Question 1

An increase in the minimum wage will tend to cause which of the following to occur?

Accepted Answer

A)  an increase in the size of the surplus of labor
B)  a leftward shift in the demand for labor
C)  a rightward shift in the supply of labor
D)  a reduction in the unemployment rateE) A) and D)
F) None of the above

Question 2

Which of the following is NOT a function of rental prices?

Accepted Answer

A)  to stimulate the construction of new housing
B)  to ration the existing housing stock
C)  to provide housing to individuals below market value
D)  to allocate existing scarce housing among different peopleE) A) and D)
F) B) and C)

Question 3

Goods X and Y are complementary goods. A decrease in price of good X has occurred. In the market for good Y, 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.E) A) and B)
F) B) and D)

Question 4

The gains from trade within a price system is

Accepted Answer

A)  the sum of consumer surplus and producer surplus.
B)  consumer surplus less producer surplus.
C)  consumer surplus divided by producer surplus.
D)  consumer surplus multiplied by producer surplus.E) A) and C)
F) A) and B)

Question 5

Which of the following is an effect of a minimum wage law that establishes a ceiling wage below the current market clearing wage?

Accepted Answer

A)  Surplus labor, or unemployment
B)  A decrease in the market clearing wage
C)  A decrease in the quantity of labor supplied
D)  An increase in the quantity of labor suppliedE) None of the above
F) All of the above

Question 6

When the government sets a maximum price that can be charged for a good or service, it creates

Accepted Answer

A)  a price support.
B)  a price floor.
C)  a white market.
D)  a price ceiling.E) B) and C)
F) A) and D)

Question 7

People consume more fresh fruit in the summer than during the rest of the year, yet the prices of fresh fruit are lower in the summer than in other seasons. What accounts for this?

Accepted Answer

A)  Fresh fruit is not subject to the law of supply.
B)  The supply of fresh fruit increases in the summer.
C)  Fresh fruit is an inferior good.
D)  Fresh fruit is not subject to the law of demand.E) None of the above
F) All of the above

Question 8

Total producer surplus in a market is measured as the

Accepted Answer

A)  area bounded above the market clearing price and beneath the market demand curve.
B)  area bounded below the market clearing price and above the market supply curve.
C)  vertical distance from the horizontal (quantity) axis to the market clearing price.
D)  horizontal distance from the vertical (price) axis to the equilibrium quantity.E) None of the above
F) B) and C)

Question 9

When supply and demand for a product increase simultaneously, we

Accepted Answer

A)  can predict that both the market clearing price and the equilibrium quantity will increase.
B)  can predict that both the market clearing price and the equilibrium quantity will decrease.
C)  cannot predict the market clearing price, but know that the equilibrium quantity will increase.
D)  cannot predict the change in either the equilibrium quantity or the market clearing price.E) All of the above
F) B) and D)

Question 10

According to the text, during World War II rationing was conducted in the U.S. through the use of

Accepted Answer

A)  queuing.
B)  lotteries.
C)  coupons.
D)  sharing.E) A) and D)
F) A) and B)

Question 11

The adverse effects of rent controls include

Accepted Answer

A)  keeping rental rates too high in a normal market.
B)  excessive construction of new rental housing.
C)  reduced incentive to construct new rental housing.
D)  increased incentives for people to purchase their own homes.E) All of the above
F) C) and D)

Question 12

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 ________.

Accepted Answer

A)  will fall, cannot be predicted
B)  will rise, cannot be predicted
C)  cannot be predicted, will fall
D)  cannot be predicted, will riseE) All of the above
F) B) and D)

Question 13

Which of the following is NOT a voluntary exchange?

Accepted Answer

A)  Tom's car is stolen from in front of his house.
B)  Marie buys groceries.
C)  Scott pays $10,000 for tuition and fees this semester.
D)  Emily buys a $1,000 plane ticket to fly from New York to Dallas on short notice.E) A) and D)
F) None of the above

Question 14

If both the demand for and the supply of computers are increasing, which of the following statements is TRUE?

Accepted Answer

A)  The consumer should buy a computer now since the price will be higher in the future.
B)  The consumer should wait and buy a computer later since the price will be lower in the future.
C)  The price of a computer will be the same in the future as it is now.
D)  It is impossible to know, given only this information, whether the prices of computers will go up or down in the future.E) A) and B)
F) A) and C)

Question 15

Government policies such as price controls, rent controls, and quantity restrictions have the effect of

Accepted Answer

A)  promoting the attainment of an unhindered market equilibrium.
B)  allowing quantity demanded to adjust to equality with aggregate supply.
C)  creating excess quantities demanded or excess quantities supplied.
D)  pushing prices to market clearing levels more rapidly than private market forces.E) B) and C)
F) A) and D)

Question 16

Price floors are designed to

Accepted Answer

A)  establish a minimum allowable price.
B)  allow free market prices to be achieved.
C)  create shortages where none existed before.
D)  none of the above.E) A) and B)
F) A) and C)

Question 17

Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of the following to occur?

Accepted Answer

A)  The shortage in the market will decrease.
B)  The shortage in the market will increase.
C)  The surplus in the market will decrease.
D)  The surplus in the market will increase.E) B) and C)
F) All of the above

Question 18

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?

Accepted Answer

A)  An increase in demand pushes up the market clearing price of roses.
B)  People buying the roses are irrational.
C)  Roses are not subject to the law of demand.
D)  Florists know that there are no substitutes for roses, so they take advantage of consumers on Valentine's Day.E) A) and B)
F) All of the above

Question 19

A price ceiling set below the market clearing price will tend to cause which of the following?

Accepted Answer

A)  a surplus
B)  a shortage
C)  an increase in demand
D)  a reduction in supplyE) C) and D)
F) A) and C)

Question 20

A supply restriction on imported goods, such as the government's restriction of imported oil for many years, is referred to as

Accepted Answer

A)  an export quota.
B)  an import quota.
C)  a price floor.
D)  a price ceiling.E) C) and D)
F) B) and D)

Exam 4: Extensions of Demand and Supply Analysis

A price ceiling set below the market clearing price will tend to cause which of the following?

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Which of the following is an effect of a minimum wage law that establishes a ceiling wage below the current market clearing wage?

Correct AnswerverifiedShow Answer

The gains from trade within a price system is

Correct AnswerverifiedShow Answer

Total producer surplus in a market is measured as the

Correct AnswerverifiedShow Answer

According to the text, during World War II rationing was conducted in the U.S. through the use of

Correct AnswerverifiedShow Answer

When supply and demand for a product increase simultaneously, we

Correct AnswerverifiedShow Answer

Which of the following is NOT a function of rental prices?

Correct AnswerverifiedShow Answer

Price floors are designed to

Correct AnswerverifiedShow Answer

Which of the following is NOT a voluntary exchange?

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Goods X and Y are complementary goods. A decrease in price of good X has occurred. In the market for good Y, this will lead to

Correct AnswerverifiedShow Answer

An increase in the minimum wage will tend to cause which of the following to occur?

Correct AnswerverifiedShow Answer

A supply restriction on imported goods, such as the government's restriction of imported oil for many years, is referred to as

Correct AnswerverifiedShow Answer

People consume more fresh fruit in the summer than during the rest of the year, yet the prices of fresh fruit are lower in the summer than in other seasons. What accounts for this?

Correct AnswerverifiedShow Answer

The adverse effects of rent controls include

Correct AnswerverifiedShow Answer

If both the demand for and the supply of computers are increasing, which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

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 ________.

Correct AnswerverifiedShow Answer

Government policies such as price controls, rent controls, and quantity restrictions have the effect of

Correct AnswerverifiedShow Answer

Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of the following to occur?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

When the government sets a maximum price that can be charged for a good or service, it creates

Correct AnswerverifiedShow Answer

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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 .

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