An increase in demand with no change in supply will lead to _____ in equilibrium quantity and _____ in equilibrium price.
an increase; a decrease
a decrease; a decrease
an increase; an increase
a decrease; an increase
Figure: The Market for Butter
Reference: Ref 5-13
(Figure: The Market for Butter) Look at the figure The Market for Butter. If a government price floor at $1.10 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.
Which of the following is TRUE concerning the relationship between efficiency and equity?
There is no trade-off between efficiency and equity if policies are fair.
Policies designed to increase efficiency will also increase equity.
Policies designed to increase efficiency will decrease equity.
Policies designed to increase equity will also increase efficiency.
Figure: The Market for Clams
Reference: Ref 5-22
(Figure: The Market for Clams) Look at the figure The Market for Clams. The government imposes a quota limiting sales of clams to 1,000 pounds. According to the figure, the quota rent per pound in this case is:
The quota rent cannot be determined from the information provided.
A consumer’s willingness to pay reflects:
the equilibrium price of the good or service.
the cost of producing the good or service.
the minimum price at which he or she would buy the good or service.
the maximum price at which he or she would buy the good or service.
Figure: Wireless Mouse Market
Reference: Ref 4-7
(Figure: Wireless Mouse Market) Use the graph to calculate consumer surplus when the market is at equilibrium.
A major state university in the South recently raised tuition by 12%. An economics professor at this university asked his students, “How many of you will transfer to another university because of the increase in tuition?” One student in about 300 said that he or she would transfer. Based on this information, the price elasticity of demand for education at this university is:
Reference: Ref 5-2
(Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $0.50 per can of soda, there will be:
a surplus of three cans.
equilibrium in the market for soda.
a shortage of two cans.
a shortage of three cans.
The Cozy Chair Company believes it can sell 200 chairs at $200 per chair or 300 chairs at $150 per chair. Using the midpoint formula, what do they think is the price elasticity of demand?
Figure: Rent Controls
Reference: Ref 5-1
(Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent3:
no one will have to pay a higher actual price than Rent0, nor will anyone be willing to do so.
some renters will be willing to pay a price as high as Rent4 for Q3 units.
rent will remain at Rent2.
the shortage of rental units is the distance Q3 – Q1.
Suppose the price of real estate increases by 37.11% in Oakland next year. If the quantity of new homes supplied does not change, this means that the price elasticity of _____ will be perfectly _____ in Oakland next year.
Consumer surplus for an individual buyer is equal to:
the consumer’s willingness to pay for the good minus the price of the good.
the marginal cost of the good minus the consumer’s willingness to pay for the good.
the price of the good minus the marginal cost of producing the good.
the consumer’s willingness to pay for the good minus the marginal cost of producing the good.
Which of the following policies is MOST likely to reduce traffic congestion in a large metropolitan area because people usually exploit opportunities to make themselves better off?
a limited number of free early-bird parking passes given only to those who arrive prior to 6 A.M.
an increase in the price of subway and bus fare to and from the city
a toll road that requires each car to pay a fee to enter the city center
asking citizens to carpool
Which of the following is NOT true?
Rational people use marginal analysis when making “how much” decisions.
Resources are scarce when they can satisfy everyone’s wants.
The real cost of a choice is what you must give up to enjoy that choice.
People typically make choices that will make them better off.
For which of the following decisions would marginal analysis be MOST relevant?
Should Mary go to graduate school after graduating from college?
Should Juan study an additional hour or take a short nap?
Should Vivek emigrate to the United States or stay in India?
Should George accept a job with Delta Airlines or with Greenpeace?
Figure: The Market for Milk
Reference: Ref 5-16
(Figure: The Market for Milk) Look at the figure The Market for Milk. With a binding price floor, the price could be equal to _____, consumers would demand _____, and producers would supply _____.
P3; Q3; Q1
P1; Q1; Q3
P2; Q2; Q2
P1; Q3; Q1
If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:
Which of the following two statements is a positive statement? Which is a normative statement?
I. The federal minimum wage in 2014 was $7.25 an hour.
II. The minimum wage should be high enough that families will not live in poverty.
I is positive; II is positive.
I is positive; II is normative.
I is normative; II is positive.
I is normative; II is normative.
When a market is in equilibrium, the quantity:
supplied is zero.
demanded is equal to quantity supplied.
demanded is equal to zero.
demanded is greater than quantity supplied.
Reference: Ref 2-21
(Table: Comparative Advantage I) Look at the table Comparative Advantage I. The opportunity cost of producing 1 box of cell phones for Sweden is _____ box(es) of herring.
Figure: The Market for Hybrid Cars
Reference: Ref 5-21
(Figure: The Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars. What area represents deadweight loss if there is a binding price floor at P1?
c + e
b + c + d + e
a + b + c
Figure: The Market for Candy
Reference: Ref 3-20
(Figure: The Market for Candy) Look at the figure The Market for Candy. Equilibrium occurs at a price of _____, and the equilibrium quantity is equal to _____.
Reference: Ref 2-9
(Figure: Wine and Wheat) Look at the figure Wine and Wheat. If this economy is producing on the production possibility frontier, what would allow it to produce at point C?
a decrease in resources
an improvement in technology
elimination of unemployment
a decrease in production
The production possibility frontier illustrates:
the inverse relation between price and quantity of a particular good.
the maximum quantity of one good that can be produced given the quantity of the other good produced.
that people usually exploit opportunities to make themselves better off.
that when markets don’t achieve efficiency, government intervention can improve society’s welfare.
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