

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After an increase in the demand for construction workers, the market will attain its new long-run equilibrium faster if

Correct AnswerverifiedShow Answer

What are transaction costs? What are some ways in which society reduces transaction costs?

Correct AnswerverifiedTransaction costs are costs associated w...View AnswerShow Answer

The price of labor in the agricultural industry has just increased. For agricultural products, this will lead to

Correct AnswerverifiedShow Answer

Rationing through the price system

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Suppose that there is an improvement in technology in the market for iPhones. Which of the following is TRUE?

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In situations in which prices cannot be used to signal relative scarcities of goods, which of the following can serve as a rationing mechanism?

Correct AnswerverifiedShow Answer

-Assume that the initial demand and supply curves in the above figure are DA and SA, respectively. The initial equilibrium price and quantity are

Correct AnswerverifiedShow Answer

A price floor represents

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Rationing goods on the basis of price is a direct result of

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A price ceiling established below the market clearing price will usually cause

Correct AnswerverifiedShow Answer

In a city that has rent control for apartments, there is

Correct AnswerverifiedShow Answer

A severe drought has devastated cocoa plants, causing an increase in the price of chocolate. In the market for chocolate chip cookies

Correct AnswerverifiedShow Answer

Other things being equal, suppose that the demand for wheat in constant quality units increases. The increase in demand will cause

Correct AnswerverifiedShow Answer

Suppose the price of cheese rises. In the market for pizza, one would expect that

Correct AnswerverifiedShow Answer

A maximum legal price that may be charged for a particular good or service is known as a

Correct AnswerverifiedShow Answer

If demand decreases and supply increases

Correct AnswerverifiedShow Answer

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Transaction costs are costs associated w...
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