Quiz III Flashcards
Suppose the equilibrium price of a physical examination (“physical”) by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the
a. demand curve for physicals shifts to the right.
b. supply curve for physicals shifts to the left.
c. quantity demanded of physicals increases, and the quantity supplied of physicals decreases.
d. number of physicals performed stays the same.
ANS: C
In response to a shortage caused by the imposition of a binding price ceiling on a market,
a. price will no longer be the mechanism that rations scarce resources.
b. long lines of buyers may develop.
c. sellers could ration the good or service according to their own personal biases.
d. All of the above are correct.
ANS: D
The price ceiling
a. is binding.
b. causes a shortage.
c. causes the quantity demanded to exceed the quantity supplied.
d. All of the above are correct.
ANS: D
The price ceiling causes a
a. surplus of 40 units.
b. surplus of 85 units.
c. shortage of 45 units.
d. shortage of 85 units.
ANS: D
A price floor is binding when it is set
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.
ANS: B
Suppose the government has imposed a price floor on the market for soybeans. Which of the following events could transform the price floor from one that is not binding into one that is binding?
a. Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans.
b. The number of farmers selling soybeans decreases.
c. Consumers’ income increases, and soybeans are a normal good.
d. The number of consumers buying soybeans increases.
ANS: A
If the government removes a binding price floor from a market, then the price paid by buyers will
a. increase, and the quantity sold in the market will increase.
b. increase, and the quantity sold in the market will decrease.
c. decrease, and the quantity sold in the market will increase.
d. decrease, and the quantity sold in the market will decrease.
ANS: C
Suppose the government has imposed a price floor on cellular phones. Which of the following events could transform the price floor from one that is binding to one that is not binding?
a. Cellular phones become less popular.
b. Traditional land line phones become more expensive.
c. The components used to produce cellular phones become less expensive.
d. Firms expect the price of cellular phones to fall in the future.
ANS: B
When a binding price floor is imposed on a market to benefit sellers,
a. no sellers actually benefit.
b. some sellers benefit, but no sellers are harmed.
c. some sellers benefit, and some sellers are harmed.
d. all sellers benefit.
ANS: C
Which of the following price ceilings would be binding in this market?
a. $2
b. $3
c. $4
d. $5
ANS: A
If the price of Vanilla Coke is $6.90, who will purchase the good?
a. all five individuals
b. Megan, Mallory and Audrey
c. David, Laura and Megan
d. David and Laura
ANS: D
Which of the following is not true?
a. At a price of $9.00, no buyer is willing to purchase Vanilla Coke.
b. At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one.
c. At a price of $4.00, total consumer surplus in the market will be $9.00.
d. All of the above are correct.
ANS: D
If the market price is $3.80,
a. David’s consumer surplus is $4.70 and total consumer surplus for the five individuals is $9.50.
b. Megan’s consumer surplus is $1.70 and total consumer surplus for the five individuals is $9.80.
c. David, Laura, and Megan will be the only buyers of Vanilla Coke.
d. the demand curve for Vanilla Coke, taking the five individuals into account, is horizontal.
ANS: B
Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren’s willingness to pay was $35, Leslie’s willingness to pay was $25, and Lydia’s willingness to pay was $30. Total consumer surplus for these three would be
a. $15.
b. $30.
c. $45.
d. $90.
ANS: C
Suppose Brent, Callie, and Danielle each purchase a particular type of electric pencil sharpener at a price of $20. Brent’s willingness to pay was $22, Callie’s willingness to pay was $25, and Danielle’s willingness to pay was $30. Which of the following statements is correct?
a. Had the price of the pencil sharpener been $24 rather than $20, only Danielle would have been a buyer.
b. Brent’s consumer surplus is the smallest of the three individual consumer surpluses.
c. For the three individuals together, consumer surplus amounts to $60.
d. The fact that all three individuals paid $20 for the same type of pencil sharpener indicates that each one placed the same value on that pencil sharpener.
ANS: B
If the equilibrium price is $50, what is the producer surplus?
a. $625
b. $3,750
c. $5,625
d. $10,000
ANS: A
If the equilibrium price is $200, what is the producer surplus?
a. $625
b. $3,750
c. $10,000
d. $20,000
ANS: C
