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# ECON 213 quiz 4 Liberty University complete answers

ECON 213 quiz 4 Liberty University complete answers

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Question 1 Why does a shortage that occurs under a binding price ceiling decrease over time?

Question 2 ____________ is a real­life example of a price floor.

Question 3 You are the president of the United States. In an attempt to make gasoline prices cheaper, you have imposed a binding price ceiling on gas. What would you expect your critics to say?

Question 4 Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 – 86 P Supply: Qs = –100 + 14 P What would be the quantity demanded if a price ceiling is set at \$2,000?

Question 5 What is the incentive to create a black market when a binding price ceiling exists?

Question 6 Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a binding price floor on most products?

Question 7 Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 – 86 P Supply: Qs = –100 + 14 P What would be the quantity demanded if a price ceiling is set at \$1,000?

Question 8 A real­life example of a binding price ceiling is:

Question 9 Apartment rent control in New York City is an example of:

Question 10 What will happen in a market where a binding price floor is removed?

Question 11 Use the following information to answer the questions that follow. Market for flat­screen TVs: Demand: Qd = 2,600 – 5 P Supply: Qs = –1,000 + 10 P What would be the quantity demanded if a price ceiling is set at \$150?

Question 12 Refer to the accompanying figure. At the price of the binding price floor, by how much would the quantity supplied change from the market equilibrium?

Question 13 What is a black market?

Question 14 You would expect there to be many customers for a black market good when the opportunity cost of finding the good under a:

Question 15 Tina, an economics student, was just named Miss Florida, based in part on her answer to the question of why price gouging laws should be relaxed in that state. Tina won because she gave which of the following answers?

Question 16 Use the following table to answer the questions that follow. What is the equilibrium quantity in the market for public transportation?

Question 17 Use the following table to answer the questions that follow. What will be the amount of government expenditure required if a price floor for corn is set at \$4.50 and the government agrees to purchase the amount of disequilibrium?

Question 18 What is the amount of the shortage or surplus in the market for public transportation when the price ceiling is \$1.75?

Question 19 As the time frame shifts from the short run to the long run, what happens to producers who are subject to a binding price floor?

Question 20 Refer to the accompanying table to answer the questions that follow. If rent control is established at \$1,550, what would be the amount of disequilibrium in the apartment market?

Question 1

What will happen in a market where a binding price floor is removed?

Question 2

If a good is subject to a binding price ceiling and you purchase it on the black market, what do you expect to happen to the price over time?

Question 3

Imagine you find yourself in a heat wave and your air conditioner has broken. Unable to find a new one at the store because of a price gouging law, you purchase an air conditioner on the black market. What role did the price gouging law have?

Question 4

Use the following information to answer the questions that follow.

Market for used cars:

Demand: Qd = 154,000 – 86 P

Supply: Qs = –100 + 14 P

What would be the quantity supplied if a price floor is set at \$100?

Question 5

Why does a surplus exist under a binding price floor?

Question 6

A binding price floor creates a surplus, which means:

Question 7

Refer to the accompanying figure to answer the questions that follow.

If there is a \$180 price ceiling imposed on a textbook, what will be the disequilibrium amount?

Question 8

Mortimer loves sushi. He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law. Who would be affected by this law and how?

Question 9

Why are binding price ceiling laws passed?

Question 10

Which of the following would be true in a city with rentcontrolled apartments?

Question 11

If you were a politician, why would you find it difficult to remove a binding price ceiling?

Question 12

Use the following information to answer the questions that follow.

Market for used cars:

Demand: Qd = 154,000 – 86 P

Supply: Qs = –100 + 14 P

What would be the equilibrium quantity for used cars?

Question 13

What will happen in a market where a binding price ceiling is removed?

Question 14

As a politician, you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would:

Question 15

Use the following table to answer the questions that follow.

At what price level does the labor market experience its largest shortage?

Question 16

Let’s say that you have a friend who was caught illegally selling a good on the black market. When the judge asks you to describe your friend’s motivation as a seller, which of the following would most likely be your reply?

Question 17

As a seller of a product subject to a binding price floor, you would be better off in which of the following situations?

Question 18

You would expect there to be many customers for a black market good when the opportunity cost of finding the good under a:

Question 19

Refer to the accompanying figure. At the price of the binding price floor, by how much would the quantity supplied change from the market equilibrium?

Question 20

Use the following table to answer the questions that follow.

What is the surplus when the price floor is \$0.75 in the market for public transportation?

Question 1 If a store sells a good at the market price, even though the government authorities have set the minimum price that can be charged, the store is selling the good in a(n):

Question 2 Which of the following is an accurate statement about the consequence of a binding price floor?

Question 3 Refer to the accompanying figure, which shows both short­run and long­run demand and supply curves. If there is a \$4 binding price ceiling imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run?

Question 4 The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements would be an example of a:

Question 5 Apartment rent control in New York City is an example of:

Question 6 Use the following table to answer the questions that follow.

At what price level does the labor market experience its largest shortage?

Question 7 Why do shortages develop under a binding price ceiling?

Question 8 Do all sellers benefit from a binding price floor?

Question 9 How do consumers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Question 10 Use the following figure to answer the questions that follow.

The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P3, predict the resulting surplus or shortage.

Question 11 Refer to the accompanying figure to answer the questions that follow.

If there is a \$60 price ceiling imposed on a textbook, what will be the disequilibrium amount?

Question 12 Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a nonbinding price floor on most products?

Question 13 What will I do differently as a seller in the black market in the long run?

Question 14 A binding price ceiling will have the following consequences:

Question 15 What will I do differently as a buyer in the black market in the long run?

Question 16 A binding price floor creates a surplus, which means:

Question 17 You are the president of the United States. In an attempt to make prescription drug prices cheaper, you have imposed a binding price ceiling on drugs. What would you expect your critics to say?

Question 18 Let’s say that you have a friend who was caught illegally buying a good on the black market. When the judge asks you to describe your friend’s motivation as a buyer, which of the following would most likely be your reply?

Question 19 What will happen in a market where a nonbinding price floor is removed?

Question 20 Refer to the accompanying figure. At what price would there be the least pressure to form a black market?

Question 1 A binding price floor creates a surplus, which means:

Question 2 The minimum wage law is an example of a:

Question 3 Refer to the accompanying table to answer the questions that follow.

At what price level does the apartment market experience its largest shortage?

Question 4 Let’s say that you have a friend who was caught illegally selling a good on the black market. When the judge asks you to describe your friend’s motivation as a seller, which of the following would most likely be your reply?

Question 5 Use the following table to answer the questions that follow.

If a minimum wage is established at \$7.50, determine the amount of disequilibrium in the labor market.

Question 6 Refer to the accompanying figure to answer the questions that follow.

The market is currently at market equilibrium. If a binding price ceiling of P1is imposed, by how much would the quantity supplied change?

Question 7 What is the long­run consequence of a price ceiling law?

Question 8 What is the incentive to create a black market when a binding price ceiling exists?

Question 9 ____________ is a real­life example of a price floor.

Question 10 Use the following figure to answer the questions that follow.

If the government imposes a price floor on wheat at \$5, predict the amount of disequilibrium.

Question 11 Who potentially benefits from a price floor?

Question 12 Why are binding price ceiling laws passed?

Question 13 What will happen in a market where a binding price floor is removed?

Question 14 Which of the following would be true in a city with rent­controlled apartments?

Question 15 Use the following table to answer the questions that follow.

What would be the equilibrium price in the market for corn?

Question 16 Why does a shortage that occurs under a binding price ceiling decrease over time?

Question 17 What is the incentive to create a black market when a binding price floor exists?

Question 18 Which of the following is a correct statement about a minimum wage law?

Question 19 Use the following table to answer the questions that follow.

At what price level does the labor market experience its largest surplus?

Question 20 The consequence of a price floor set below the equilibrium price is:

As the time frame shifts from the short run to the long run, what happens to producers who are subject to a binding price floor

What is the incentive to create a black market when a binding price ceiling exists

What is the amount of the shortage or surplus in the market for public transportation when the price ceiling is \$1.75

You are the president of the United States. In an attempt to make prescription drug prices cheaper, you have imposed a binding price ceiling on drugs. What would you expect your critics to say

Use the following information to answer the questions that follow.
Market for a new hardcover book:
Demand: Qd = 325 – 8 P
Supply: Qs =  –60 + 3 P
What would be the quantity supplied if a price floor is set at \$50

If a price floor is imposed at \$15 per unit when the equilibrium market price is \$12, there will be

Use the following table to answer the questions that follow.
At what price level does the labor market experience its largest shortage

Use the following table to answer the questions that follow.
What is the equilibrium price in the market for public transportation

Refer to the accompanying table to answer the questions that follow.
At what price level does the apartment market experience its largest shortage

Suppose you live in a community with no price controls. What do you expect will happen if your town borders a community where there is a binding price ceiling on most products

Many states have laws that limit the maximum amount of interest that a lender can charge a borrower. Such a law is an example of a(n)

Use the following figure to answer the questions that follow.
The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P1, predict the resulting surplus or shortage

If the local government tells gas stations that they are not allowed to change the price of gas for three weeks during hurricane season, what will be the consequence

Let’s say that you have a friend who was caught illegally selling a good on the black market. When the judge asks you to describe your friend’s motivation as a seller, which of the following would most likely be your reply

What will happen in a market where a binding price floor is removed

Use the following table to answer the questions that follow.
What is the surplus when the price floor is \$0.75 in the market for public transportation

Use the following information to answer the questions that follow. Market for a new hardcover book:
Demand: Qd = 325  – 8 P
Supply: Qs =  –60 + 3 P
What would be the quantity demanded if a price ceiling is set at \$20

The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements would be an example of a

Use the following information to answer the questions that follow.
Market for used cars:
Demand: Qd = 154,000 – 86 P
Supply: Qs =  –100 + 14 P
What would be the equilibrium price for used cars

Refer to the accompanying figure. If the government has a budget of \$300,000 to purchase surplus shampoo, what is the maximum possible floor price that could be imposed

Question 1 If a store sells a good at the market price, even though the government authorities have set the minimum price that can be charged, the store is selling the good in a(n):

Question 2 Which of the following is an accurate statement about the consequence of a binding price floor?

Question 3 Refer to the accompanying figure, which shows both short­run and long­run demand and supply curves. If there is a \$4 binding price ceiling imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run?

Question 4 The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements would be an example of a:

Question 5 Apartment rent control in New York City is an example of:

Question 6 Use the following table to answer the questions that follow.

At what price level does the labor market experience its largest shortage?

Question 7 Why do shortages develop under a binding price ceiling?

Question 8 Do all sellers benefit from a binding price floor?

Question 9 How do consumers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Question 10 Use the following figure to answer the questions that follow

The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P3, predict the resulting surplus or shortage.

Question 11 Refer to the accompanying figure to answer the questions that follow. If there is a \$60 price ceiling imposed on a textbook, what will be the disequilibrium amount?

Question 12 Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a nonbinding price floor on most products?

Question 13 What will I do differently as a seller in the black market in the long run?

Question 14 A binding price ceiling will have the following consequences:

Question 15 What will I do differently as a buyer in the black market in the long run?

Question 16 A binding price floor creates a surplus, which means:

Question 17 You are the president of the United States. In an attempt to make prescription drug prices cheaper, you have imposed a binding price ceiling on drugs. What would you expect your critics to say?

Question 18 Let’s say that you have a friend who was caught illegally buying a good on the black market. When the judge asks you to describe your friend’s motivation as a buyer, which of the following would most likely be your reply?

Question 19 What will happen in a market where a nonbinding price floor is removed?

Question 20 Refer to the accompanying figure. At what price would there be the least pressure to form a black market?

Question 1 Refer to the accompanying figure. If the government has a budget of \$300,000 to purchase surplus shampoo, what is the maximum possible floor price that could be imposed?

Question 2 The minimum wage law is an example of a:

Question 3 Which of the following is an accurate statement about the consequence of a binding price ceiling?

Question 4 Use the following information to answer the questions that follow. Market for flat­screen TVs: Demand: Qd = 2,600 – 5 P Supply: Qs = –1,000 + 10 P What would be the equilibrium quantity for flatscreen TVs?

Question 5 Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 – 86 P Supply: Qs = –100 + 14 P What would be the equilibrium price for used cars?

Question 6 A binding price ceiling will have the following consequences:

Question 7 Use the following table to answer the questions that follow. What would be the equilibrium quantity in the market for corn?

Question 8 Refer to the accompanying table to answer the questions that follow. At what price level does the apartment market experience its largest surplus?

Question 9 A nonbinding price floor has the following consequences:

Question 10 Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 – 86 P Supply: Qs = –100 + 14 P What would be the quantity demanded if a price ceiling is set at \$2,000?

Question 11 What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

Question 12 Use the following figure to answer the questions that follow. If the government imposes a price floor on wheat at \$5 and agrees to purchase any surpluses, how much will the government be forced to spend?

Question 14 A real­life example of a binding price ceiling is:

Question 15 What is the long­run consequence of a price ceiling law?

Question 16 As a politician, you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would:

Question 17 Refer to the accompanying figure to answer the questions that follow. The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity supplied change?

Question 18 Use the following table to answer the questions that follow. What would be the equilibrium price in the market for corn?

Question 19 Use the following table to answer the questions that follow. At what price level does the labor market reach equilibrium?

Question 20 In some countries, a binding price ceiling is placed on prescription medicines. What would you expect the prescription medicine market to be like in these countries?

Question 1 Refer to the accompanying figure. At what price would there be the least pressure to form a black market?

Question 2 Do all buyers benefit from a binding price ceiling?

Question 3 Refer to the accompanying table to answer the questions that follow. At what price level does the apartment market reach equilibrium?

Question 4 Why are binding price floor laws passed?

Question 5 Why is raising the minimum wage generally ineffective?

Question 6 Refer to the accompanying figure to answer the questions that follow. The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity demanded change?

Question 7 Refer to the accompanying figure, which shows both short-­run and long-­run demand and supply curves. If there is a \$4 binding price ceiling imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run?

Question 8 Use the following information to answer the questions that follow. Market for a new hardcover book: Demand: Qd = 325 – 8 P Supply: Qs = –60 + 3 P What would be the equilibrium price for hardcover books?

Question 9 What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

Question 10 Use the following figure to answer the questions that follow. The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P1, predict the resulting surplus or shortage.

Question 11 What is the long­run consequence of a price ceiling law?

Question 12 Let’s say that you have a friend who was caught illegally buying a good on the black market. When the judge asks you to describe your friend’s motivation as a buyer, which of the following would most likely be your reply?

Question 13 Refer to the accompanying figure. At the price of the binding price floor, by how much would the quantity supplied change from the market equilibrium?

Question 14 A nonbinding price floor has the following consequences:

Question 15 How do producers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Question 16 Let’s say that you have a friend who was caught illegally selling a good on the black market. When the judge asks you to describe your friend’s motivation as a seller, which of the following would most likely be your reply?

Question 17 If a good is subject to a binding price ceiling and you purchase it on the black market, what do you expect to happen to the availability of the good over time?

Question 18 Refer to the accompanying figure to answer the questions that follow. The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity supplied change?

Question 19 You are the president of the United States. In an attempt to make prescription drug prices cheaper, you have imposed a binding price ceiling on drugs. What would you expect your critics to say?

Question 20 Which of the following is true, holding all other things constant, when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?

Question 1 A binding price floor creates a surplus, which means:

Question 2 The minimum wage law is an example of a:

Question 3 Refer to the accompanying table to answer the questions that follow.

At what price level does the apartment market experience its largest shortage?

Question 4 Let’s say that you have a friend who was caught illegally selling a good on the black market. When the judge asks you to describe your friend’s motivation as a seller, which of the following would most likely be your reply?

Question 5 Use the following table to answer the questions that follow

If a minimum wage is established at \$7.50, determine the amount of disequilibrium in the labor market.

Question 6 Refer to the accompanying figure to answer the questions that follow.

The market is currently at market equilibrium. If a binding price ceiling of P1is imposed, by how much would the quantity supplied change?

Question 7 What is the long­run consequence of a price ceiling law?

Question 8 What is the incentive to create a black market when a binding price ceiling exists?

Question 9 ____________ is a real­life example of a price floor.

Question 10 Use the following figure to answer the questions that follow.

If the government imposes a price floor on wheat at \$5, predict the amount of disequilibrium.

Question 11 Who potentially benefits from a price floor?

Question 12 Why are binding price ceiling laws passed?

Question 13 What will happen in a market where a binding price floor is removed?

Question 14 Which of the following would be true in a city with rent­controlled apartments?

Question 15 Use the following table to answer the questions that follow.

What would be the equilibrium price in the market for corn?

Question 16 Why does a shortage that occurs under a binding price ceiling decrease over time?

Question 17 What is the incentive to create a black market when a binding price floor exists?

Question 18 Which of the following is a correct statement about a minimum wage law?

Question 19 Use the following table to answer the questions that follow.

At what price level does the labor market experience its largest surplus?

Question 20 The consequence of a price floor set below the equilibrium price is:

Question 1

Which of the following concepts do economists focus their study on when explaining how humans behave?

Question 2

If you don’t like changing the oil in your car and pay your father to do it for you, you have provided him with a(n):

Question 3

What is the opportunity cost of taking this exam?

Question 4

The opportunity cost of working rather than going to school is:

Question 5

Question 6

Saudi Arabia has a comparative advantage in producing oil because it:

Question 7

Ceteris paribus means:

Question 8

A graph that shows the maximum attainable combinations of two goods when society efficiently uses its productive resources is called:

Question 9

On a production possibilities frontier (PPF) that shows the trade-off between consumer goods and capital goods given a fixed amount of labor, unemployment is illustrated by:

Question 10

Consider the production possibilities frontier (PPF) shown in the figure below to answer the questions that follow.

The set of efficient points is best described as:

Question 11

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the questions that follow.

What is Gibbs’s opportunity cost of solving a crime?

Question 12

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. Refer to these figures to answer the questions that follow.

What is Jim’s opportunity cost of making 1 pizza?

Question 13

Specialization and trade allow individuals to:

Question 14

Refer to the following table to answer the questions that follow.

Suppose that Alicia Keys and Jay-Z could each make either New York–style pizza or Philly cheesesteaks. Given an eight-hour workday, which of the following would permit them to consume outside their respective production possibilities frontiers (PPFs)?

Question 15

Suppose that, on a particular Saturday, Mark Zuckerberg and Bill Gates can either plant trees or spread mulch in their gardens. Their maximum output per day is listed in the following table, along with blanks where you can calculate the opportunity cost. At what terms of trade (relative price ratio) could they specialize and trade with one another so that both have more trees planted and mulch spread than they could accomplish on their own?

Question 16

Something is a normal good if the demand for the good:

Question 17

The demand curve for a good will shift to the right if, holding all else constant,

Question 18

Refer to the accompanying figure. When the price changes from P1 to P2, we will see a(n):

Question 19

If the price of Gatorade increases, the

Question 20

Which of the quantity (Q) and price (P) combinations in the accompanying figure represents the market at competitive equilibrium?

Question 21

According to the supply and demand model, when the cotton gin was invented and if all else was held constant, we would expect the equilibrium price of cotton to _________ and the equilibrium quantity of cotton to _________.

Question 22

When the price of scooters drops by 5%, the quantity demanded changes by 20%. You know that the price elasticity of demand for scooters is:

Question 23

Refer to the accompanying table. When the price drops from \$5 to \$3, price elasticity of demand for sushi (using the midpoint method) at an income of \$30,000 is:

Question 24

While there are many pizza places in Curtisville, Pappy’s Pizza is known for its distinctive deep-dish pizza with an almost pie-like crust, whereas Momma’s Pizza Pizzazz is comparable to many other restaurants. Pappy’s is likely to find that it can ________ prices to increase total revenue, and Mommas must ________ prices to increase total revenue.

Question 25

A binding price ceiling will have the following consequences:

Question 26

Refer to the accompanying figure to answer the questions that follow.

The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity demanded change?

Question 27

Refer to the accompanying figure to answer the questions that follow.

If there is a \$180 price ceiling imposed on a textbook, what will be the disequilibrium amount?

Question 28

Refer to the accompanying table to answer the questions that follow.

At what price level does the apartment market reach equilibrium?

Question 29

Use the following information to answer the questions that follow.

Market for flat-screen TVs:

Demand: Qd = 2,600  – 5 P

Supply: Qs =  –1,000 + 10 P

What would be the quantity demanded if a price floor is set at \$300?

Question 30

Use the following table to answer the questions that follow.

At what price level does the labor market experience its largest shortage?

23. Muddy’s Bakery and Lilly’s Sweetshop both sell cupcakes. The market price of one chocolate cupcake is \$2.50. Muddy’s is willing to sell a cupcake for as little as \$1.65; Lilly’s is willing to sell a cupcake for as little as \$1.75. What is the total producer surplus for the two firms?

a. \$0.75

b. \$1.60

c. \$0.85

d. \$2.50

e. \$3.40

24. When looking at a supply and demand graph, you would find consumer surplus:

a. above the demand curve and below the supply curve.

b. below the demand curve and above market price.

c. to the right of equilibrium quantity and above market price.

d. above the demand curve and above the supply curve.

e. below market price and above the supply curve.

25. Explain what happens to the amount of consumer surplus and producer surplus when the supply of scarves suddenly declines (shifts left).

a. Producer surplus declines and consumer surplus is unchanged.

b. Consumer surplus declines and producer surplus is unchanged.

c. Consumer surplus declines and producer surplus declines.

d. Consumer surplus is unchanged and producer surplus is unchanged.

e. Producer surplus increases and consumer surplus increases.

26. Assume that a family spends 35% of its income on housing, 20% on travel-related expenses, 10% on utilities, 25% on health care, and 5% on miscellaneous items. Demand for which category will be most responsive to a change in price?

a. miscellaneous

b. health care

c. utilities

d. travel-related expenses

e. housing

27. When the price increases by 30% and the quantity demanded drops by 30%, the price elasticity of demand is:

a. perfectly inelastic.

b. inelastic.

c. unitary elastic.

d. elastic.

e. perfectly elastic.

28. Henry raised his quantity demanded of hockey pucks from 100 to 150 when the price fell from \$5 to \$3 per puck. Using the midpoint method, his price elasticity of demand is:

a. 0.80

b. 1.25

c. 1.00

d. 0.40

e. 0.80

29. At a price of \$2, the quantity demanded for pens is 12. When the price increases to \$3, the quantity demanded for pens is 10. The price elasticity of demand for pens is:

a. perfectly inelastic.

b. inelastic.

c. horizontal.

d. elastic.

e. perfectly elastic.

30. When would oil producers see the largest percentage decline in the quantity demanded for oil due to an increase in the price of oil today?

a. tomorrow

b. in 6 months

c. in 2 years

d. in 8 years

e. in 15 years

31. In the accompanying graph, the price elastic portion of demand is found in the ___________ region and the price inelastic portion of demand is found in the ___________ region of the graph.

a. middle; lower

b. lower; upper

c. upper; lower

d. middle; middle

e. None of these choices are correct.

32. If the percentage change in the quantity consumed of pizza is 8% and the percentage change in income is 2%, what is the income elasticity of demand for pizza?

a. 0.25

b. 4

c. 0.25

d. 4

e. 1

33. As price elasticity of supply becomes more elastic over time, the overall shape of the supply curve:

a. becomes more vertical.

b. remains unchanged.

c. becomes closer to 45 degrees from the origin.

d. becomes completely vertical.

e. becomes more horizontal.

Use the following information to answer the next two questions.

Market for a new hardcover book:

Demand: Qd = 325 – 8 P

Supply: Qs = –60 + 3 P

34. What would be the quantity demanded if a price ceiling is set at \$20?

a. 90

b. 45

c. 265

d. 165

e. 305

35. What would be the quantity demanded if a price ceiling is set at \$50?

a. 90

b. 45

c. 265

d. 165

e. 75

36. Producer surplus is the difference between:

a. supply and demand.

b. the price the producer receives and the willingness to sell a good.

c. the willingness to pay for a good and the willingness to sell a good.

d. the willingness to pay for a good and the amount that is paid to get it.

e. the price paid for a good and the amount of the good produced.

37. Consider the market for socks. The current price of a pair of plain white socks is \$5.00. Two consumers, Jeff and Samir, are willing to pay \$7.25 and \$8.00, respectively, for a pair of plain white socks. Two sock manufacturers are willing to sell plain white socks for as little as \$4.00 and \$4.15 per pair. What is the total producer surplus in this market?

a. \$0.15

b. \$8.15

c. \$0.85

d. \$1.00

e. \$1.85

38. Consider the market for socks. The current price of a pair of plain white socks is \$5.00. Two consumers, Jeff and Samir, are willing to pay \$7.25 and \$8.00, respectively, for a pair of plain white socks. Two sock manufacturers are willing to sell plain white socks for as little as \$4.00 and \$4.15 per pair. What is the total producer AND consumer surplus (i.e., social welfare) in this market?

a. \$7.10

b. \$5.25

c. \$1.85

d. \$23.40

e. \$4.50

39. A market has reached an efficient outcome when:

a. producers are able to produce and sell as much as they like.

b. total surplus is minimized.

c. producer surplus is greater than consumer surplus.

d. consumers are able to purchase as much as they like.

e. total surplus is maximized.

40. Which of the following statements is concerned with equity rather than efficiency?

a. Almost all taxes create some amount of deadweight loss.

b. Excise taxes tend to raise prices for consumers and reduce sales for firms.

c. Tax rates on the wealthy are too low and should be raised.

d. The incidence of a tax does not depend on who actually pays it.

e. Taxes generate revenues that governments spend on services.

41. When a tax is imposed on some good, what tends to happen to consumer prices and producer prices?

a. Consumer prices decrease and producer prices increase.

b. Consumer prices increase and producer prices decrease.

c. Consumer prices increase and producer prices increase.

d. Consumer prices decrease and producer prices increase.

e. Consumer prices and producer prices converge at the same point.

42. When a tax is imposed, consumer surplus and producer surplus are reallocated to:

a. social welfare.

b. tax revenue and deadweight loss.

c. tax revenue.

e. government spending on public services.

43. The costs or benefits of a market activity that affect a third party are called:

a. externalities.

b. public goods.

c. club goods.

d. internal costs.

e. common-resource goods.

44. For a market to work efficiently,

a. the external costs must be paid.

b. all external costs must be eliminated.

c. all internal costs must be eliminated.

d. the social costs must be equal to the internal costs.

e. all pollution must be eliminated.

45. Consider a market where production of the good is creating a negative externality. In the market equilibrium, there is a deadweight loss because the:

a. internal cost is not equal to the external cost.

b. internal cost is not equal to the internal benefit.

c. internal benefit is not equal to the external benefit.

d. social cost is greater than the internal benefit.

e. internal benefit is less than the internal cost.

46.When pollution (a negative externality) is created by firms, which of the following is NOT a valid way for the government to restore the social optimum?

a. require firms to install pollution-abatement equipment

b. require firms to change production techniques to reduce emissions

c. levy a tax on the production of the good

d. require firms to pay for the environmental damage they create

e. offer a subsidy to firms to reduce their production cost

47. If your friend says, “I am never going to buy another Avicii remix again!” his price elasticity of demand for Avicii remixes is:

a. perfectly elastic.

b. perfectly inelastic.

c. elastic.

d. inelastic.

e. unitary elastic.

48. If the income elasticity of demand is 0.5, the good will be a(n):

a. complement good.

b. substitute good.

c. necessity good.

d. inferior good.

e. luxury good.

49. When her income falls from \$50,000 to \$20,000, Alex increases her monthly purchase of hamburger from 20 pounds to 35 pounds. From the midpoint method, Alex’s income elasticity of demand for hamburgers is:

a. 1.57.

b. 0.63.

c. 0.54.

d. 0.85.

e. 1.57.

50. Zumba classes sell all 20 participant spots at a price of \$4.50 each. When the instructor raised the prices to \$5.50, 10 people attended the class. From the midpoint method, the price elasticity of demand for Zumba is:

a. 0.50.

b. 3.33.

c. 2.50.

d. 0.20.

e. 0.20.

1. If the income elasticity of demand for laptops is 3.5, you know that laptops are a(n):

a. substitute good.

b. inferior good.

c. luxury good.

d. necessity good.

e. complement good.

2. If the income elasticity of demand for noodles is 2 and the percentage change in the quantity consumed is 5%, what is the percentage change in income?

a. 2.5%

b. 10%

c. 2.5%

d. 10%

e. 0.4%

3.When Sue received a promotion at work, her income rose by 50%. The income elasticity of demand for steak was found to be 1.5. For her, steak is a(n):

a. inferior good.

b. necessity.

c. complement to potatoes.

d. substitute for chicken.

e. luxury.

4. When you change your quantity demanded of one good because of a change in price of another good, you are acting according to the principle of:

a. price elasticity of demand.

b. cross-price elasticity of demand.

c. income elasticity of demand.

d. price elasticity of supply.

e. income elasticity of supply.

5.If the percentage change in quantity demanded of Good B is 2% and the percentage change in the price of Good A is 10%, what is the cross-price elasticity of demand?

a. 0.20

b. 5

c. 1

d. 5

e. 0.20

6. A local sandwich shop can quickly place an order for food with its local vendors if it uses up its existing resources quickly. This indicates that the price elasticity of supply is:

a. unitary elastic.

b. perfectly elastic.

c. perfectly inelastic.

d. relatively elastic.

e. relatively inelastic.

7. Refer to the accompanying figure. At what price would there be the least pressure to form a black market?

a. \$5

b. \$8

c. \$13

d. \$15

e. \$20

8. What is the long-run consequence of a price ceiling law?

a. A surplus will continue to exist and will grow larger over time.

b. A surplus will continue to exist and will grow smaller over time.

c. A shortage will continue to exist and will grow larger over time.

d. A shortage will continue to exist and will grow smaller over time.

e. The amount of the surplus will not change.

9. Refer to the accompanying figure, which shows both short-run and long-run demand and supply curves. If there is a \$4 binding price ceiling imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run?

a. There will be a shortage of 1,500,000 units.

b. There will be a shortage of 800,000 units.

c. There will not be a shortage; there will be a surplus.

d. There will be a shortage of 2,000,000 units.

e. There will be a shortage of 500,000 units.

10. If the local government tells gas stations that they are not allowed to change the price of gas for three weeks during hurricane season, what will be the consequence?

a. Gas stations will be unable to sell all the gas they want at the temporary price ceiling price.

b. Consumers will be unable to buy all the gas they want at the temporary price ceiling price.

c. The supply curve for gas will increase and shift to the right.

d. The demand curve for gas will increase and shift to the right.

e. Equilibrium in the gas market will be achieved.

Refer to the accompanying figure for the next two questions.

11. The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P1, predict the resulting surplus or shortage.

a. There would be a shortage of 75,000 units.

b. There would be a surplus of 75,000 units.

c. There would be neither a shortage nor a surplus.

d. There would be a shortage of 150,000 units.

e. There would be a surplus of 150,000 units.

12. The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P3, predict the resulting surplus or shortage.

a. There would be a shortage of 75,000 units.

b. There would be a surplus of 75,000 units.

c. There would be neither a shortage nor a surplus.

d. There would be a shortage of 150,000 units.

e. There would be a surplus of 150,000 units.

13. As the time frame shifts from the short run to the long run, what happens to producers who are subject to a binding price floor?

a. They are increasingly willing to substitute away from producing the good, and the supply curve becomes less elastic.

b. There are no changes, and their elasticity of supply remains unchanged.

c. They are increasingly willing to substitute away from producing the good, and the supply curve becomes more elastic.

d. They are less willing to substitute away from producing the good, and the supply curve becomes less elastic.

e. They are less willing to substitute away from the good, and the supply curve becomes more elastic.

14. A tax on apples would cause consumers to suffer because:

a. consumer surplus would increase.

b. the price of apples would increase and fewer apples would be purchased.

c. revenues for apple growers would decrease.

d. the government would collect revenue from the tax.

e. producer surplus would decrease.

15. In most cases, taxes reduce economic efficiency because:

a. they lower prices for consumers and cause firms to suffer.

b. they increase firms’ profits at the expense of consumers.

c. taxes are perceived as unfair by some taxpayers.

d. the government often spends tax revenues on programs that some voters don’t like.

e. they reduce consumer surplus and producer surplus.

16. A tax on apples would cause the price paid by consumers to ___________ and the price received by producers to _____________.

a. increase; increase

b. increase; decrease

c. decrease; increase, then decrease

d. decrease; decrease

e. increase, then decrease; increase

17. Taxes almost always cause producer prices to decrease. How much they decrease depends on:

a. the elasticities of supply and demand.

b. the amount of the tax.

c. who is legally obligated to pay the tax.

d. who pays the tax out of pocket.

e. how often the government collects the tax.

18. In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the:

a. deadweight loss from a tax will be less than it is in the short run.

b. deadweight loss will be zero.

c. government will likely reduce tax rates.

d. tax revenue will be lower than it is in the short run.

e. tax revenue will be higher than it is in the short run.

19. The costs of a market activity paid for by an individual NOT engaged in the market activity are:

a. external costs.

b. internal costs.

c. free-rider costs.

d. social costs.

e. common costs.

20. Refer to the accompanying figure. Which area represents the deadweight loss associated with producing at the market equilibrium instead of the social optimum?

a. A

b. B

c. A + B

d. C

e. A + B + C

21. What is the long-run consequence of a price ceiling law?

a. A surplus will continue to exist and will grow larger over time.

b. A surplus will continue to exist and will grow smaller over time.

c. A shortage will continue to exist and will grow larger over time.

d. A shortage will continue to exist and will grow smaller over time.

e. The amount of the surplus will not change.

22. Bob is willing to pay \$65 for a new pair of shoes. Bill is willing to pay \$50 for the same shoes. The shoes have a price of \$45. What is the total consumer surplus for Bob and Bill?

a. \$15

b. \$20

c. \$5

d. \$25

e. \$35

During the winter months, many elderly persons leave their homes in northern New York and travel south to Florida or Arizona. What would you expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York?

When Heavenly Cookies prices its sugar cookies at \$1.00, they sell 75 cookies. They lowered the price to \$0.50 and sold 200 cookies. Their total revenue because the price elasticity of demand for sugar cookies is

For a market to be competitive

If a good is subject to a binding price ceiling and you purchase it on the black market, what do you expect to happen to the price over time?

Use these production possibilities frontier (PPF) curves, which compare the ancient production of agricultural products to art and literature, to answer the questions that follow. Suppose a great plague wipes out half of the society’s population. Which of the following graphs best depicts how this would affect the PPF?

In the first few months of 2012, the price of gasoline increased by approximately 15%. Because of this increase, we would expect the curve in the market for hybrid cars to

An increase in general resources that affects the production of both goods on a production possibilities frontier (PPF) would cause an

Use the following scenario to answer the questions that follow: Dairy Dream, a local ice cream store, finds that it sells out of ice cream sandwiches at the current price of \$1. It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore.

While there are many pizza places in Curtisville, Pappy’s Pizza is known for its distinctive deep-dish pizza with an almost pie-like crust, whereas Momma’s Pizza Pizzazz is comparable to many other restaurants. Pappy’s is likely to find that it can prices to increase total revenue, and Mommas must              prices to increase total revenue.

The scientific method and the tools of economics are useful in examining

A positive statement

When the price of a basketball is \$15, the quantity supplied is 5,000. When the price increases to \$20, the quantity supplied is 10,000. The price elasticity of supply is

Which of the following will cause the demand curve for burgers to shift the right?

You have an absolute advantage in producing something whenever

From the accompanying table, we would expect that, for recreational skaters, the price elasticity of demand for ice skates between \$10 and \$20 to be than that of hockey players because

Refer to the accompanying figure. What event would cause the supply curve to shift out?

The production possibilities frontier (PPF) shows

With no barriers to entry or exit and when firms in a market are operating at a loss, you can expect other firms to exit, causing the curve to shift to the and making the equilibrium price and the equilibrium quantity

Google has started a project to scan all books and make those that are not copyrighted available to people free of charge. Why is it important that only books without a copyright are available?

According to economists, one reason few professional athletes have PhD’s is that the

What will happen in a market where a binding price floor is removed?

What would you expect to happen to the price and quantity of Pepsi if the price of Coke increases and Pepsi develops a new technology that makes its production process more efficient?

Which statement best describes the absolute advantage as shown in the graphs?

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the questions that follow. What is DiNozzo’s opportunity cost for solving a crime?

Ceteris paribus, if a society is producing at a point on the production possibilities frontier (PPF), it can only increase the production of one good by

In the accompanying table, assume that the price of ice skates increases from \$10 to \$20 per pair. Using the midpoint method, calculate the price elasticity of demand for ice skates for hockey players.

Refer to the following figure for the questions that follow. As you move from points N to M to L, the opportunity cost of additional apple pie

Assume that the market for pencils is in equilibrium and that demand is very price elastic. The popularity of digital tablets and electronic pens increases and demand for pencils declines. The equilibrium change in quantity demanded is

Refer to the accompanying figure. When the price changes from P1 to P2, we will see a(n)

When the price is the equilibrium price, we would expect there to be a causing the market to put pressure on the price until it went back to the equilibrium price.

Suppose that Dwight and Jim can either make salads or grill steaks. Their maximum output per hour is listed in the following table. Given the same quantity of resources, at what terms of trade (relative price ratio) could they specialize and trade so that both consume outside their own production possibilities frontier (PPF)?

What would you expect to happen to the price of bagels if the price of flour decreased and the price of cream cheese decreased?

To determine which of two producers has a comparative advantage, you would need to know their

The area inside (within) the production possibilities frontier (PPF) contains

Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand

The accompanying figures depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. If Jim and Pam were to specialize and trade, at what exchange rate would they find some quantity of trade to be mutually beneficial?

Use the following table to answer the questions that follow. What is the surplus when the price floor is \$0.75 in the market for public transportation?

Why are binding price ceiling laws passed?

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the questions that follow. Which statement best describes absolute advantage?

Which of the following will cause a movement along a good’s supply curve?

What would happen in the market for SUVs if the government started to subsidize the production of SUVs that get very few miles per gallon and the price of gasoline went up?

If the percentage change in the quantity consumed of pizza is 8% and the percentage change in income is 2%, what is the income elasticity of demand for pizza?

If the price and quantity for a normal good, Good X, is \$8 and 6 units at the original equilibrium, what is one possibility for the new equilibrium of Good X if we see income increase and all other factors stay constant?

Chris runs a sporting goods store and knows that the price elasticity of demand for his sports clothing line is –1.5. He is planning to lower prices by 10%. The percentage change in quantity demanded will be

If the cross-price elasticity of demand for two goods is zero, the two goods are

The price of peanut butter increases from \$2.50 to \$3.00 and the quantity of jelly demanded falls from 30 jars to 24 jars. Calculate the cross-price elasticity of demand

Use the following scenario to answer the questions that follow. Dairy Dream, a local ice cream store, finds that it sells out of ice cream sandwiches at the current price of \$1. It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore. The owners raised the price because they believed that the demand for ice cream sandwiches is

Spam is considered an inferior good. What would happen to the equilibrium price and quantity of Spam if income decreased and more firms started producing Spam?

Refer to the accompanying table to answer the questions that follow. The price of erasers increases from \$0.50 to \$1.00 per eraser. Use the midpoint method to calculate the cross-price elasticity of demand between pencils and erasers

The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements would be an example of a:
a. fair wage law.
b. black market price.
c. ration price.
d. price ceiling.
e. minimum wage law.

Which of the following is true, holding all other things constant, when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?
In regions with the highest minimum wage, most of the jobs require low skills and workers are not productive enough to get paid the higher wage.
In regions with the lowest minimum wage, most of the jobs require technical skills and no one works minimum wage jobs.
In regions with the lowest minimum wage, the price control is nonbinding; in the regions with the highest minimum wage, the price control is binding.
In regions with the lowest minimum wage, the price control is binding; in the regions with the highest minimum wage, the price control is nonbinding.
In regions with the highest minimum wage, the minimum wage law is legally enforced; in regions with the lowest minimum wage, the law is not strongly enforced.

As a politician, you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would:
remain below the equilibrium wage and be binding.
remain above the equilibrium wage and be binding.
remain below the equilibrium wage and be nonbinding.
remain above the equilibrium wage and be nonbinding.
be equal to the equilibrium wage.

Use the following information to answer the questions that follow.
Market for flat-screen TVs:
Demand: Qd = 2,600  – 5 P
Supply: Qs =  –1,000 + 10 P
What would be the quantity demanded if a price floor is set at \$100?

What will I do differently as a seller in the black market in the long run?
I will substitute away from producing the product.
I will substitute toward producing the product.
When there exists a binding price floor, I will be able to sell the good at a higher price.
When there exists a binding price ceiling, I will be able to sell the good at a lower price.
What I as a seller do in the long run will be no different from what I do in the short run.

You are the president of the United States. In an attempt to make prescription drug prices cheaper, you have imposed a binding price ceiling on drugs. What would you expect your critics to say?
The binding price ceiling will encourage companies to overproduce drugs and will result in waste.
The binding price ceiling will discourage patients from obtaining the drugs they need.
The binding price ceiling will increase the likelihood that consumers will obtain needed drugs on the black market.
The binding price ceiling will cause firms to spend too many resources on the research and development of new drugs.
The binding price ceiling will cause firms to spend too much time making a drug without any flaws.

Why do government leaders impose price controls?
They are trying to promote the formation of black markets.
They are trying to ensure that the market reaches equilibrium.
They are trying to ensure that all consumers are able to purchase a specific product.
They are trying to ensure that a social goal is satisfied.

They are trying to increase the demand curve.

You are the president of the United States. In an attempt to make gasoline prices cheaper, you have imposed a binding price ceiling on gas. What would you expect your critics to say?
The binding price ceiling will encourage oil companies to deplete the resource too quickly.
The binding price ceiling will discourage individuals from using their personal automobile to commute to work or school.
The binding price ceiling will cause firms to minimize their spending on the research and development of alternatives to gasoline.
The binding price ceiling will increase the likelihood that customers obtain needed
gasoline on the black market.
The binding price ceiling will cause firms to produce only gasoline of the highest quality.

If a store sells a good at the market price, even though the government authorities have set the minimum price that can be charged, the store is selling the good in a(n):
black market for a market price that is higher.
black market for a market price that is lower.
effort to eliminate a surplus of the good.
legal market for a market price that is higher.
legal market for a market price that is lower.

What is the quantity demanded when the price floor is \$0.75 in the market for public transportation

What will happen in a market where a nonbinding price ceiling is removed?
There will be downward pressure on the price in the legal market.
The products sold will improve in quality and become more plentiful.
Sellers will face a reduced incentive to sell the product.
The price and quantity will not change in the legal market.
There will be increased pressure to buy and sell the good on the black market.

A tax on consumers of a good would shift the __________ curve down and cause the price paid by consumers to __________.
supply; increase
supply; decrease
demand; increase

The incidence of a tax is determined by:
the relative elasticities of supply and demand.
who pays the tax out of pocket.
whether the supply curve or demand curve shifts as a result of the tax.
how much tax revenue it generates.
how much paperwork there is to complete.

A good with a __________ generates no deadweight loss when taxed.
perfectly elastic supply
perfectly inelastic supply
somewhat elastic supply
somewhat inelastic supply
slowly increasing supply

Which party is responsible for paying this tax out of pocket

A(n) __________ in the elasticity of supply or demand in a market for a good that is taxed would tend to __________ who is legally responsible for paying the tax.
decrease; have no effect on
increase; narrow
increase; have no effect on

Consumers will lose no consumer surplus due to a tax if:
demand is somewhat elastic.
supply is perfectly elastic.
supply is somewhat elastic.
demand is perfectly elastic.
demand is perfectly inelastic.

Gasoline and ethanol are substitute fuels. If the government increases taxes on gasoline, this will cause a(n):
decrease in deadweight loss in the market for gasoline and an increase in the price of ethanol.
increase in deadweight loss in the market for gasoline and a decrease in demand for ethanol.
increase in deadweight loss in the market for gasoline and an increase in the price of ethanol.
decrease in deadweight loss in the market for gasoline and an increase in demand for ethanol.
increase in deadweight loss in the market for gasoline and a decrease in the price of ethanol.

At very low tax rates:
supply is much larger than demand.
willingness to pay is much larger than deadweight loss.
demand is much larger than supply.
tax revenue is much larger than deadweight loss.
tax revenue is much larger than willingness to sell.

When the price of a good increases and all else is held constant:
both consumer surplus and producer surplus decrease.
both consumer surplus and producer surplus increase.
consumer surplus decreases.
producer surplus decreases.
producer surplus increases.

Producers bear the entire incidence of a tax when:
supply is perfectly inelastic.
demand is perfectly elastic.
supply is perfectly elastic.
demand and supply are equally elastic.
demand is perfectly inelastic.

What areas represent the total lost consumer and producer surplus (i.e., social welfare) as a result of the tax?
A + B + C + E + F + G
A + C
A + B + C + E
F + G

B + C + F + G

Which of the following is true of a negative externality?
Some costs are borne by a third party.
The government can use subsidies to encourage firms to internalize the externality.
The government must take over the production of this good so that the externality can be internalized.
Some benefits accrue to a third party.
Its existence always requires corrective measures by the government.

The government allocates three allowances to each firm, where each allowance allows one unit to be emitted. If both firms now emit three units each, the total cost of reducing emissions for Firm 1 is __________ and the total cost of reducing emissions for Firm 2 is __________.\$30; \$60

Five fishermen live in a village and have no other employment or income-earning possibilities besides fishing. They each own a boat that is suitable for fishing but does not have any resale value. Fish are worth \$5 per pound, and the marginal cost of operating the boat is \$500 per month. They all fish a river next to the village. According to the following schedule, they have determined that, when there are more of them out on the river fishing, they each catch fewer fish per month.
What is the optimal number of boats that should operate?

If the government sets a quota of 300 pounds of fish caught per day, then fish will sell for __________ more per pound than the cost of catching the fish.

Museum visits in a particular city are free. This good is:

The government allocates three allowances to each firm, where each allowance allows one unit to be emitted. The optimal outcome in this case is for __________ to sell one permit to the other firm, and a price that will be agreeable to both is __________

External benefits arise from the actions of

The government imposes a tax on the sale of a good whose production is creating a negative externality. The value of the tax is \$4 per unit sold. In the new equilibrium, you would expect:
the same amount to be sold and the price to be \$4 higher.
the same amount to be sold and the price to increase by less than \$4.
less to be sold and the price to increase by \$4.
less to be sold and the price to increase by less than \$4.
less to be sold and the price to increase by more than \$4.

Mortimer loves sushi. He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law. Who would be affected by this law and how?
a. Some consumers would benefit from such a law because prices for sushi would be lower for those able to buy it in the legal market.
b. Consumers would benefit from such a law because prices would be lower and all would be able to purchase sushi cheaply.
c. Consumers would benefit from such a law because the sushi would be made of higher quality fish, and each serving would be larger than it had been with no binding price ceiling in place.
d. Sellers would benefit from such a law because they would be able to sell higher-quality sushi and thus capture a larger share of the market.
e. Sellers would benefit from such a law because they would receive a higher price for their product.

What is the long-run consequence of a price ceiling law?
a. A shortage will continue to exist and will grow smaller over time.
b. A surplus will continue to exist and will grow smaller over time.
c. A shortage will continue to exist and will grow larger over time.
d. A surplus will continue to exist and will grow larger over time.
e. The amount of the surplus will not change.

A real-life example of a binding price ceiling is:
a. a ration price.
b. rent control.
c. a price gouging law.
d. a minimum wage law.
e. a black market price.

The minimum wage law is an example of a:
a. price floor.
b. law that allows individual employers and employees to make free decisions.
c. law that sets the minimum number of hours that an employee must work for wages during the week.
d. law that requires quantity demanded to equal quantity supplied.
e. price ceiling.

Which of the following is an accurate statement about the consequence of a binding price floor?
a. Binding price floors encourage the formation of a black market.
b. Binding price floors discourage the formation of a black market.
c. Binding price floors do not allow sellers to receive a higher price if they sell the product in the legal market.
d. Binding price floors create a shortage of the product.
e. Binding price floors cause consumers to want to purchase more of the product in the legal market.

Do all sellers benefit from a binding price floor?
a. No. A binding price floor doesn't benefit any buyers because buyers are unwilling to purchase any of the products at a price lower than the equilibrium.
b. No. A binding price floor benefits only some sellers because the price is initially higher but then eventually decreases to the equilibrium price.
c. No. A binding price floor doesn't benefit any sellers because sellers will be unwilling to sell any of their products.
d. Yes. A binding price floor benefits all sellers because it allows all sellers to sell as much as they produce on the legal market.
e. No. A binding price floor benefits only some sellers because not all are able to sell as much as they would like in the legal market.

You are a senator from Kansas who wants to help farmers. You have worked to encourage the passage of a law that would impose a binding price floor on wheat. What would you expect your critics to say?
a. The binding price floor will cause a surplus of wheat that farmers will be unable to sell.
b. The binding price floor will encourage consumers to eat too much wheat.
c. The binding price floor will discourage farmers from using the most productive farming
methods available.
d. The binding price floor will discourage farmers from planting wheat and they will plant other crops instead.
e. The binding price floor will cause a shortage of wheat.

Which of the following is a correct statement about a minimum wage law?
a. It is a price ceiling law that makes wages higher than the market equilibrium price.
b. It is a price floor law that forces wages to be lower than the market equilibrium price.
c. It causes prices to rise as producers pay more for labor.
d. It ensures that all who want a job can get a job with a high enough wage.
e. It reduces costs for employers.

Why is raising the minimum wage generally ineffective?
a. The minimum wage is an amount suggested by the government, and employers are under no obligation to pay their employees the suggested basic wage.
b. Most employers purchase labor on the black market, where the binding price floor is not present.
c. Most employees who hold low-wage jobs work in the black market, where the binding price floor doesn't exist.
d. Employees are often unconcerned with their wages and care more about the benefits that come with the job.
e. The minimum wage is usually set below the prevailing equilibrium wage and is frequently nonbinding.

As a seller of a product subject to a binding price floor, you would be better off in which of the following situations?
You would be better off under a binding price floor because you would be able to sell all that you produce at a higher price.
You would be better off under a binding price floor because you would be able to sell goods that are smaller and cost less to produce.
You would be better off under a binding price floor because you would be able to sell goods of lower quality, which cost less to produce.
You would be better off under a binding price floor because you could sell any of the resulting surplus to the government.
There is no scenario where a seller is better off when selling a good that is subject to a binding price floor.

se the following information to answer the questions that follow.
Market for used cars:
Demand: Qd = 154,000 – 86 P
Supply: Qs =  –100 + 14 P
What would be the equilibrium quantity for used cars?100154,10021,4741,541153,900

What will be the amount of government expenditure required if a price floor for corn is set at \$4.50 and the government agrees to purchase the amount of disequilibrium?

As a voter, why would or wouldn’t you vote for a referendum calling for an increase in the minimum wage? What consequences would result from raising the minimum wage?

Let’s say that you are a politician who promises cheaper gasoline for everyone in the country if you are elected. Once you are elected, you make gas cheaper by imposing a price ceiling that is one full dollar less than the market’s equilibrium price. What would be the reaction of the sellers of gasoline and of the public to your price ceiling law? Would you expect to be reelected in the long run?

In some countries, a binding price ceiling is placed on prescription medicines. What would you expect the prescription medicine market to be like in these countries?
The legal maximum price would mean that all consumers are able to receive the medicines they need at a price they can afford.
The legal maximum price would mean that pharmaceutical companies face an incentive to sell more prescription medicines in that country.
The legal maximum price would mean that it is unlikely that an illegal and dangerous black market for prescription drugs will form in that country.
The legal maximum price would mean that pharmaceutical companies face an incentive to develop new prescription medicines.
The legal maximum price would mean that not all consumers will have access to prescription medicines.

What is the amount of the shortage or surplus in the market for public transportation when the price ceiling is \$1.75?

Five fishermen live in a village and have no other employment or income-earning possibilities besides fishing. They each own a boat that is suitable for fishing but does not have any resale value. Fish are worth \$5 per pound, and the marginal cost of operating the boat is \$500 per month. They all fish a river next to the village. According to the following schedule, they have determined that, when there are more of them out on the river fishing, they each catch fewer fish per month.'
If four boats operate, then each boat will make a profit of:

The city decides to offer a subsidy to each homeowner’s association that plants more flowers in their common areas. In the market for flowers, this will cause the:
supply curve to shift to the left.
supply curve to shift to the right.
demand curve to shift to the left.
demand curve to shift to the right.
the supply curve to shift to the left and the demand curve to shift to the right.

Refer to the accompanying figure. When a negative externality exists and the government does not intervene, which point best identifies the market equilibrium?

Your roommate is studying to be a chef and likes to try new recipes. He leaves his delicious creations in the refrigerator for anyone who wants to eat them. The food he leaves is always gone within a day. This is an example of:

The market works efficiently in the absence of externalities if the good is

Individuals who haven’t studied economics may not understand how all-you-can-eat buffets manage to make money. This can be explained by the concept of __________, which makes each trip to the buffet line less satisfactory than the previous one.

The combination of goods and services that maximizes utility for a given income is called

To maximize your satisfaction when deciding between two goods:

Higher prices:

Kim and James are on a road trip across the country. They both say that they get 25 utils from peanut butter sandwiches and 25 utils from trail mix. Knowing this, we can conclude that Kim:

Dave gets 20 utils from consuming guacamole and 15 utils from consuming salsa; Buster gets 30 utils from the same guacamole and 15 utils from salsa. Given this information, a researcher can conclude that:

Cellphone companies rely on the ___________ of conversation to make unlimited night and weekend diminishing marginal utility

You are a senator from Kansas who wants to help farmers. You have worked to encourage the passage of a law that would impose a binding price floor on wheat. What would you expect your critics to say?

When supply shifts to the right and demand stays constant, the equilibrium price:

What is the surplus when the price floor is \$1.75 in the market for public transportation?

Refer to the accompanying graph. If consumers expect the price of a good to decrease in the future and all else is held constant, we would assume that the demand curve would:

Who potentially benefits from a price floor?

Which is a correct statement about a rent control law?

Why are binding price floor laws passed?

If you were a politician, why would you find it difficult to remove a binding price ceiling?

The minimum wage law is an example of a:

Why does a shortage that occurs under a binding price ceiling decrease over time?

Which of the following represents a point that is unattainable with current resources and technology?

Imagine you find yourself in a heat wave and your air conditioner has broken. Unable to find a new one at the store because of a price gouging law, you purchase an air conditioner on the black market. What role did the price gouging law have?

In the first few months of 2012, the price of gasoline increased by approximately 15%. Because of this increase, we would expect the _________ curve in the market for hybrid cars to _________.

What will happen in a market where a nonbinding price ceiling is removed?

Joanna was laid off from her job 11 months ago. After searching for a job for months, Joanna finds a job but is only offered part-time work. Joanna would rather be working full-time. Economists would classify Joanna as:

Zero unemployment:

Typically during a recession, the percentage of the total unemployed that are classified under short-term unemployment ____________ and the percentage classified as long-term unemployment ____________.

Employment data is released ___________ gross domestic product (GDP) data.

Which of the following is a topic of microeconomics?

Katherine was laid off from her job 11 months ago. After searching for a job for months, Katherine gives up her job search because she feels there are no jobs available for her. Economists would classify Katherine as:

Some jobs in the economy are no longer needed after an advancement in technology. A person who loses his job this way would be considered:

Which of the following statements is true about the natural rate of unemployment?

During which period was the economy in a contraction?

Which of the following questions does the official unemployment rate answer?

The state of Florida spends \$3 million to repave highways. This is included in the ______ category of GDP.

Bob wins the lottery. This ________ included in ________ category of GDP.

Between 1979 and 2012, service industries employment in the United States has:

Real GDP increases if:

In Bovania, milk constitutes 56% of the typical basket of goods for a typical consumer. Let`s say the price of milk rises by 7% and the prices of all other goods fall by 4%. Based on the information given, we can definitely say:

In Nation A, the price index rises from 110 to 120 in a particular year. In the same year, the price level rises from 120 to 130 in Nation B. This means:

Three accuracy problems with the consumer price index (CPI) are:

In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las Vegas currently and your salary is \$57,000. You are offered a promotion and pay raise of \$70,000 to move to San Francisco. If you take the promotion:

1.          Why do government leaders impose price controls?

a.  They are trying to promote the formation of black markets.

b.  They are trying to ensure that the market reaches equilibrium.

c.  They are trying to ensure that all consumers are able to purchase a specific product.

d.  They are trying to ensure that a social goal is satisfied.

e.  They are trying to increase the demand curve.

3.  The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements would be an example of a:

a.  minimum wage law.

b.  fair wage law.

c.  price ceiling.

d.  black market price.

e.  ration price.

5.  If a store sells a good at the market price, even though the government authorities have set the maximum price that can be charged for it, the store is selling the good in a(n):

a.  black market for a market price that is higher.

b.  black market for a market price that is lower.

c.  effort to eliminate a surplus of the good.

d.  legal market for a market price that is higher.

e.  legal market for a market price that is lower.

7.  A binding price ceiling will have the following consequences:

a.  There will be downward pressure on prices until quantity demanded equals quantity supplied.

b.  There will be upward pressure on prices until quantity demanded equals quantity supplied.

c.  There are no consequences to a binding price ceiling.

d.  The quantity demanded will always exceed the quantity supplied.

e.  The quantity demanded will always be smaller than the quantity supplied.

9.  What will happen in a market where a binding price ceiling is removed?

a.  There will be downward pressure on the price in the legal market.

b.  The products sold will improve in quality and become more plentiful.

c.  Sellers will face a reduced incentive to sell the product.

d.  Buyers will find the good more difficult to obtain in the legal market.

e.  There will be increased pressure to buy and sell the good on the black market.

11.  Why does a surplus exist under a binding price floor?

a.  It encourages sellers to produce less of the product.

b.  It encourages buyers to purchase more of the product.

c.  It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.

d.  It makes the price so low that the quantity demanded exceeds the quantity supplied on the legal market.

e.  It discourages sellers from increasing the quality of the product they sell, which, in turn, increases the quantity demanded.

13.  Which of the following is an accurate statement about the consequence of a binding price ceiling?

a.  Binding price ceilings do not allow consumers to pay a lower price for the product in the legal market.

b.  Binding price ceilings encourage the formation of a black market.

c.  Binding price ceilings discourage the formation of a black market.

d.  Binding price ceilings create a surplus of the product.

e.  Binding price ceilings cause consumers to purchase more of the product in the legal market.

15.  Mortimer loves sushi. He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law. Who would be affected by this law and how?

a.  Sellers would benefit from such a law because they would receive a higher price for their product.

b.  Consumers would benefit from such a law because prices would be lower and all would be able to purchase sushi cheaply.

c.  Consumers would benefit from such a law because the sushi would be made of higher-quality fish, and each serving would be larger than it had been with no binding price ceiling in place.

d.  Some consumers would benefit from such a law because prices for sushi would be lower for those able to buy it in the legal market.

e.  Sellers would benefit from such a law because they would be able to sell higher-quality sushi and thus capture a larger share of the market.

Use the following information to answer the next two questions.

Market for flat-screen TVs:

Demand: Qd = 2,600 – 5 P

Supply: Qs = –1,000 + 10 P

16.            What would be the quantity demanded if a price ceiling is set at \$150?

a.  500

b.  1,850

c.  240

d.  1,350

e.  260

17.  What would be the quantity demanded if a price ceiling is set at \$400?

a.  600

b.  1400

c.  0

d.  3,000

e.  2,400

23.  Which of the following is an accurate statement about the consequence of nonbinding price ceilings?

a.  They prevent the seller from receiving the equilibrium price.

b.  They require the seller to advertise the product at the equilibrium price.

c.  They create a surplus in the legal market.

d.  They do not change the quantity of goods bought or sold in the legal market.

e.  They increase the quantity demanded of the good in question.

25.  If a price ceiling is imposed at \$15 per unit when the equilibrium market price is \$12, there will be:

a.  no surplus or shortage.

b.  a surplus.

c.  a shortage.

d.  a downward pressure on prices.

e.  an upward pressure on prices.

Refer to the accompanying figure to answer the next two questions.

29.            The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity demanded change?

a.  It would increase by 12,000 units.

b.  It would decrease by 30,500 units.

c.  It would decrease by 12,000 units.

d.  It would increase by 30,500 units.

e.  It would increase by 30,000 units.

Oil is a main component in the manufacture of plastic bags. If the price of oil were to increase, the price of plastics bags would:

The equilibrium price of peanut butter is \$5. A study comes out that says the fat in peanut butter is good for your heart. Holding all other factors constant, which of the following scenarios could happen?

What is the surplus when the price floor is \$.75 in the market for public transportation?

With no barriers to entry or exit and when firms in a market are operating at a loss, you can expect other firms to exit, causing the _________ curve to shift to the _________ and making the equilibrium price _________ and the equilibrium quantity _________.

Assume that the market for iPods has only two consumers: Chuck and Ryan. According the table above, if the price of an iPod is \$85, the market will demand:

The town of Fairness has a law that says that wages should be high enough to ensure that all people can afford to buy enough food to feed their families. The law that sets food prices low enough to meet these requirements would be an example of a:

Imperfect markets:

When a hurricane rips through Florida, the price of oranges rises because the:

If the price floor for corn is set at \$5.00, what amount and type of disequilibrium will be present in the market for corn?

You would expect there to be many customers for a black market good when the opportunity cost of finding the good under a:

Given current resources and technology, the unattainable range is best described as:

At what price level does the labor market experience its largest shortage?

Some studies have shown that eating chocolate before a test can increase brain activity, thereby causing students to score higher on exams. When these findings were announced, the price and quantity sold of chocolate increased in college towns. One reason for this could have been that the:

The opportunity cost of working rather than going to school is:

Economists use the scientific method and the tools of economic study:

Which point in the corresponding figure represents a combination of smoothies and milk shakes that society cannot currently produce?

Which following change in the coffee market would shift the supply curve to the right?

If a price ceiling is imposed at \$15 per unit when the equilibrium market price is \$12, there will be:

A good is ________ if it takes even a small amount of time, energy, or money to acquire.

You would expect there to be many customers for a black market good when the opportunity cost of finding the good under a:

Suppose you find a production possibilities frontier (PPF) that is shaped like a straight line. What can you determine about the production of the two goods?

At what price level does the apartment market experience its largest surplus?

When supply shifts left and demand shifts to the right:

Wine and cheese are complement goods because they are consumed together. What would you expect to happen to the equilibrium quantity of cheese if the price of wine increased and all else is held constant?

What will happen in a market where a binding price floor is removed?

The market is currently at market equilibrium. If a binding price ceiling of P 1 is imposed, by how much would the quantity supplied change?

Jamal works in a factory in Lake Zurich, Illinois, assembling toy trains. The factory owner updates the current equipment and installs new robots that can do Jamal’s job. As a result, Jamal is laid off and is now unemployed. Jamal would be considered:

What is the value of nominal GDP in 2009?

Real GDP is equal to:

When you buy a new car built by Ford, it is included in the ________ category of GDP.

Between quarter 2 and quarter 3, real GDP grew by what percentage?

Economic growth is best measured by changes in:

Which of the following statements about the composition of the labor force is correct?

A member of the labor force is defined as:

When actual unemployment is less than its natural rate:

Underemployed workers are:

Company X sells paper to company Y for \$100,000. Company Y uses the paper to make textbooks, selling them to consumers for \$500,000. The total contribution to GDP is:

A company sells 100 boxes of chocolate, yet it only produced 90 boxes of chocolate during the year. Which of the following is true?

One misconception that people often have about unemployment is that:

Which of the following represents the largest share of U.S. GDP?

Real GDP is GDP adjusted for changes in:

If nominal GDP changed by 6% and the price level changed by 2%, then real GDP changed by:

The definition of short-term unemployment is unemployment that lasts:

Assuming the price level increased, if real GDP is greater than nominal GDP for a given year, then:

Which of the following is a service?

If the labor force participation rate increases:

What was the GDP deflator in 2012?

The GDP deflator is a measure of:

What was the rate of inflation between the two years?

Which of the following is a topic of macroeconomics?

Brian Murphy is a political consultant for a candidate in Massachusetts. Mr. Murphy’s candidate is defeated in the November election, and as a result, Mr. Murphy finds himself unemployed. Mr. Murphy’s unemployment is classified as:

Nominal GDP increases if:

Knowing the length of unemployment is important because:

To calculate the labor force participation rate, you only need to know:

Holding all else constant, if people who are currently discouraged workers decide to start looking for jobs again, you will see:

When an unemployed worker receives a payment from the government as a result of being unemployed, it is:

During which year was average income climbing the most rapidly?

The invention of the Internet has reduced ____________ unemployment because it allows for workers and employers to find each other more quickly

Nominal GDP increased from \$14.0 trillion to \$14.7 trillion, and the price level increased from 120 to 126. Which of the following is true?

Which of the following questions does the official unemployment rate answer?

An index of the average prices of all goods and services throughout the economy is called:

When George buys a new computer for his business, it is included in GDP as _______, and when he buys a new computer for use at home, it counts as ________.

An accurate measure of GDP is derived by adding:

30.  The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity supplied change?

a.  It would increase by 32,000 units.

b.  It would decrease by 18,000 units.

c.  It would decrease by 30,500 units.

d.  It would decrease by 30,000 units.

e.  It would decrease by 32,000 units.

Refer to the accompanying figure to answer the next two questions.

31.            If there is a \$60 price ceiling imposed on a textbook, what will be the disequilibrium amount?

a.  There will be a shortage of 800,000 textbooks.

b.  There will be a surplus of 800,000 textbooks.

c.  There will be neither a shortage nor a surplus.

d.  There will be a shortage of 2,600,000 textbooks.

e.  There will be a shortage of 400,000 textbooks.

32.  If there is a \$180 price ceiling imposed on a textbook, what will be the disequilibrium amount?

a.  There will be a shortage of 1,500,000 units.

b.  There will be a shortage of 800,000 units.

c.  There will not be a shortage.

d.  There will be a shortage of 3,000,000 units.

e.  There will be a shortage of 450,000 units.

33.  What is the amount of the shortage or surplus in the market for public transportation when the price ceiling is \$1.75?

Market for Public Transportation
Price
Quantity Demanded
Quantity Supplied
\$0.75
100,000
65,000
\$1.00
92,000
80,000
\$1.25
86,000
86,000
\$1.50
80,000
100,000
\$1.75
75,000
115,000
\$2.00
68,000
116,000
a.  100,000

b.  86,000

c.  75,000

d.  40,000

e.  0 (zero)

37.  What is the incentive to create a black market when a binding price ceiling exists?

a.  A black market emerges because sellers have a surplus that they need to sell.

b.  A black market emerges because sellers want a market where they can sell lower-quality products.

c.  A black market emerges because sellers want a market where they can sell higher-quality products at higher prices.

d.  A black market does not emerge because sellers are content to sell at the lower price.

e.  A black market emerges because buyers who have a low opportunity cost are seeking out the product.

39.  What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

a.  Both the quality and the size of the product will decrease.

b.  The quality of the product will increase but the size of the product will decrease.

c.  Both the quality and the size of the product will increase.

d.  The quality of the product will decrease but the size of the product will increase.

e.  Neither the quality nor the size of the product will be affected.

41.  If a good is subject to a binding price ceiling and you purchase it on the black market, what do you expect to happen to the availability of the good over time?

a.  The availability of the good will rise over time as the supply curve becomes more elastic and the demand curve becomes more inelastic. (The shortage of the good will fall.)

b.  The availability of the good will fall over time as both the supply and demand curves become more elastic. (The shortage of the good will fall.)

c.  The availability of the good will fall over time as both the supply and demand curves become more elastic. (The shortage of the good will rise.)

d.  The availability of the good will rise over time as the demand curve becomes more elastic and the supply curve becomes more inelastic. (The shortage of the good will fall.)

e.  The availability of the good will not change over time.

43.  Let’s say that you have a friend who was caught illegally selling a good on the black market. When the judge asks you to describe your friend’s motivation as a seller, which of the following would most likely be your reply?

a.  My friend sold the good on the black market because a binding price floor had created a shortage in the legal market and my friend was performing a public service by making the good available.

b.  My friend sold the good on the black market because a nonbinding price ceiling caused the price to be lower on the black market.

c.  My friend sold the good on the black market because a nonbinding price floor had created a shortage in the legal market and my friend was performing a public service by making the good available.

d.  My friend sold the good on the black market because a nonbinding price floor made the good too expensive to purchase in the legal market and it was cheaper on the black market.

e.  My friend sold the good on the black market because a binding price floor resulted in a surplus of the product in the legal market and he needed to get rid of the surplus.

67.  Tina, an economics student, was just named Miss Florida, based in part on her answer to the question of why price gouging laws should be relaxed in that state. Tina won because she gave which of the following answers?

a.  They prevent customers who are willing to pay higher prices for needed products from doing so during a time of disaster.

b.  They cause consumers to consume more of certain products during a time of disaster.

c.  They cause producers to overproduce products during a time of disaster.

d.  They act as a binding price floor in a time of disaster.

e.  They cause a surplus in the product during a time a time of disaster.

69.  The town of Fairness has a law stating that wages should be high enough to ensure that all people can afford to buy enough food for their families. The law that sets wages would be an example of a:

a.  minimum wage law.

b.  fair wage law.

c.  price ceiling.

d.  black market price.

e.  ration price.

71.  The minimum wage law is an example of a:

a.  price floor.

b.  price ceiling.

c.  law that requires quantity demanded to equal quantity supplied.

d.  law that allows individual employers and employees to make free decisions.

e.  law that sets the minimum number of hours that an employee must work for wages during the week.

73.  What will happen in a market where a binding price floor is removed?

a.  The products sold will become scarcer.

b.  There will be upward pressure on the prices.

c.  There will be downward pressure on the prices.

d.  The price or quantity of the product sold in the legal market will not change.

e.  There will be increased pressure to buy and sell the good on the black market.

75.  Why are binding price floor laws passed?

a.  They make goods less expensive.

b.  They make goods available to the largest number of customers.

c.  They encourage producers to produce goods in the most cost-efficient fashion.

d.  They help producers receive higher prices for products sold in the legal market.

e.  They discourage the formation of illegal black markets.

77.  Do all sellers benefit from a binding price floor?

a.  No. A binding price floor benefits only some sellers because not all are able to sell as much as they would like in the legal market.

b.  Yes. A binding price floor benefits all sellers because it allows all sellers to sell as much as they produce on the legal market.

c.  No. A binding price floor doesn’t benefit any sellers because sellers will be unwilling to sell any of their products.

d.  No. A binding price floor benefits only some sellers because the price is initially higher but then eventually decreases to the equilibrium price.

e.  No. A binding price floor doesn’t benefit any buyers because buyers are unwilling to purchase any of the products at a price lower than the equilibrium.

79.  As a seller of a product subject to a binding price floor, you would be better off in which of the following situations?

a.  You would be better off under a binding price floor because you would be able to sell all that you produce at a higher price.

b.  You would be better off under a binding price floor because you would be able to sell goods that are smaller and cost less to produce.

c.  You would be better off under a binding price floor because you would be able to sell goods of lower quality, which cost less to produce.

d.  You would be better off under a binding price floor because you could sell any of the resulting surplus to the government.

e.  There is no scenario where a seller is better off when selling a good that is subject to a binding price floor.

Use the following information to answer the next three questions.

Market for flat-screen TVs:

Demand: Qd = 2,600 – 5 P

Supply: Qs = –1,000 + 10 P

81.            What would be the equilibrium quantity for flat-screen TVs?

a.  240

b.  140

c.  24

d.  1,400

e.  1,600

82.  What would be the quantity demanded if a price floor is set at \$300?

a.  900

b.  200

c.  240

d.  1,100

e.  2,000

83.  What would be the quantity demanded if a price floor is set at \$100?

a.  240

b.  2,100

c.  0

d.  1,400

e.  700

Use the following table to answer the next two questions.

Market for Corn
Year
Price
Quantity Demanded
Quantity Supplied
1
\$2.00
200,000
100,000
2
\$2.50
186,000
125,000
3
\$3.00
184,000
141,000
4
\$3.50
169,000
169,000
5
\$4.00
161,000
181,000
6
\$4.50
155,000
200,000
7
\$5.00
120,000
223,000
92.            If the price floor for corn is set at \$5.00, what amount and type of disequilibrium will be present in the market for corn?

a.  There will be no shortage or surplus.

b.  There will be a shortage of 103,000.

c.  There will be a surplus of 103,000.

d.  There will be a surplus of 223,000.

e.  There will be a surplus of 120,000.

93.  What will be the amount of government expenditure required if a price floor for corn is set at \$4.50 and the government agrees to purchase the amount of disequilibrium?

a.  \$202,500

b.  \$45,000

c.  no government payment required

d.  \$10,000

e.  \$900,000

95.  The government has imposed a price control for many agricultural products in an effort to support farmers. In the case of price floor P2 in the accompanying figure, how much of a disequilibrium in quantity exists?

a.  a shortage of 30,000 units

b.  a surplus of 120,000 units

c.  30,000 units

d.  a surplus of 30,000 units

e.  an excess of \$3

97.  What will happen in a market where a nonbinding price floor is removed?

a.  The products sold will become more plentiful.

b.  The price or quantity of the product sold on the legal market will not change.

c.  There will be upward pressure on the prices.

d.  There will be downward pressure on the prices.

e.  There will be increased pressure to buy and sell the good on the black market.

103.  Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a nonbinding price floor on most products?

a.  The products sold will become more plentiful.

b.  The products sold will become less plentiful.

c.  There will be upward pressure on the prices.

d.  There will be downward pressure on the prices.

e.  The price and the quantity sold in the community without a nonbinding price floor will be the same as the price and quantity in the community with a nonbinding price floor.

Refer to the accompanying figure for the next two questions.

104.          The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P1, predict the resulting surplus or shortage.

a.  There would be a shortage of 75,000 units.

b.  There would be a surplus of 75,000 units.

c.  There would be neither a shortage nor a surplus.

d.  There would be a shortage of 150,000 units.

e.  There would be a surplus of 150,000 units.

105.  The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P3, predict the resulting surplus or shortage.

a.  There would be a shortage of 75,000 units.

b.  There would be a surplus of 75,000 units.

c.  There would be neither a shortage nor a surplus.

d.  There would be a shortage of 150,000 units.

e.  There would be a surplus of 150,000 units.

109.  Refer to the accompanying figure. If the government has a budget of \$300,000 to purchase surplus shampoo, what is the maximum possible floor price that could be imposed?

a.  \$1

b.  \$2

c.  \$3

d.  \$4

e.  \$5

45.  One strategy I might use to be elected mayor of a university town is to place a binding price ceiling on rent for student apartments. What will happen if I get elected and am able to pass such a law?

a.  The price ceiling will increase the number of apartments available for rent.

b.  The price ceiling will cause the demand curve to shift.

c.  The price ceiling will cause the supply curve to shift.

d.  The price ceiling will decrease the number of students who want to rent an apartment.

e.  The price ceiling will cause students to sleep in their cars or to move in with their friends because they won’t be able to find a place to live.

47.  You are the president of the United States. In an attempt to make prescription drug prices cheaper, you have imposed a binding price ceiling on drugs. What would you expect your critics to say?

a.  The binding price ceiling will encourage companies to overproduce drugs and will result in waste.

b.  The binding price ceiling will discourage patients from obtaining the drugs they need.

c.  The binding price ceiling will increase the likelihood that consumers will obtain needed drugs on the black market.

d.  The binding price ceiling will cause firms to spend too many resources on the research and development of new drugs.

e.  The binding price ceiling will cause firms to spend too much time making a drug without any flaws.

49.  Suppose you live in a community with no price controls. What do you expect will happen if your town borders a community where there is a binding price ceiling on most products?

a.  Prices in the legal market in the community with a binding price ceiling will rise.

b.  Prices in the legal market in the community with a binding price ceiling will fall.

c.  There will be shortages in the community with a binding price ceiling.

d.  More consumers will purchase the product in the community with the price ceiling.

e.  The black market in your community will be larger than the black market in the community with the binding price ceiling.

51. How do consumers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

a.  Consumers are increasingly willing to substitute away from the good, and their elasticity of demand becomes less elastic.

b.  There are no changes, and elasticity remains unchanged.

c.  Consumers are increasingly willing to substitute away from the good, and their elasticity of demand becomes more elastic.

d.  Consumers are less willing to substitute away from the good, and their elasticity of demand becomes less elastic.

e.  Consumers are less willing to substitute away from the good, and their elasticity of demand becomes more elastic.

53.  Refer to the accompanying figure, which shows both short-run and long-run demand and supply curves. If there is a \$4 binding price ceiling imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run?

a.  There will be a shortage of 1,500,000 units.

b.  There will be a shortage of 800,000 units.

c.  There will not be a shortage; there will be a surplus.

d.  There will be a shortage of 2,000,000 units.

e.  There will be a shortage of 500,000 units.

55.  What will I do differently as a seller in the black market in the long run?

a.  I will substitute away from producing the product.

b.  I will substitute toward producing the product.

c.  When there exists a binding price floor, I will be able to sell the good at a higher price.

d.  When there exists a binding price ceiling, I will be able to sell the good at a lower price.

e.  What I as a seller do in the long run will be no different from what I do in the short run.

57.  An example of a binding price ceiling is:

a.  a minimum wage law that is set above the equilibrium price.

b.  rent control that is set above the equilibrium price.

c.  a black market that sets the price below the equilibrium price.

d.  a minimum wage law that is set below the equilibrium price.

e.  rent control that is set below the equilibrium price.

59.  Apartment rent control in New York City is an example of:

a.  government intervention to ensure a market equilibrium is reached.

b.  a subsidy for landlords.

c.  a nonbinding price floor.

d.  a binding price ceiling.

e.  a black market.

Refer to the accompanying table to answer the next five questions.

Monthly Rent
Quantity of Apartments Demanded
Quantity of Apartments Supplied
\$1,500
136,500
78,100
\$1,550
112,750
83,760
\$1,600
107,000
87,900
\$1,650
100,100
94,250
\$1,700
98,450
98,450
\$1,750
95,000
118,500
\$1,800
92,800
125,600
61.            At what price level does the apartment market reach equilibrium?

a.  \$1,500

b.  \$1,550

c.  \$1,600

d.  \$1,650

e.  \$1,700

62.  At what price level does the apartment market experience its largest shortage?

a.  \$1,500

b.  \$1,550

c.  \$1,700

d.  \$1,750

e.  \$1,800

63.  At what price level does the apartment market experience its largest surplus?

a.  \$1,500

b.  \$1,550

c.  \$1,700

d.  \$1,750

e.  \$1,800

64.  If rent control is established at \$1,550, what would be the amount of disequilibrium in the apartment market?

a.  There would be a shortage of 28,990 apartments.

b.  There would be a surplus of 28,990 apartments that is reduced, over time, as individuals rent apartments in the illegal black market.

c.  There would be neither a shortage nor a surplus.

d.  There would be a surplus of 28,990 apartments that is eliminated through individuals renting apartments in the illegal black market.

e.  There would be a surplus of 28,990 apartments that increases as houses and condominiums are converted into apartments.

65.  If rent control is established at \$1,750, what would be the amount of disequilibrium in the apartment market?

a.  There would be a shortage of 23,500 apartments.

b.  There would be a surplus of 23,500 apartments that is reduced, over time, as individuals rent apartments in the illegal black market.

c.  There would be neither a shortage nor a surplus.

d.  There would be a surplus of 23,500 apartments that is eliminated through individuals renting apartments in the illegal black market.

e.  There would be a surplus of 23,500 apartments that increases as houses and condominiums are converted into apartments,

111.  You are a senator from Kansas who wants to help farmers. You have worked to encourage the passage of a law that would impose a binding price floor on wheat. What would you expect your critics to say?

a.  The binding price floor will discourage farmers from planting wheat and they will plant other crops instead.

b.  The binding price floor will encourage consumers to eat too much wheat.

c.  The binding price floor will discourage farmers from using the most productive farming methods available.

d.  The binding price floor will cause a shortage of wheat.

e.  The binding price floor will cause a surplus of wheat that farmers will be unable to sell.

113.  As the time frame shifts from the short run to the long run, what happens to consumers who are subject to a binding price floor?

a.  They are increasingly willing to substitute away from the good, and the demand curve becomes less elastic.

b.  There are no changes, and elasticity remains unchanged.

c.  They are less willing to substitute away from the good, and the demand curve becomes less elastic.

d.  They are increasingly willing to substitute away from the good, and the demand curve becomes more elastic.

e.  They are less willing to substitute away from the good, and the demand curve becomes more elastic.

115.  Who potentially benefits from a price floor?

a.  workers

b.  employers

c.  no one

d.  renters

e.  consumers

121.  How would an economist explain a teenager’s continued unemployment where there exists a minimum wage?

a.  The minimum wage law made it such that the quantity of labor willing to work at that wage was less than the quantity of labor demanded at that wage.

b.  The minimum wage law made it illegal to hire teenagers because they likely would have been unable to work a minimum number of hours.

c.  The minimum wage law made it such that the quantity of labor willing to work at that wage was greater than the quantity of labor demanded at that wage.

d.  The minimum wage law made it such that the market had reached equilibrium.

e.  The minimum wage law was nonbinding.

Question 1

What is a black market?

Select one:

a. It is an illegal market that emerges when binding and nonbinding price controls are in place.

b. It is an illegal market that emerges when only binding price ceilings and binding price floors are in place.

c. It is an illegal market that emerges when no price controls are present.

d. It is an illegal market that emerges when binding price floors are in place.

e. It is an illegal market that emerges when binding price ceilings are in place.

Question 2

Why are binding price ceiling laws passed?

Select one:

a. They encourage producers to sell higher-quality products.

b. They permit customers to obtain higher-quality products.

c. They encourage sellers to produce more of a good.

d. They make goods more expensive (and profitable) for firms.

e. They make a good less expensive for those customers who are able to purchase the good in the legal market.

Question 3

Mortimer loves sushi. He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law. Who would be affected by this law and how?

Select one:

a. Consumers would benefit from such a law because prices would be lower and all would be able to purchase sushi cheaply.

b. Sellers would benefit from such a law because they would receive a higher price for their product.

c. Consumers would benefit from such a law because the sushi would be made of higher quality fish, and each serving would be larger than it had been with no binding price ceiling in place.

d. Some consumers would benefit from such a law because prices for sushi would be lower for those able to buy it in the legal market.

e. Sellers would benefit from such a law because they would be able to sell higher-quality sushi and thus capture a larger share of the market.

Question 4

Use the following information to answer the questions that follow. Market for flat-screen TVs:

Demand: Qd = 2,600 – 5 P

Supply: Qs = –1,000 + 10 P

What would be the quantity demanded if a price ceiling is set at \$150?

Select one:

a. 240

b. 260

c. 1,350

d. 500

e. 1,850

Question 5

Use the following information to answer the questions that follow. Market for used cars:

Demand: Qd = 154,000 – 86 P

Supply: Qs = –100 + 14 P

What would be the quantity demanded if a price ceiling is set at \$1,000?

Select one:

a. 500

b. 68,000

c. 13,900

d. 54,100

e. 21,474

Question 6

Use the following information to answer the questions that follow. Market for a new hardcover book:

Demand: Qd = 435 – 8 P

Supply: Qs = –60 + 3 P

What would be the quantity demanded if a price ceiling is set at \$50?

Select one:

a. 35

b. 75

c. 265

d. 90

e. 165

Question 7

Use the following table to answer the questions that follow.

If the price ceiling for corn is \$2.50, what amount and type of disequilibrium would be present in the market for corn?

Select one:

a. There would be a shortage of 186,000.

b. There would be a shortage of 61,000.

c. There would be a surplus of 61,000.

d. There would be a shortage of 125,000.

e. There would be neither a shortage nor a surplus.

Question 8

What is the amount of the shortage or surplus in the market for public transportation when the price ceiling is \$1.75?

Select one:

a. 0 (zero)

b. 100,000

c. 40,000

d. 75,000

e. 86,000

Question 9

Suppose you live in a community with no price controls. What do you expect will happen if your town borders a community where there is a nonbinding price ceiling on most products?

Select one:

a. The black market in the community with a binding price ceiling will not be strong because consumers will simply purchase the product in the community that has no price ceiling.

b. The price and the quantity sold in the community without a nonbinding price ceiling will be the same as the price and quantity in the community with a nonbinding price ceiling.

c. There will be more shortages in the community with a binding price ceiling.

d. Legal market prices will rise in the community with a binding price ceiling.

e. Legal market prices will fall in the community with a binding price ceiling.

Question 10

What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

Select one:

a. The quality of the product will decrease but the size of the product will increase.

b. Both the quality and the size of the product will decrease.

c. Neither the quality nor the size of the product will be affected.

d. Both the quality and the size of the product will increase.

e. The quality of the product will increase but the size of the product will decrease.

Question 11

Let’s say that you have a friend who was caught illegally buying a good on the black market. When the judge asks you to describe your friend’s motivation as a buyer, which of the following would most likely be your reply?

Select one:

a. My friend bought the good on the black market because a binding price floor had created a shortage in the legal market and my friend really needed the good.

b. My friend bought the good on the black market because a binding price floor made the good too expensive to purchase on the legal market and it was cheaper on the black market.

c. My friend bought the good on the black market because a nonbinding price floor made the good too expensive to purchase on the legal market and it was cheaper on the black market.

d. My friend bought the good on the black market because a price ceiling caused the price to be lower on the black market.

e. My friend bought the good on the black market because a nonbinding price floor had created a shortage on the legal market and my friend really needed the good.

Question 12

Refer to the accompanying figure. At what price would there be the least pressure to form a black market? Select one:

a. \$20

b. \$8

c. \$13

d. \$5

e. \$15

Question 13

Refer to the accompanying table to answer the questions that follow.

At what price level does the apartment market reach equilibrium?

Select one:

a. \$1,700

b. \$1,500

c. \$1,650

d. \$1,550

e. \$1,600

Question 14

The minimum wage law is an example of a:

Select one:

a. law that requires quantity demanded to equal quantity supplied.

b. price ceiling.

c. law that sets the minimum number of hours that an employee must work for wages during the week.

d. price floor.

e. law that allows individual employers and employees to make free decisions.

Question 15

Do all sellers benefit from a binding price floor?

Select one:

a. No. A binding price floor doesn’t benefit any sellers because sellers will be unwilling to sell any of their products.

b. No. A binding price floor benefits only some sellers because not all are able to sell as much as they would like in the legal market.

c. No. A binding price floor doesn’t benefit any buyers because buyers are unwilling to purchase any of the products at a price lower than the equilibrium.

d. No. A binding price floor benefits only some sellers because the price is initially higher but then eventually decreases to the equilibrium price.

e. Yes. A binding price floor benefits all sellers because it allows all sellers to sell as much as they produce on the legal market.

Question 16

If a price floor is imposed at \$15 per unit when the equilibrium market price is \$12, there will be:

Select one:

a. a downward pressure on prices.

b. a surplus.

c. mass hysteria

d. no surplus or shortage.

e. a shortage.

Question 17

What will happen in a market where a nonbinding price floor is removed?

Select one:

a. There will be upward pressure on the prices.

b. There will be increased pressure to buy and sell the good on the black market.

c. There will be downward pressure on the prices.

d. The products sold will become more plentiful.

e. The price or quantity of the product sold on the legal market will not change.

Question 18

Use the following figure to answer the questions that follow.

The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P3, predict the resulting surplus or shortage.

Select one:

a. There would be a surplus of 75,000 units.

b. There would be a shortage of 75,000 units.

c. There would be a shortage of 150,000 units.

d. There would be neither a shortage nor a surplus.

e. There would be a surplus of 150,000 units.

Question 19

How would an economist explain a teenager’s continued unemployment where there exists a minimum wage?

Select one:

a. The minimum wage law made it such that the quantity of labor willing to work at that wage was greater than the quantity of labor demanded at that wage.

b. The minimum wage law made it illegal to hire teenagers because they likely would have been unable to work a minimum number of hours.

c. The minimum wage law was nonbinding.

d. The minimum wage law made it such that the market had reached equilibrium.

e. The minimum wage law made it such that the quantity of labor willing to work at that wage was less than the quantity of labor demanded at that wage.

Question 20

Why is raising the minimum wage generally ineffective?

Select one:

a. The minimum wage is usually set below the prevailing equilibrium wage and is frequently nonbinding.

b. Most employees who hold low-wage jobs work in the black market, where the binding price floor doesn’t exist.

c. The minimum wage is an amount suggested by the government, and employers are under no obligation to pay their employees the suggested basic wage.

d. Most employers purchase labor on the black market, where the binding price floor is not present.

e. Employees are often unconcerned with their wages and care more about the benefits that come with the job.