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Economy > Test 2 > Flashcards

Test 2 Flashcards

1
Q

If market demand decreases and market supply increases, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____.

a. indeterminate; increase
b. indeterminate; decrease
c. decrease; indeterminate
d. increase; indeterminate

A

b. indeterminate; decrease

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2
Q

Assuming that the demand and supply of a good have moved in the same direction, and by the same amount, the new equilibrium would represent:

a. no change in price and an increase in quantity exchanged.
b. a decrease in price and a decrease in quantity exchanged.
c. no change in price, and an indeterminate change in quantity exchanged.
d. an increase in price and an increase in quantity exchanged.

A

c. no change in price, and an indeterminate change in quantity exchanged.

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3
Q

A price ceiling set below the equilibrium price is binding.

a. true
b. false

A

a. true

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4
Q

If both the supply and demand for computer games increase, then the equilibrium price of the games:

a. is indeterminate and the equilibrium quantity falls.
b. is indeterminate and the equilibrium quantity rises.
c. falls and the equilibrium quantity also falls.
d. falls and the change in equilibrium quantity is indeterminate.

A

b. is indeterminate and the equilibrium quantity rises.

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5
Q

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

a. A decrease in demand.
b. An increase in demand.
c. An increase in supply.
d. A decrease in supply.

A

d. A decrease in supply.

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6
Q

Say that the equilibrium price of natural gas would be $5 per thousand cubic feet, but there is a price floor imposed at $7 per thousand cubic feet. That price floor is then lowered to $5 per thousand cubic feet. As a result,

a. the shortage of natural gas will get worse.
b. the shortage of natural gas will get less severe.
c. the surplus of natural gas will get worse.
d. the surplus of natural gas will be eliminated.

A

d. the surplus of natural gas will be eliminated.

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7
Q

Minimum wage laws have little or no effect in this segment.

a. Unemployed workers
b. Teenagers
c. Low-skilled Labor
d. Skilled workers

A

d. Skilled workers

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8
Q

A price ceiling set below the equilibrium price causes a shortage in the market.

a. true
b. false

A

a. true

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9
Q

Suppose there is a reduction in consumer income and an increase in the price of jet fuel, an important resource used to produce air travel. If air travel is a normal good, how will these changes influence the price and quantity of air travel? The price of air travel will (be) ____ and quantity purchased will (be) ____.

a. decrease; decrease
b. indeterminate; decrease
c. increase; indeterminate
d. decrease; indeterminate

A

b. indeterminate; decrease

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10
Q

Which of the following could not cause an increase in both the equilibrium price and quantity of a good exchanged?

a. Increased input prices.
b. An increase in the price of a substitute good.
c. Decreased incomes for an inferior good.
d. Increased tastes for the good.

A

a. Increased input prices.

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11
Q

Which of the following is likely to result in a lower equilibrium price?

a. A decrease in both demand and supply.
b. An increase in both demand and supply.
c. An increase in demand and a decrease in supply.
d. A decrease in demand and an increase in supply.

A

d. A decrease in demand and an increase in supply.

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12
Q

A price floor will be binding only if it is set

a. equal to the equilibrium price.
b. below the equilibrium price.
c. above the equilibrium price.
d. either above or below the equilibrium price.

A

c. above the equilibrium price.

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13
Q

A price ceiling will be binding only if it is set

a. below the equilibrium price.
b. above the equilibrium price.
c. equal to the equilibrium price.
d. either above or below the equilibrium price.

A

a. below the equilibrium price.

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14
Q

Suppose the equilibrium price of bread is $2.00 per loaf. If the government sets a price ceiling of $1.50 per loaf:

a. the quantity of wheat demanded will decrease.
b. the quantity of wheat supplied will increase.
c. there will be a shortage of bread.
d. the equilibrium price of wheat will fall and a shortage of wheat will be created.

A

c. there will be a shortage of bread.

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15
Q

A shortage exists in the market for corn at the prevailing price. The shortage will be eliminated by a price:

a. increase, increasing the supply and decreasing the demand.
b. decrease, increasing the supply and decreasing the demand.
c. decrease, increasing the quantity supplied and decreasing the quantity demanded.
d. increase, increasing the quantity supplied and decreasing the quantity demanded.

A

d. increase, increasing the quantity supplied and decreasing the quantity demanded.

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16
Q

If a price ceiling is not binding, then

a. there will be a shortage in the market.
b. there will be a surplus in the market.
c. there will be no effect on the market price or quantity sold.
d. the market will be less efficient than it would be without the price ceiling.

A

c. there will be no effect on the market price or quantity sold.

17
Q

Which of the following is true?

a. It is possible to eliminate a shortage by raising a price ceiling sufficiently.
b. It is possible to eliminate a surplus by raising a price floor sufficiently.
c. It is possible to create a surplus by raising a price ceiling sufficiently.
d. It is possible to create a shortage by lowering a price floor sufficiently.

A

a. It is possible to eliminate a shortage by raising a price ceiling sufficiently.

18
Q

If a nonbinding price ceiling is imposed on a market, then the

a. quantity sold in the market will stay the same.
b. quantity sold in the market will decrease.
c. price in the market will increase.
d. price in the market will decrease

A

a. quantity sold in the market will stay the same.

19
Q

A shortage exists in the market for corn at the prevailing price. The shortage will be eliminated by a price:

a. decrease, increasing the supply and decreasing the demand.
b. increase, increasing the supply and decreasing the demand.
c. decrease, increasing the quantity supplied and decreasing the quantity demanded.
d. increase, increasing the quantity supplied and decreasing the quantity demanded.

A

d. increase, increasing the quantity supplied and decreasing the quantity demanded.

20
Q

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:

a. surpluses in both the wheat and gasoline markets.
b. a surplus in the wheat market and a shortage in the gasoline market.
c. shortages in both the wheat and gasoline markets.
d. a surplus in the wheat market and an increase the quantity of gasoline traded.

A

d. a surplus in the wheat market and an increase the quantity of gasoline traded.

21
Q

If a price ceiling is not binding, then

a. there will be a surplus in the market.
b. there will be a shortage in the market.
c. the market will be less efficient than it would be without the price ceiling.
d. there will be no effect on the market price or quantity sold.

A

d. there will be no effect on the market price or quantity sold.

22
Q

Which of the following is likely to result in a smaller equilibrium quantity exchanged?

a. An increase in both demand and supply.
b. A decrease in both demand and supply.
c. An increase in demand and a decrease in supply.
d. A decrease in demand and an increase in supply.

A

b. A decrease in both demand and supply.

23
Q

If nuts and bolts are complements, an increase in the price of nuts caused by a change in the supply of nuts will:

a. decrease the demand for nuts
b. decrease the number of bolts sold
c. increase the price of bolts.
d. increase the number of bolts sold.

A

b. decrease the number of bolts sold

24
Q

Ceteris paribus, the fear among travelers created by the 9-11 attacks would have what impact on the market for air travel?

a. an increase in equilibrium price and a decrease in equilibrium quantity.
b. an increase in equilibrium price and an increase in equilibrium quantity.
c. a decrease in equilibrium price and an increase in equilibrium quantity.
d. a decrease in equilibrium price and a decrease in equilibrium quantity.

A

d. a decrease in equilibrium price and a decrease in equilibrium quantity.

25
Q

A safety report is released that contends that sport utility vehicles are prone to roll over during crashes. At the same time, the price of steel (used to produce motor vehicles) increases. The net effect of these two incidents on the market for sport utility vehicles is a(n):

a. indeterminate change in price and a decrease in equilibrium quantity.
b. decrease in price and an increase in equilibrium quantity.
c. increase in price and a decrease in equilibrium quantity.
d. decrease in price and a decrease in equilibrium quantity.

A

a. indeterminate change in price and a decrease in equilibrium quantity.

26
Q

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

a. true
b. false

A

a. true

27
Q

Either a price floor or a price ceiling above the equilibrium price would cause a surplus.

a. true
b. false

A

b. false

28
Q

To be binding, a price floor must be set above the equilibrium price.

a. true
b. false

A

a. true

29
Q

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

a. the quantity supplied of wheat will increase.
b. there will be no change in the quantity of bread demanded or supplied.
c. the price of wheat will rise and a shortage is created.
d. there will be a shortage of bread.

A

b. there will be no change in the quantity of bread demanded or supplied.

30
Q

Producer surplus from a unit of output is the difference between the market price and the seller’s cost of producing that unit.

A

true

31
Q

Which of the following is true about consumer surplus?

a. Consumer surplus is how much more consumers have to pay than they are willing to pay.
b. An increase in the market price due to a decrease in supply will increase consumer surplus.
c. Consumer surplus is shown graphically as the area under the demand curve but above the supply curve.
d. A decrease in market price due to an increase in supply will increase consumer surplus.

A

d. A decrease in market price due to an increase in supply will increase consumer surplus

32
Q

Which of the following is true about producer surplus?

a. An increase in the market price due to an increase in demand will increase producer surplus.
b. Producer surplus is how much more it costs sellers than they are paid.
c. Producer surplus is shown graphically as the area under the demand curve but above the supply curve.
d. All of the above are true about producer surplus.

A

a. An increase in the market price due to an increase in demand will increase producer surplus.

33
Q

Consumer surplus is:

a. the marginal utility of the last unit consumed multiplied by the number of units consumed.
b. the total utility derived from consuming a good.
c. the difference between what consumers are willing to pay and what they are required to pay for a good.
d. the area underneath the demand curve.

A

c. the difference between what consumers are willing to pay and what they are required to pay for a good

34
Q

The net loss to society from a tax on a product can be measured as:

a. the loss in consumer surplus.
b. the loss in producer surplus.
c. the loss in both consumer and producer surplus.
d. the difference between the loss in consumer and producer surplus and the gain in tax revenue.

A

d. the difference between the loss in consumer and producer surplus and the gain in tax revenue.

35
Q

If the world supply of diamonds decreases, diamonds become more valuable, and therefore, the consumer surplus derived from diamonds increases.

a. true
b. false

A

false

Economy (3 decks)

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