Question 1

A price floor is binding when it is set

Accepted Answer

A)   above the equilibrium price, causing a shortage.
B)   above the equilibrium price, causing a surplus.
C)   below the equilibrium price, causing a shortage.
D)   below the equilibrium price, causing a surplus.

Question 2

A shortage will result whenever:

Accepted Answer

A)   the government imposes a price floor below equilibrium price.
B)   the government imposes a price ceiling above equilibrium price.
C)   the government imposes a price floor above equilibrium price.
D)   the government imposes a price ceiling below equilibrium price.

Question 3

Assuming that the demand and supply of a good have moved in the same direction,and by the same amount,the new equilibrium would represent:

Accepted Answer

A)   an increase in price and an increase in quantity exchanged.
B)   no change in price and an increase in quantity exchanged.
C)   a decrease in price and a decrease in quantity exchanged.
D)   no change in price, and an indeterminate change in quantity exchanged.

Question 4

Ceteris paribus,if negotiations lead to lower wages for airline employees,what will be the result in the market for air travel?

Accepted Answer

A)   an increase in equilibrium price and an increase in equilibrium quantity
B)   an increase in equilibrium price and a decrease in equilibrium quantity
C)   a decrease in equilibrium price and an increase in equilibrium quantity
D)   a decrease in equilibrium price and a decrease in equilibrium quantity

Question 5

A shortage exists in the market for corn at the prevailing price.The shortage will be eliminated by a price:

Accepted Answer

A)   increase, increasing the supply and decreasing the demand.
B)   decrease, increasing the supply and decreasing the demand.
C)   decrease, increasing the quantity supplied and decreasing the quantity demanded.
D)   increase, increasing the quantity supplied and decreasing the quantity demanded.

Question 6

If consumers expected the price of a good to increase in the near future and the price of a complement good decreased at the same time,as a result:

Accepted Answer

A)   prices would rise.
B)   prices would fall.
C)   larger quantities to be exchanged.
D)   both prices and quantities exchanged would increase.

Question 7

Suppose the United States steps up efforts to combat drug trafficking and,with the aid of the Colombian military,destroys a significant percentage of cocaine crops.Predict the impact of increased drug interdiction on the market for cocaine in Los Angeles.

Accepted Answer

A)   The supply of cocaine will increase causing the price of cocaine to increase.
B)   The demand for cocaine will increase causing the price of cocaine to increase.
C)   The supply of cocaine will decrease causing the price of cocaine to increase.
D)   There will be a movement up along the supply curve of cocaine.

Question 8

In the market for natural gas,a particularly mild winter will lead to:

Accepted Answer

A)   a decrease in the demand and an increase in both equilibrium price and quantity.
B)   an increase in the supply and an increase in both equilibrium price and quantity.
C)   an increase in the supply, a decrease in equilibrium price, and an increase in equilibrium quantity.
D)   a decrease in the demand and a decrease in both equilibrium price and quantity.

Question 9

When a binding price ceiling is imposed on a market to benefit buyers,

Accepted Answer

A)   no buyers actually benefit.
B)   some buyers benefit, but no buyers are harmed.
C)   all buyers benefit.some buyers benefit, and some buyers are harmed.
D)   all buyers benefit.

Question 10

If nuts and bolts are complements,an increase in the price of nuts caused by a change in the supply of nuts will:

Accepted Answer

A)   increase the number of bolts sold.
B)   decrease the demand for nuts
C)   increase the price of bolts.
D)   decrease the number of bolts sold

Question 11

Exhibit 5-8 R,what quantity of gasoline will be sold? A)  QS B)  QD C)  0 D)  the equilibrium quantity" class="answers-bank-image d-inline" rel="preload" > Refer to Exhibit 5-8.At price PR,what quantity of gasoline will be sold?

Accepted Answer

A)   QS
B)   QD
C)   0
D)   the equilibrium quantity

Question 12

The imposition of a price ceiling on a market often results in:

Accepted Answer

A)   an increase in investment in the industry.
B)   a surplus.
C)   a shortage.
D)   a decrease in discrimination on the part of sellers.

Question 13

We can be sure that the equilibrium price will fall when:

Accepted Answer

A)   supply and demand both increase.
B)   supply and demand both decrease.
C)   supply increases and demand decreases.
D)   supply decreases and demand increases.

Question 14

Which of the following is an example of an unintended consequence?

Accepted Answer

A)   government sponsored ad campaigns that lead to an increase in vaccinations
B)   rent controls that lead to a decline in the quality of rental properties
C)   higher property taxes that allow for better public schools
D)   increased airport security measures that result in safer travel

Question 15

Say that the equilibrium price of natural gas would be $5 per thousand cubic feet,but there is a price ceiling imposed at $3 per thousand cubic feet.That price ceiling is then lowered to $2 per thousand cubic feet.As a result,

Accepted Answer

A)   the shortage of natural gas will get worse.
B)   the shortage of natural gas will get less severe.
C)   the surplus of natural gas will get worse.
D)   the surplus of natural gas will get less severe.

Question 16

If the government removes a binding price ceiling from a market,then the price paid by buyers will

Accepted Answer

A)   increase, and the quantity sold in the market will increase.
B)   increase, and the quantity sold in the market will decrease.
C)   decrease, and the quantity sold in the market will increase.
D)   decrease, and the quantity sold in the market will decrease.

Question 17

Medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties.An economist would expect to find that,after this announcement,the price of Retin-A ____ and the quantity sold ____.

Accepted Answer

A)   rose; fell
B)   rose; rose
C)   fell; fell
D)   fell; rose

Question 18

A binding price ceiling causes a shortage in the market.

Accepted Answer

A) True 
 B)False

Question 19

When a binding price floor is imposed on a market,

Accepted Answer

A)   price no longer serves as a rationing device.
B)   the quantity supplied at the price floor exceeds the quantity that would have been supplied without the price floor.
C)   only some sellers benefit.
D)   All of the above are correct.

Question 20

A shift in the supply curve of bicycles resulting from higher steel prices will lead to:

Accepted Answer

A)   higher prices of bicycles.
B)   lower prices of bicycles.
C)   a shift in the demand curve for bicycles.
D)   a larger output of bicycles.

Exam 5: Markets in Motion and Price Controls

Suppose the United States steps up efforts to combat drug trafficking and,with the aid of the Colombian military,destroys a significant percentage of cocaine crops.Predict the impact of increased drug interdiction on the market for cocaine in Los Angeles.

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If nuts and bolts are complements,an increase in the price of nuts caused by a change in the supply of nuts will:

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A shortage exists in the market for corn at the prevailing price.The shortage will be eliminated by a price:

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In the market for natural gas,a particularly mild winter will lead to:

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Exhibit 5-8 Refer to Exhibit 5-8.At price PR,what quantity of gasoline will be sold?

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Medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties.An economist would expect to find that,after this announcement,the price of Retin-A ____ and the quantity sold ____.

Correct AnswerverifiedShow Answer

We can be sure that the equilibrium price will fall when:

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Ceteris paribus,if negotiations lead to lower wages for airline employees,what will be the result in the market for air travel?

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A shortage will result whenever:

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A price floor is binding when it is set

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Which of the following is an example of an unintended consequence?

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If the government removes a binding price ceiling from a market,then the price paid by buyers will

Correct AnswerverifiedShow Answer

A shift in the supply curve of bicycles resulting from higher steel prices will lead to:

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Assuming that the demand and supply of a good have moved in the same direction,and by the same amount,the new equilibrium would represent:

Correct AnswerverifiedShow Answer

The imposition of a price ceiling on a market often results in:

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When a binding price floor is imposed on a market,

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A binding price ceiling causes a shortage in the market.

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When a binding price ceiling is imposed on a market to benefit buyers,

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Say that the equilibrium price of natural gas would be $5 per thousand cubic feet,but there is a price ceiling imposed at $3 per thousand cubic feet.That price ceiling is then lowered to $2 per thousand cubic feet.As a result,

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If consumers expected the price of a good to increase in the near future and the price of a complement good decreased at the same time,as a result:

Correct AnswerverifiedShow Answer

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Exhibit 5-8 Refer to Exhibit 5-8.At price P_R,what quantity of gasoline will be sold?

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Medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties.An economist would expect to find that,after this announcement,the price of Retin-A and the quantity sold .

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