Question 1

When a government imposes price controls, the result is that

Accepted Answer

A)  the rationing function of prices is not allowed to function freely.
B)  the price system operates more efficiently.
C)  all trades are as mutually beneficial to each party as possible.
D)  scarcity usually disappears.E) A) and B)
F) A) and C)

Question 2

If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve?

Accepted Answer

A)  Supply increased.
B)  Demand decreased.
C)  Demand increased.
D)  Supply decreased.E) A) and D)
F) A) and B)

Question 3

Suppose new research shows that soy milk and other products derived from soybeans provide more health benefits than previously thought. At the same time, drought conditions result in extensive damage to the soybean crop. What will be the combined impact of these two factors on the equilibrium price and quantity of soybeans?

Accepted Answer

A)  Price will decrease, but the effect on quantity is indeterminate.
B)  Price will increase, but the effect on quantity is indeterminate.
C)  Quantity will decrease, but the effect on price is indeterminate.
D)  Quantity will increase, but the effect on price is indeterminate.E) A) and B)
F) A) and C)

Question 4

If a price floor is set below the current market clearing price, then

Accepted Answer

A)  a surplus must immediately occur.
B)  a shortage must immediately occur.
C)  there will be incentives for black markets to develop.
D)  quantity demanded will remain equal to quantity supplied at the current market clearing price.E) A) and B)
F) B) and C)

Question 5

What would happen in the market for rental housing in your community if the local government legally mandated rents that were below the market clearing price?

Accepted Answer

A)  There would be a surplus of rental housing.
B)  There would be a shortage of rental housing.
C)  The demand for rental housing would increase.
D)  The supply of rental housing would decrease.E) C) and D)
F) A) and B)

Question 6

A price floor set above a market equilibrium price causes

Accepted Answer

A)  a surplus.
B)  a shortage.
C)  producers to receive lower prices.
D)  consumers to pay lower prices.E) None of the above
F) A) and D)

Question 7

If one day it was discovered that lime juice caused cancer, which of the following would likely result?

Accepted Answer

A)  The supply curve for lime juice would shift to the right.
B)  The supply curve for lime juice would shift to the left.
C)  The demand curve for lime juice would shift to the right.
D)  The demand curve for lime juice would shift to the left.E) A) and B)
F) C) and D)

Question 8

Price ceilings often generate

Accepted Answer

A)  market clearing prices.
B)  rapid increases in supply to meet the excess demand.
C)  equilibriums that utilize rationing by price.
D)  black markets.E) All of the above
F) B) and C)

Question 9

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

Accepted Answer

A)  selling price was below equilibrium price.
B)  selling price was above equilibrium price.
C)  selling price was at equilibrium.
D)  the game was advertised too heavily.E) C) and D)
F) A) and B)

Question 10

When the government establishes a minimum price for an agricultural product above the equilibrium price, the government is creating a(n)

Accepted Answer

A)  price ceiling.
B)  elevated price.
C)  price floor.
D)  surplus price.E) A) and C)
F) B) and C)

Question 11

-Refer to the above figure. A price ceiling of $20 results in

Accepted Answer

A)  a shortage of 100 units.
B)  a shortage of 200 units.
C)  a surplus of 100 units.
D)  a surplus of 200 units.E) A) and B)
F) A) and C)

Question 12

The income of consumers increases. and the wage rate in the DVD industry increases. As a result

Accepted Answer

A)  the price of DVDs stays the same and the quantity sold can either increase or decrease, depending on whether the change in demand is greater than the change in supply.
B)  the price of DVDs increases and the quantity sold can either increase, decrease or stay the same depending on whether the change in demand was greater than the change in supply.
C)  the equilibrium quantity sold increases and price can either increase or decrease, depending on whether the change in demand is greater than the change in supply.
D)  the equilibrium quantity sold can either increase or decrease and the price can either increase or decrease, depending on whether the change in demand was greater than the change in supply.E) A) and D)
F) A) and B)

Question 13

If demand increases while supply simultaneously decreases, then the equilibrium quantity

Accepted Answer

A)  always increases.
B)  always decreases.
C)  can never change.
D)  none of the aboveE) A) and D)
F) A) and C)

Question 14

In a market, the rationing function of prices results in

Accepted Answer

A)  long queues or waiting lines.
B)  a price ceiling.
C)  equilibrium.
D)  a shortage or surplus.E) None of the above
F) All of the above

Question 15

The price of milk increases. Which of the following is NOT part of the likely chain of events that follows from this price change?

Accepted Answer

A)  Some milk consumers reduce their consumption of milk.
B)  Milk producers increase their production of milk.
C)  The producers of feed for dairy cows increase production.
D)  The manufacturers of milking machines lay off some workers.E) A) and C)
F) All of the above

Question 16

The market clearing price of corn has just increased. Which of the following could have caused this change?

Accepted Answer

A)  a reduction in demand
B)  a reduction in supply
C)  an increase in quantity demanded
D)  an increase in quantity suppliedE) A) and D)
F) All of the above

Question 17

Prices play a role in a market

Accepted Answer

A)  because they distribute scarce goods to those consumers who value them most highly.
B)  because when prices are in equilibrium, product shortages or surpluses can occur.
C)  because they help eliminate poverty.
D)  because they eliminate scarcity.E) A) and B)
F) A) and C)

Question 18

-Refer to the above figure. A price support set at P₃ will

Accepted Answer

A)  lead to a surplus of Q₃ minus Q₁.
B)  lead to a shortage of Q₃ minus Q₁.
C)  lead to an equilibrium quantity of Q₂.
D)  be ineffective.E) A) and C)
F) C) and D)

Question 19

In a market system, the costs associated with exchanging goods are known as

Accepted Answer

A)  voluntary costs.
B)  signaling costs.
C)  wholesale costs.
D)  transaction costs.E) B) and C)
F) All of the above

Question 20

A decrease in demand and an increase in supply will lead to

Accepted Answer

A)  unambiguous increases in both price and quantity.
B)  unambiguous decreases in both price and quantity.
C)  an unambiguous decrease in price, but the effect on quantity is indeterminate.
D)  an unambiguous decrease in quantity, but the effect on price is indeterminate.E) A) and B)
F) A) and C)

Exam 4: Extensions of Demand and Supply Analysis

Correct Answer
verified

In a market, the rationing function of prices results in

Correct Answer
verified

When the government establishes a minimum price for an agricultural product above the equilibrium price, the government is creating a(n)

Correct Answer
verified

If demand increases while supply simultaneously decreases, then the equilibrium quantity

Correct Answer
verified

The income of consumers increases. and the wage rate in the DVD industry increases. As a result

Correct Answer
verified

A decrease in demand and an increase in supply will lead to

Correct Answer
verified

Price ceilings often generate

Correct Answer
verified

The market clearing price of corn has just increased. Which of the following could have caused this change?

Correct Answer
verified

What would happen in the market for rental housing in your community if the local government legally mandated rents that were below the market clearing price?

Correct Answer
verified

Prices play a role in a market

Correct Answer
verified

When a government imposes price controls, the result is that

Correct Answer
verified

If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve?

Correct Answer
verified

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

Correct Answer
verified

If one day it was discovered that lime juice caused cancer, which of the following would likely result?

Correct Answer
verified

In a market system, the costs associated with exchanging goods are known as

Correct Answer
verified

-Refer to the above figure. A price support set at P₃ will

Correct Answer
verified

A price floor set above a market equilibrium price causes

Correct Answer
verified

-Refer to the above figure. A price ceiling of $20 results in

Correct Answer
verified

The price of milk increases. Which of the following is NOT part of the likely chain of events that follows from this price change?

Correct Answer
verified

If a price floor is set below the current market clearing price, then

Correct Answer
verified

Exam 4: Extensions of Demand and Supply Analysis

Correct AnswerverifiedShow Answer

In a market, the rationing function of prices results in

Correct AnswerverifiedShow Answer

When the government establishes a minimum price for an agricultural product above the equilibrium price, the government is creating a(n)

Correct AnswerverifiedShow Answer

If demand increases while supply simultaneously decreases, then the equilibrium quantity

Correct AnswerverifiedShow Answer

The income of consumers increases. and the wage rate in the DVD industry increases. As a result

Correct AnswerverifiedShow Answer

A decrease in demand and an increase in supply will lead to

Correct AnswerverifiedShow Answer

Price ceilings often generate

Correct AnswerverifiedShow Answer

The market clearing price of corn has just increased. Which of the following could have caused this change?

Correct AnswerverifiedShow Answer

What would happen in the market for rental housing in your community if the local government legally mandated rents that were below the market clearing price?

Correct AnswerverifiedShow Answer

Prices play a role in a market

Correct AnswerverifiedShow Answer

When a government imposes price controls, the result is that

Correct AnswerverifiedShow Answer

If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If one day it was discovered that lime juice caused cancer, which of the following would likely result?

Correct AnswerverifiedShow Answer

In a market system, the costs associated with exchanging goods are known as

Correct AnswerverifiedShow Answer

-Refer to the above figure. A price support set at P₃ will

Correct AnswerverifiedShow Answer

A price floor set above a market equilibrium price causes

Correct AnswerverifiedShow Answer

-Refer to the above figure. A price ceiling of $20 results in

Correct AnswerverifiedShow Answer

The price of milk increases. Which of the following is NOT part of the likely chain of events that follows from this price change?

Correct AnswerverifiedShow Answer

If a price floor is set below the current market clearing price, then

Correct AnswerverifiedShow Answer

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