Question 1

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 2

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.

Question 3

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

Accepted Answer

Transaction costs are costs associated w...

Question 4

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D)  is a market where products with outdated expiration dates are sold.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 5

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 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

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 8

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 9

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 10

-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 11

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 12

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 13

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 14

-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 15

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 16

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 17

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 18

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 19

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 20

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.

Exam 4: Extensions of Demand and Supply Analysis

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

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If demand decreases and supply increases

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Rationing through the price system

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

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

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

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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?

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

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

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A price floor represents

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

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

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

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

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

Correct AnswerverifiedShow Answer

Markets tend to

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

Correct AnswerverifiedShow Answer

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Transaction costs are costs associated w...
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