Chapter 3

Question 1

Which of the following describe the effects on equilibrium price and quantity of a simultaneous increase in both demand and supply?

Answer 1

Equilibrium quantity rises and an indeterminate change in equilibrium price.

Question 2

Which of the following results in a decrease in the equilibrium quantity of new houses and an indeterminate change in price?

Answer 2

Government taxes home builders, and a decrease in consumer incomes.

Question 3

Which of the following describes the effects on price and quantity as a result of a decrease in supply and increase in demand?

Answer 3

The equilibrium price increases but the change in quantity is indeterminate.

Question 4

If the price of accommodation rises as a result of a natural disaster some people will convert existing property to rental units. What will be the effect of this on the market for rental accommodation?

Answer 4

The quantity supplied will increase in response to the new higher price.

Question 5

Which of the following describe the effects on equilibrium price and quantity due to an increase in supply and a decrease in demand?

Answer 5

Equilibrium price falls and the change in quantity is indeterminate.

Question 6

After an initial price increase in accommodation, as a result of a natural disaster, some people will be unable to afford to pay rent. What will be the effect of this on the market for accommodation?

Answer 6

The quantity demanded will fall.

Question 7

Flooding destroys many of the houses in a town in Manitoba. In the short run, what will happen in the market place for accommodation?

Answer 7

Supply will shift left and the price will increase.

Question 8

Which of the following describes the effects on equilibrium price and quantity as a result of a simultaneous increase in supply and demand

Answer 8

The change in price is indeterminate and quantity increases

Question 9

After a natural disaster, rents will keep rising as long as there are _____.

Answer 9

Shortages

Question 10

What is the effect on equilibrium price and quantity of a decrease in supply and a decrease in demand

Answer 10

An indeterminate change in price and a decrease in quantity.

Question 11

The increase in the quantity of accommodation after the initial effects of a natural disaster decreasing the supply of the housing stock is a result of which of the following?

Answer 11

An increase in the quantity supplied

Question 12

The fall in the quantity demanded for rental units after a natural disaster is a result of

Answer 12

a higher price

Question 13

A hurricane hits a town on the coast of Belize destroying many houses. In the short run, what will happen in the market place for accommodation?

Answer 13

Supply will shift left and the price will increase.

Question 14

As a result of a natural disaster, in the long run property owners will respond to high rental rates by building new rental units. What effect will this have on the market for accommodation?

Answer 14

The supply curve will shift to the right, lowering the price.

Question 15

When a market is experiencing shortages from a natural disaster, the government faces the question of _____.

Answer 15

should they let the market correct the issue or step in and address the problem.

Question 16

True or false: A market always produces equitable results.

Answer 16

False

Question 17

A price ______ mandated in the apartment rental market benefits the consumer by establishing a price ______ the free market equilibrium price.

Answer 17

ceiling; below

Question 18

At any price below the equilibrium price, the quantity demanded will ______ the quantity supplied resulting in a shortage.

Answer 18

Exceed

Question 19

Suppose that the equilibrium price of a litre of milk is $2. If the government sets a price ceiling of $1 per litre, what will be the result?

Answer 19

There will be a shortage of milk.

Question 20

What is the term for the allocation system where sellers are allowed to allocate a good or service based on their own criteria?

Answer 20

Producers’ preference

Question 21

Even in a competitive labor market:

Answer 21

a higher wage rate might prompt firms to find more productive tasks for low-paid workers, thereby raising their productivity

Question 22

What effect does a subsidy given to buyers have?

Answer 22

It increases both the quantity and price.

Question 23

What effect does a sales tax imposed on the buyer have?

Answer 23

It decreases the demand

Question 24

What effect does a subsidy given to buyers have?

Answer 24

It increases the demand