Question 1

Suppose a price ceiling is set by the government below the market equilibrium price.Which of the following will result?

Accepted Answer

A)  The demand curve will shift to the left.
B)  The quantity demanded will exceed the quantity supplied.
C)  The quantity supplied will exceed the quantity demanded.
D)  There will be a surplus.E) C) and D)
F) B) and C)

Question 2

A public good may be defined as any good or service that:

Accepted Answer

A)  must be provided only to certain groups.
B)  must be distributed to all citizens in equal shares.
C)  excludes free riders.
D)  is not exclusive.E) A) and C)
F) A) and B)

Question 3

A market consequence of a price floor program is that:

Accepted Answer

A)  a shortage of the product will develop.
B)  producers will stop supplying the product.
C)  some rationing device must then be instituted.
D)  a surplus of the product will develop.
E)  there will be an excess demand for the product.F) C) and D)
G) A) and C)

Question 4

Which of the following is not a characteristic of a public good?

Accepted Answer

A)  It is scarce.
B)  It is not diminished in amount as additional people consume the product.
C)  Its benefits cannot be withheld from anyone.
D)  It is free.
E)  It yields widespread benefits.F) None of the above
G) A) and B)

Question 5

Which of the following is not a solution to the problem of negative externalities due to pollution?

Accepted Answer

A)  Create private property rights.
B)  Levy pollution taxes.
C)  Create obligatory controls.
D)  Reward the production of the products through subsidies.
E)  Establish strict limits on the amount of pollution allowed.F) A) and E)
G) A) and D)

Question 6

If the price of fish rises,then the demand for chips will:

Accepted Answer

A)  rise.
B)  fall.
C)  remain unchanged.
D)  react unpredictably.E) A) and D)
F) C) and D)

Question 7

Which of the following is the best example of a public good?

Accepted Answer

A)  Potatoes.
B)  Government building.
C)  Lighthouse.
D)  Commercial TV.E) B) and C)
F) A) and C)

Question 8

Price ceilings are imposed if the government:

Accepted Answer

A)  believes that the market will not achieve an equilibrium price.
B)  wants to provide 'essential service'.
C)  wants to spend money.
D)  wants producers to increase the supply.E) B) and D)
F) A) and C)

Question 9

Price floors are used as a method to:

Accepted Answer

A)  assure buyers that goods won't be cheaper tomorrow.
B)  see that production levels don't fall too low.
C)  guarantee there will be enough food for everyone.
D)  combat excess demand in the market.
E)  assure sellers of a minimum price for their goods.F) A) and C)
G) C) and E)

Question 10

Which of the following is not a market failure?

Accepted Answer

A)  A lack of competition in some markets.
B)  Prices determined in competitive markets, which consumers, as individuals, have no control over.
C)  The presence of externalities in some markets.
D)  A lack of public goods desired by a majority of citizens.
E)  Income inequality.F) B) and C)
G) C) and E)

Question 11

If it costs $2,000 to pick up the litter along a highway,then the cost of the externality is:

Accepted Answer

A)  $0.
B)  more than $0 but less than $2,000.
C)  $2,000.
D)  more than $2,000 but finite.
E)  infinite.F) B) and E)
G) A) and E)

Question 12

The private sector will not provide public goods because:

Accepted Answer

A)  it cost too much to produce.
B)  consumers are likely to be free riders.
C)  it is provided by government anyway.
D)  it takes a long time to change the production.E) A) and C)
F) A) and D)

Question 13

Externalities get their name from the fact that they are:

Accepted Answer

A)   B and D.
B)  unintended.
C)  short-lived.
D)  outside of decisions.
E)   outside of marketplace.F) C) and E)
G) None of the above

Question 14

Exhibit 4-2 Supply and demand curves
 
-The market shown in Exhibit 4-2 is initially in equilibrium at E₃.Changes in market conditions result in a new equilibrium at E₄.This change is stated as a/an:

Accepted Answer

A)  increase in demand and an increase in supply.
B)  decrease in demand and a decrease in quantity supplied.
C)  increase in quantity demanded and an increase in quantity supplied.
D)  decrease in supply and a decrease in quantity demanded.
E)  increase in supply and an increase in quantity demanded.F) A) and C)
G) C) and D)

Question 15

In 2002 a community in the United States passed a beautification ordinance (law) prohibiting the placement of indoor furniture outside of homes (e.g.,no couches on the porch) .The law represents a conflict between _____ and _____.

Accepted Answer

A)  the rich; the poor
B)  third parties; market participants
C)  victims; criminals
D)  public goods; private goods
E)  residents; visitorsF) A) and E)
G) A) and C)

Question 16

Non-smoking sections in restaurants are designed to remove _____ from a market _____.

Accepted Answer

A)  smoke; with food service
B)  third parties; for food service
C)  externalities; with public goods
D)  third parties; externality
E)  non-smokers; for food serviceF) A) and E)
G) A) and D)

Question 17

A free rider is a person who:

Accepted Answer

A)  is harmed by another's actions.
B)  is subject to a negative externality.
C)  receives benefits from someone else's action but does not pay for them.
D)  pays less than the full value for a product.
E)  won the lottery.F) A) and E)
G) A) and D)

Question 18

Suppose the government sets a price ceiling.Which of the following will result?

Accepted Answer

A)  The quantity supplied will be greater than quantity demanded.
B)  There will be a shortage.
C)  There will be a surplus.
D)  The quantity supplied will be equal to quantity demanded.E) None of the above
F) B) and D)

Question 19

The reason individual homeowners usually do not hire a private contractor to fill the potholes on their street is because:

Accepted Answer

A)  it costs too much.
B)  the value to the neighbourhood exceeds the cost of repair.
C)  others who use the street will be free riders.
D)  they do not trust the government.
E)  there are negative externalities associated with the repair.F) A) and D)
G) B) and D)

Question 20

The shortage because of the price ceiling might result in:

Accepted Answer

A)  less waiting times.
B)  more goods on offer.
C)  lower quality of the good.
D)  higher quality of the good.E) B) and D)
F) All of the above

Exam 4: Markets in action

Which of the following is not a market failure?

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Non-smoking sections in restaurants are designed to remove _____ from a market _____.

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Price ceilings are imposed if the government:

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A market consequence of a price floor program is that:

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A free rider is a person who:

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A public good may be defined as any good or service that:

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Suppose a price ceiling is set by the government below the market equilibrium price.Which of the following will result?

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Suppose the government sets a price ceiling.Which of the following will result?

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The shortage because of the price ceiling might result in:

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In 2002 a community in the United States passed a beautification ordinance (law) prohibiting the placement of indoor furniture outside of homes (e.g.,no couches on the porch) .The law represents a conflict between _____ and _____.

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Which of the following is not a solution to the problem of negative externalities due to pollution?

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Which of the following is not a characteristic of a public good?

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Which of the following is the best example of a public good?

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Externalities get their name from the fact that they are:

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Price floors are used as a method to:

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The reason individual homeowners usually do not hire a private contractor to fill the potholes on their street is because:

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If the price of fish rises,then the demand for chips will:

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The private sector will not provide public goods because:

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If it costs $2,000 to pick up the litter along a highway,then the cost of the externality is:

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Exhibit 4-2 Supply and demand curves -The market shown in Exhibit 4-2 is initially in equilibrium at E₃.Changes in market conditions result in a new equilibrium at E₄.This change is stated as a/an:

Correct AnswerverifiedShow Answer

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Non-smoking sections in restaurants are designed to remove _ from a market _.

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In 2002 a community in the United States passed a beautification ordinance (law) prohibiting the placement of indoor furniture outside of homes (e.g.,no couches on the porch) .The law represents a conflict between _ and _.

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