Question 1

A more efficient means of processing tree bark to produce an anticancer drug is discovered.As a result,the supply curve for the drug will:

Accepted Answer

A)   shift to the right, increasing the price of the drug.
B)   shift to the left, increasing the price of the drug.
C)   shift to the right, decreasing the price of the drug.
D)   shift to the left, decreasing the price of the drug.E) A) and B)
F) B) and C)

Question 2

Coca-Cola bottlers increased their prices as the price of sugar (an important ingredient in producing Coke) rose sharply in the late 1980s.Under these circumstances,the increase in the price of Coke occurs as a result of a(n) :

Accepted Answer

A)   decrease in supply.
B)   decrease in demand.
C)   increase in supply.
D)   increase in demand.E) A) and B)
F) None of the above

Question 3

Exhibit 5-6  Refer to Exhibit 5-6.The government imposes a $3.25 price ceiling at the same time there is a substantial decrease in the price of sport utility vehicles.(Assume that sport utility vehicles get very low mileage per gallon.) As a result,the:

Accepted Answer

A)   price of gasoline equals $3.25 per gallon and the quantity demanded equals the quantity supplied.
B)   price of gasoline rises above $3.25 per gallon and a surplus of gasoline is created.
C)   price of gasoline will fall below $3.25 per gallon and a shortage of gasoline is created.
D)   legal price of gasoline will equal $3.25 per gallon and a shortage of gasoline is created.E) None of the above
F) A) and B)

Question 4

Which of the following combinations of changes would tend to both decrease the quantity of a good traded and increase the price?

Accepted Answer

A)   An increase in demand.
B)   A decrease in demand.
C)   An increase in supply.
D)   A decrease in supply.E) All of the above
F) B) and C)

Question 5

A price ceiling is binding when it is set

Accepted Answer

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

Question 6

A price ceiling set above the equilibrium price causes a surplus in the market.

Accepted Answer

A) True 
 B)False

Question 7

Suppose the equilibrium price of bread is $2.00 per loaf.If the government sets a price ceiling of $2.50 per loaf:

Accepted Answer

A)   the price of wheat will rise and a shortage is created.
B)   the quantity supplied of wheat will increase.
C)   there will be no change in the quantity of bread demanded or supplied.
D)   there will be a shortage of bread.E) B) and C)
F) A) and C)

Question 8

Which of the following could be responsible for an increase in the price of wheat?

Accepted Answer

A)   an increase in the supply of wheat
B)   an increase in the demand for wheat
C)   a decrease in the demand for wheat
D)   a simultaneous increase in supply and decrease in demand for wheatE) None of the above
F) A) and B)

Question 9

Exhibit 5-6  Refer to Exhibit 5-6.Assuming the market for gasoline is initially in equilibrium,what is likely to happen when there is a significant decrease in the price of sport utility vehicles? (Assume that sport utility vehicles get very low gas mileage.)

Accepted Answer

A)   The market price and quantity of gasoline will both decrease.
B)   The market price for gasoline will increase and the quantity demanded will decrease.
C)   The market price of gasoline will decrease and the quantity demanded will increase.
D)   Both the market price and quantity of gasoline demanded will increase.E) C) and D)
F) B) and C)

Question 10

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

Accepted Answer

A)   first time tax credits that cause more home sales
B)   a price ceiling on gasoline that causes a gas shortage
C)   increased parking fines that lead to fewer violators
D)   all of the aboveE) All of the above
F) B) and C)

Question 11

A ban on the use of the technology used by most producers in an industry is likely to result in:

Accepted Answer

A)   higher prices and a higher quantity exchanged in the industry.
B)   higher prices and a lower quantity exchanged in the industry.
C)   lower prices and a lower quantity exchanged in the industry.D) A) and B)
E) All of the above

Question 12

Whenever a price ceiling is imposed in a market,

Accepted Answer

A)   quantity demanded exceeds quantity supplied and a surplus results.
B)   quantity demanded exceeds quantity supplied and a shortage results.
C)   quantity supplied exceeds quantity demanded and a surplus results.
D)   it is necessary to know whether the ceiling is imposed above or below the equilibrium price in order to determine whether the quantity traded will be affected.E) A) and C)
F) B) and C)

Question 13

Exhibit 5-2 1 to S2 could occur if: A)  there is an increase in the price of submarine sandwiches. B)  there is an increase in the price of potato chips, a complement to submarine sandwiches. C)  there is a reduction in the price of sliced beef used to make submarine sandwiches. D)  there is an increase in the price of wheat bread used to make submarine sandwiches." class="answers-bank-image d-inline" rel="preload" > Refer to Exhibit 5-2.A movement from S1 to S2 could occur if:

Accepted Answer

A)   there is an increase in the price of submarine sandwiches.
B)   there is an increase in the price of potato chips, a complement to submarine sandwiches.
C)   there is a reduction in the price of sliced beef used to make submarine sandwiches.
D)   there is an increase in the price of wheat bread used to make submarine sandwiches.E) None of the above
F) A) and B)

Question 14

Starting from an equilibrium position,

Accepted Answer

A)   the imposition of a price floor below the equilibrium price will increase the quantity demanded.
B)   the imposition of a price floor below the equilibrium price will decrease the quantity exchanged.
C)   the imposition of a price floor above the equilibrium price will decrease the quantity demanded.
D)   the imposition of a price floor above the equilibrium price will increase the quantity exchanged.E) B) and D)
F) B) and C)

Question 15

If the government wanted to reduce the quantity of a good traded,it could do so by:

Accepted Answer

A)   setting a price ceiling for the good below the equilibrium price.
B)   setting a price floor for the good above the equilibrium price.
C)   tax the good more heavily.
D)   doing any of the above.E) None of the above
F) All of the above

Question 16

For the price in a market to remain the same,while the quantity traded fell,both supply and demand would have to shift to the left.

Accepted Answer

A) True 
 B)False

Question 17

Assume a price floor is imposed in the wheat market at the equilibrium price and that a price ceiling is imposed in the gasoline market at the equilibrium price.An increase in supply in both the wheat and gasoline markets will create:

Accepted Answer

A)   surpluses in both the wheat and gasoline markets.
B)   shortages in both the wheat and gasoline markets.
C)   a surplus in the wheat market and an increase the quantity of gasoline traded.
D)   a surplus in the wheat market and a shortage in the gasoline market.E) A) and C)
F) A) and B)

Question 18

If both market demand and supply increase simultaneously,then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.

Accepted Answer

A)   indeterminate; decrease
B)   increase; increase
C)   increase; indeterminate
D)   decrease; decreaseE) None of the above
F) All of the above

Question 19

Assume there is a price ceiling imposed on a good which is below the equilibrium price.Which of the following changes would reduce the size of the surplus?

Accepted Answer

A)   An increase in demand.
B)   A decrease in demand.
C)   An increase in supply.
D)   None of the above; there is no surplus.E) B) and C)
F) A) and D)

Question 20

If a price floor is not binding,then it will have no effect on the market.

Accepted Answer

A) True 
 B)False

Exam 5: Markets in Motion and Price Controls

Exhibit 5-6 Refer to Exhibit 5-6.Assuming the market for gasoline is initially in equilibrium,what is likely to happen when there is a significant decrease in the price of sport utility vehicles? (Assume that sport utility vehicles get very low gas mileage.)

Correct AnswerverifiedShow Answer

Starting from an equilibrium position,

Correct AnswerverifiedShow Answer

Whenever a price ceiling is imposed in a market,

Correct AnswerverifiedShow Answer

Suppose the equilibrium price of bread is $2.00 per loaf.If the government sets a price ceiling of $2.50 per loaf:

Correct AnswerverifiedShow Answer

If a price floor is not binding,then it will have no effect on the market.

Correct AnswerverifiedShow Answer

For the price in a market to remain the same,while the quantity traded fell,both supply and demand would have to shift to the left.

Correct AnswerverifiedShow Answer

Assume a price floor is imposed in the wheat market at the equilibrium price and that a price ceiling is imposed in the gasoline market at the equilibrium price.An increase in supply in both the wheat and gasoline markets will create:

Correct AnswerverifiedShow Answer

If both market demand and supply increase simultaneously,then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A price ceiling set above the equilibrium price causes a surplus in the market.

Correct AnswerverifiedShow Answer

If the government wanted to reduce the quantity of a good traded,it could do so by:

Correct AnswerverifiedShow Answer

Exhibit 5-6 Refer to Exhibit 5-6.The government imposes a $3.25 price ceiling at the same time there is a substantial decrease in the price of sport utility vehicles.(Assume that sport utility vehicles get very low mileage per gallon.) As a result,the:

Correct AnswerverifiedShow Answer

A price ceiling is binding when it is set

Correct AnswerverifiedShow Answer

Which of the following combinations of changes would tend to both decrease the quantity of a good traded and increase the price?

Correct AnswerverifiedShow Answer

A more efficient means of processing tree bark to produce an anticancer drug is discovered.As a result,the supply curve for the drug will:

Correct AnswerverifiedShow Answer

Which of the following could be responsible for an increase in the price of wheat?

Correct AnswerverifiedShow Answer

Coca-Cola bottlers increased their prices as the price of sugar (an important ingredient in producing Coke) rose sharply in the late 1980s.Under these circumstances,the increase in the price of Coke occurs as a result of a(n) :

Correct AnswerverifiedShow Answer

Exhibit 5-2 Refer to Exhibit 5-2.A movement from S1 to S2 could occur if:

Correct AnswerverifiedShow Answer

A ban on the use of the technology used by most producers in an industry is likely to result in:

Correct AnswerverifiedShow Answer

Assume there is a price ceiling imposed on a good which is below the equilibrium price.Which of the following changes would reduce the size of the surplus?

Correct AnswerverifiedShow Answer

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If both market demand and supply increase simultaneously,then equilibrium quantity will (be) and equilibrium price will (be) .

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Exhibit 5-2 Refer to Exhibit 5-2.A movement from S₁ to S₂ could occur if:

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