Question 1

-Refer to Situation 4-1.An economist would predict that once price controls were abolished in the spring of 1974,

Accepted Answer

A)   the price of gasoline would decline sharply.
B)   the surplus of gasoline would go away.
C)   the shortage of gasoline would go away.
D)   the demand for gasoline would decrease.
E)   both c and dF) A) and C)
G) D) and E)

Question 2

Exhibit 4-1 
-Refer to Exhibit 4-1.How many fewer units are exchanged because of the price ceiling than ultimately would be exchanged in a free market?

Accepted Answer

A)   50
B)   60
C)   65
D)   100E) A) and B)
F) A) and C)

Question 3

List and describe the two major jobs performed by price.

Accepted Answer

Prices serve as: (1)a rationing device a...

Question 4

A price floor is usually set _____________ the equilibrium price.

Accepted Answer

A)   above
B)   at
C)   below
D)   at or belowE) A) and B)
F) C) and D)

Question 5

Exhibit 4-1 
-Refer to Exhibit 4-1.Some buyers will offer sellers $7 per unit instead of the $6 price ceiling because

Accepted Answer

A)   $7 is closer to the equilibrium price and buyers prefer equilibrium prices to all others.
B)   they think it is only fair for sellers to receive higher prices.
C)   they want to increase their chances of buying a good for which there is a shortage.
D)   it is customary to pay more than the price ceiling.E) B) and C)
F) None of the above

Question 6

In order for a price ceiling to have an impact on a market it must be set above the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 7

A price ceiling set below the equilibrium price will

Accepted Answer

A)   clear the market for the good.
B)   result in a shortage of the good.
C)   result in a surplus of the good.
D)   induce new firms to enter the industry.E) All of the above
F) A) and B)

Question 8

If the minimum wage law sets a wage floor below the equilibrium wage in the market for unskilled labor,then the

Accepted Answer

A)   minimum wage will create a surplus of unskilled labor.
B)   minimum wage will create a shortage of unskilled labor.
C)   minimum wage will not affect the unskilled labor market.
D)   unskilled labor market will change,but we cannot be certain how.E) A) and D)
F) A) and C)

Question 9

Exhibit 4-8 F.What has happened to the producers' surplus as a result of the imposition of the price floor? A)  Producers' surplus has risen by (area 2 + 3)  B)  Producers' surplus has fallen by (area 4 + 5)  C)  Producers' surplus has changed by (area 3 - area 5)  D)  Producers' surplus has changed by (area 2 - area 5) " class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 4-8.Suppose that wheat producers lobby the government for a price floor and receive one.This price floor is set at PF.What has happened to the producers' surplus as a result of the imposition of the price floor?

Accepted Answer

A)   Producers' surplus has risen by (area 2 + 3) 
B)   Producers' surplus has fallen by (area 4 + 5) 
C)   Producers' surplus has changed by (area 3 - area 5) 
D)   Producers' surplus has changed by (area 2 - area 5) E) B) and C)
F) None of the above

Question 10

Exhibit 4-2 
-Exhibit 4-2 represents the orange juice market.The horizontal line represents a price ceiling imposed by the government.Which of the following is true?

Accepted Answer

A)   At equilibrium,the quantity demanded is 700 units.
B)   At the price ceiling,there is a surplus of orange juice.
C)   The quantity supplied at the price ceiling will equal the quantity sold.
D)   The quantity demanded at the price ceiling will equal the quantity supplied.
E)   The quantity demanded at the price ceiling will equal the quantity sold.F) B) and E)
G) A) and E)

Question 11

Exhibit 4-3 1 is a price floor,then A)  the quantity exchanged is Q1. B)  there is a surplus in the market for good X. C)  it is the lowest price that can legally be charged in the market for good X. D)  both b and c E)  all of the above" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 4-3.If price P1 is a price floor,then

Accepted Answer

A)   the quantity exchanged is Q1.
B)   there is a surplus in the market for good X.
C)   it is the lowest price that can legally be charged in the market for good X.
D)   both b and c
E)   all of the aboveF) None of the above
G) A) and B)

Question 12

If goods are not rationed according to price,if follows that

Accepted Answer

A)   they won't get rationed at all.
B)   some mechanism will be used to ration the goods.
C)   first-come-first-served will necessarily be the rationing device.
D)   there will be surpluses in the market.
E)   none of the aboveF) A) and E)
G) C) and D)

Question 13

A price floor set above the equilibrium price will

Accepted Answer

A)   clear the market for the good.
B)   result in a shortage of the good.
C)   result in a surplus of the good.
D)   force some firms in this industry to go out of business.E) C) and D)
F) B) and C)

Question 14

Explain why it is important to differentiate between the "number of unskilled workers" and the "number of unskilled labor hours" when evaluating the impact on the market for unskilled labor of a change in minimum wage.

Accepted Answer

If the minimum wage is imposed above the...

Question 15

Exhibit 4-3 1 is a price ceiling,the highest price for good Y,which is tied (a tie-in sale) to good X,is A)  P1. B)  P2. C)  P3. D)  P3 - P1. E)  P1 + P2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 4-3.If P1 is a price ceiling,the highest price for good Y,which is tied (a tie-in sale) to good X,is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P3 - P1.
E)   P1 + P2.F) B) and D)
G) A) and B)

Question 16

If the minimum wage law sets a price floor that is below the equilibrium wage in the unskilled labor market,the minimum wage will create a shortage of unskilled labor.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound.If the price of butter rises to $3.90 and the price of margarine rises to $2.20,then the absolute price of butter has _______________ and the relative price of butter has _______________.

Accepted Answer

A)   risen;fallen
B)   fallen;risen
C)   risen;risen
D)   fallen;fallenE) B) and C)
F) A) and D)

Question 18

Someone says,"Even though the equilibrium wage rate is $7 an hour in the unskilled labor market,if we impose a minimum wage of $8 an hour,no one currently working will lose his or her job." This person must believe that the

Accepted Answer

A)   demand curve for unskilled labor is vertical.
B)   demand curve for unskilled labor is downward-sloping.
C)   firms that hire unskilled laborers are earning high profits.
D)   firms that hire unskilled laborers have relatively low costs.
E)   none of the above.F) A) and C)
G) A) and D)

Question 19

Exhibit 4-3 2 is a price ceiling,then A)  there is a shortage in the market for good X. B)  the highest price that can legally be charged in this market is P3. C)  the price at which exchange legally takes place in the market for good X is P2. D)  the quantity exchanged is less than the quantity demanded. E)  all of the above" class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 4-3.If price P2 is a price ceiling,then

Accepted Answer

A)   there is a shortage in the market for good X.
B)   the highest price that can legally be charged in this market is P3.
C)   the price at which exchange legally takes place in the market for good X is P2.
D)   the quantity exchanged is less than the quantity demanded.
E)   all of the aboveF) B) and D)
G) A) and B)

Question 20

Price ceilings and price floors

Accepted Answer

A)   shift demand and supply curves and therefore have no effect upon the rationing function of prices.
B)   interfere with the rationing function of prices.
C)   make the rationing function of free markets more efficient.
D)   cause surpluses and shortages,respectively.E) A) and C)
F) A) and B)

Exam 4: Prices: Free, controlled, and Relative

Exhibit 4-3 -Refer to Exhibit 4-3.If price P1 is a price floor,then

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If the minimum wage law sets a price floor that is below the equilibrium wage in the unskilled labor market,the minimum wage will create a shortage of unskilled labor.

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-Refer to Situation 4-1.An economist would predict that once price controls were abolished in the spring of 1974,

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Exhibit 4-3 -Refer to Exhibit 4-3.If price P2 is a price ceiling,then

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A price floor is usually set _____________ the equilibrium price.

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Price ceilings and price floors

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If the minimum wage law sets a wage floor below the equilibrium wage in the market for unskilled labor,then the

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If goods are not rationed according to price,if follows that

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Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound.If the price of butter rises to $3.90 and the price of margarine rises to $2.20,then the absolute price of butter has _______________ and the relative price of butter has _______________.

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List and describe the two major jobs performed by price.

Correct AnswerverifiedPrices serve as: (1)a rationing device a...View AnswerShow Answer

Exhibit 4-1 -Refer to Exhibit 4-1.How many fewer units are exchanged because of the price ceiling than ultimately would be exchanged in a free market?

Correct AnswerverifiedShow Answer

A price floor set above the equilibrium price will

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Exhibit 4-8 -Refer to Exhibit 4-8.Suppose that wheat producers lobby the government for a price floor and receive one.This price floor is set at PF.What has happened to the producers' surplus as a result of the imposition of the price floor?

Correct AnswerverifiedShow Answer

A price ceiling set below the equilibrium price will

Correct AnswerverifiedShow Answer

Someone says,"Even though the equilibrium wage rate is $7 an hour in the unskilled labor market,if we impose a minimum wage of $8 an hour,no one currently working will lose his or her job." This person must believe that the

Correct AnswerverifiedShow Answer

Exhibit 4-1 -Refer to Exhibit 4-1.Some buyers will offer sellers $7 per unit instead of the $6 price ceiling because

Correct AnswerverifiedShow Answer

Exhibit 4-3 -Refer to Exhibit 4-3.If P1 is a price ceiling,the highest price for good Y,which is tied (a tie-in sale) to good X,is

Correct AnswerverifiedShow Answer

In order for a price ceiling to have an impact on a market it must be set above the equilibrium price.

Correct AnswerverifiedShow Answer

Explain why it is important to differentiate between the "number of unskilled workers" and the "number of unskilled labor hours" when evaluating the impact on the market for unskilled labor of a change in minimum wage.

Correct AnswerverifiedIf the minimum wage is imposed above the...View AnswerShow Answer

Exhibit 4-2 -Exhibit 4-2 represents the orange juice market.The horizontal line represents a price ceiling imposed by the government.Which of the following is true?

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Exhibit 4-3 -Refer to Exhibit 4-3.If price P₁ is a price floor,then

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Exhibit 4-3 -Refer to Exhibit 4-3.If price P₂ is a price ceiling,then

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Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound.If the price of butter rises to $3.90 and the price of margarine rises to $2.20,then the absolute price of butter has _ and the relative price of butter has _.

Correct Answer
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Correct Answer
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Prices serve as: (1)a rationing device a...
View Answer

Correct Answer
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Correct Answer
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Exhibit 4-8 -Refer to Exhibit 4-8.Suppose that wheat producers lobby the government for a price floor and receive one.This price floor is set at P_F.What has happened to the producers' surplus as a result of the imposition of the price floor?

Correct Answer
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Exhibit 4-3 -Refer to Exhibit 4-3.If P₁ is a price ceiling,the highest price for good Y,which is tied (a tie-in sale) to good X,is

Correct Answer
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Correct Answer
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Correct Answer
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If the minimum wage is imposed above the...
View Answer

Correct Answer
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