question
A price ceiling such as a rent ceiling ___________.
Draw the supply and demand curves, with price on the vertical axis and quantity on the horizontal axis. Equilibrium price and quantity are where they intersect. You can represent a price ceiling by a horizontal line at the level of the ceiling.
Draw the supply and demand curves, with price on the vertical axis and quantity on the horizontal axis. Equilibrium price and quantity are where they intersect. You can represent a price ceiling by a horizontal line at the level of the ceiling.
answer
A. results in a surplus if the ceiling price is less than the equilibrium price
B. always results in a shortage
C. always results in a surplus
D. results in a shortage if the ceiling price is less than the equilibrium price
B. always results in a shortage
C. always results in a surplus
D. results in a shortage if the ceiling price is less than the equilibrium price
question
The opportunity cost of buying a good includes which of the following?
I. the price of the good
II. the value of time spent searching for the good
I. the price of the good
II. the value of time spent searching for the good
answer
A. only I
B. only II
C. neither I nor II
D. both I and II
B. only II
C. neither I nor II
D. both I and II
question
In the U.S. economy, wage rates for various types of labor are determined primarily by ___________.
answer
A. the supply and demand for the various types of labor
B. businesses
C. the federal government
D. the Labor Relations Board
B. businesses
C. the federal government
D. the Labor Relations Board
question
The initial effect of a labor-saving invention, such as automatic teller machines in the banking industry, is ___________.
answer
A. a leftward shift of the supply curve of labor
B. a rightward shift of the supply curve of labor
C. a rightward shift of the demand curve for labor
D. a leftward shift of the demand curve for labor
B. a rightward shift of the supply curve of labor
C. a rightward shift of the demand curve for labor
D. a leftward shift of the demand curve for labor
question
In the short run, with no minimum wage, the introduction of labor-saving inventions in a market for low-skilled labor will cause ___________.
Draw in the supply and demand for labor curves. Now shift the demand curve in the appropriate direction.
Draw in the supply and demand for labor curves. Now shift the demand curve in the appropriate direction.
answer
A. the equilibrium wage rate to rise and the quantity of labor employed to decrease
B. the equilibrium wage rate to fall and the quantity of labor employed to decrease
C. the equilibrium wage rate to rise and the quantity of labor employed to increase
D. the equilibrium wage rate to fall and the quantity of labor employed to increase
B. the equilibrium wage rate to fall and the quantity of labor employed to decrease
C. the equilibrium wage rate to rise and the quantity of labor employed to increase
D. the equilibrium wage rate to fall and the quantity of labor employed to increase
question
A sales tax ___________.
answer
A. is always paid by the consumer
B. creates a deadweight loss
C. could be paid by either sellers, consumers, or both
D. Both b and c are correct.
B. creates a deadweight loss
C. could be paid by either sellers, consumers, or both
D. Both b and c are correct.
question
The seller will pay the entire sales tax levied on a good when ___________.
Graph a set of supply and demand curves. Show supply as a vertical line to represent perfectly inelastic supply, and draw demand normally. Increase the price and see what happens. For perfectly elastic supply, draw a horizontal line. Now try the same thing with the demand curve, drawing supply normally.
Graph a set of supply and demand curves. Show supply as a vertical line to represent perfectly inelastic supply, and draw demand normally. Increase the price and see what happens. For perfectly elastic supply, draw a horizontal line. Now try the same thing with the demand curve, drawing supply normally.
answer
A. demand is perfectly elastic or supply is perfectly elastic
B. demand is perfectly elastic or supply is perfectly inelastic
C. demand is perfectly inelastic or supply is perfectly elastic
D. demand is perfectly inelastic or supply is perfectly inelastic
B. demand is perfectly elastic or supply is perfectly inelastic
C. demand is perfectly inelastic or supply is perfectly elastic
D. demand is perfectly inelastic or supply is perfectly inelastic
question
Price floors in agricultural markets ___________.
A price floor is graphed similarly to a price ceiling, but a price floor is a minimum price that must be paid for a good. Graph this and see whether a shortage or surplus results.
A price floor is graphed similarly to a price ceiling, but a price floor is a minimum price that must be paid for a good. Graph this and see whether a shortage or surplus results.
answer
A. create shortages that must be covered by the government
B. decrease the quantity that farmers are permitted to produce
C. create surpluses that must be bought by the government
D. create lower prices for consumers
B. decrease the quantity that farmers are permitted to produce
C. create surpluses that must be bought by the government
D. create lower prices for consumers
question
Which of the following goods is closest to exhibiting totally inelastic supply?
answer
A. Gucci handbags, because they have an exclusive designer label
B. petroleum, because the quantity produced is controlled by OPEC
C. the world supply of oil paintings by Vincent van Gogh
D. cocaine, because it cannot be legally imported into the U.S.
B. petroleum, because the quantity produced is controlled by OPEC
C. the world supply of oil paintings by Vincent van Gogh
D. cocaine, because it cannot be legally imported into the U.S.
question
Even though they cause some inefficiency, some taxes are necessary because ___________.
answer
A. they pay for important public goods such as education, which would be undersupplied by the market
B. they can be used to address concerns about severe poverty and inequality, which most societies have
C. they pay for the government legislation and law enforcement, which is necessary for the competitive market to work
D. All of the above are correct.
B. they can be used to address concerns about severe poverty and inequality, which most societies have
C. they pay for the government legislation and law enforcement, which is necessary for the competitive market to work
D. All of the above are correct.
question
Some consumers feel the government should impose a price ceiling on electricity prices to prevent them from becoming too high. A result of this policy might be ___________.
answer
A. private companies decide not to build a new power plant
B. a resident of San Diego decides not to install new solar panels which would cut her energy use
C. electricity use is higher than it would be otherwise
D. shortages of electricity are seen at peak times
E. All of the above
B. a resident of San Diego decides not to install new solar panels which would cut her energy use
C. electricity use is higher than it would be otherwise
D. shortages of electricity are seen at peak times
E. All of the above
question
NOTE: Questions 17-19 are difficult questions included for you to think about. You will not see multiple choice questions this difficult on the exams.
A supply shock has caused a sudden increase in gasoline prices and shortages of gasoline at the pump. One politician proposes to cut the gasoline tax to help consumers. This policy ___________.
A supply shock has caused a sudden increase in gasoline prices and shortages of gasoline at the pump. One politician proposes to cut the gasoline tax to help consumers. This policy ___________.
answer
A. would exacerbate shortages but increase consumer surplus for those who did manage to buy, because the price they paid would be lower
B. would equally benefit consumers and producers
C. would primarily benefit producers, because supply in this case is inelastic, and quantity supplied could not adjust down
D. would not have an effect on government revenue
B. would equally benefit consumers and producers
C. would primarily benefit producers, because supply in this case is inelastic, and quantity supplied could not adjust down
D. would not have an effect on government revenue
question
NOTE: Questions 17-19 are difficult questions included for you to think about. You will not see multiple choice questions this difficult on the exams.
A group is campaigning for an increase in the minimum wage. If such an increase is enacted, it will ___________.
A group is campaigning for an increase in the minimum wage. If such an increase is enacted, it will ___________.
answer
A. benefit all workers equally by increasing their take-home pay
B. benefit some workers working at the minimum wage, but harm others who will lose their jobs or not be hired because of the increase
C. hurt all workers by creating a surplus of the supply of labor
D. benefit all workers, primarily those working in low-skill jobS
B. benefit some workers working at the minimum wage, but harm others who will lose their jobs or not be hired because of the increase
C. hurt all workers by creating a surplus of the supply of labor
D. benefit all workers, primarily those working in low-skill jobS
question
NOTE: Questions 17-19 are difficult questions included for you to think about. You will not see multiple choice questions this difficult on the exams.
An environmental group wants the government to ban mining on public lands. This position is ___________.
An environmental group wants the government to ban mining on public lands. This position is ___________.
answer
A. indefensible on economic grounds, since minerals are essential for the economy
B. economically defensible if the maintenance of pristine national parks and wilderness areas has a public good value
C. an issue which is outside the realm of economics
D. definitely supported by economists, because natural parks are our national heritage
B. economically defensible if the maintenance of pristine national parks and wilderness areas has a public good value
C. an issue which is outside the realm of economics
D. definitely supported by economists, because natural parks are our national heritage
question
A price ceiling is __________.
answer
A. a price that creates a surplus of the good
B. a price above which a seller cannot legally sell
C. a price below which a seller cannot legally sell
D. Both a and c are correct.
B. a price above which a seller cannot legally sell
C. a price below which a seller cannot legally sell
D. Both a and c are correct.
question
A rent ceiling set above the equilibrium rent
answer
A. restricts the quantity demanded but not the quantity supplied.
B. restricts the quantity supplied but not the quantity demanded.
C. restricts both the quantity demanded and the quantity supplied.
D. has no effect.
B. restricts the quantity supplied but not the quantity demanded.
C. restricts both the quantity demanded and the quantity supplied.
D. has no effect.
question
A minimum wage is a government-imposed price ________ that is designed to be ________ the equilibrium wage rate.
answer
A. ceiling; above
B. ceiling; below
C. floor; above
D. floor; below
B. ceiling; below
C. floor; above
D. floor; below
question
The buyer will pay the entire sales tax levied on a good when .
answer
A. demand is perfectly elastic or supply is perfectly inelastic
B. demand is perfectly elastic or supply is perfectly elastic
C. demand is perfectly inelastic or supply is perfectly elastic
D. demand is perfectly inelastic or supply is perfectly inelastic
B. demand is perfectly elastic or supply is perfectly elastic
C. demand is perfectly inelastic or supply is perfectly elastic
D. demand is perfectly inelastic or supply is perfectly inelastic
question
In agricultural markets, once the crop has been harvested, the supply is .
answer
A. elastic but not perfectly elastic
B. perfectly inelastic
C. perfectly elastic
D. unit elastic
B. perfectly inelastic
C. perfectly elastic
D. unit elastic
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