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A black market is a market in which


A) goods are traded at prices above their legal maximum prices.
B) sales taxes are effectively doubled.
C) goods are sold at outlet prices.
D) sales take place exclusively at outlet prices.

E) None of the above
F) C) and D)

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The total amount of consumer surplus and producer surplus is at its maximum when


A) consumers and producers are allowed to trade at the market clearing price.
B) the government imposes a price floor that is higher than the market clearing price.
C) the government imposes a price ceiling that is lower than the market clearing price.
D) free market exchanges do not exist.

E) C) and D)
F) None of the above

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If demand decreases and supply increases


A) the market clearing price will decrease, and the equilibrium quantity will increase.
B) the market clearing price will decrease, and equilibrium quantity will decrease.
C) the equilibrium quantity will decrease, but the change in the market clearing price cannot be determined without more information.
D) the equilibrium price will decrease, but the change in the equilibrium quantity cannot be determined without more information.

E) A) and B)
F) None of the above

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In the 1970s, the government placed price ceilings on gasoline prices. A shortage of gasoline occurred, and long lines formed at the pumps. Some gas stations required that in addition to paying the price on the pump you had to buy a blank will. The action of having to purchase the will in order to purchase gas is known as


A) a surplus.
B) a price support.
C) the price system.
D) a black market.

E) A) and D)
F) A) and C)

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Who benefits primarily from rent controls?


A) construction workers
B) poor people looking for low-income housing
C) all who want to rent
D) only renters who are able to get units at below-market rates

E) C) and D)
F) B) and D)

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Which of the following is an example of a price ceiling?


A) the minimum wage
B) agricultural price supports
C) rent controls
D) None of the above is correct.

E) A) and D)
F) A) and B)

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Consumer surplus is


A) the total difference between the total amount that consumers actually pay for an item and the total amount that they would have been willing to pay.
B) the total difference between the total costs firms incur in producing an item and the utility consumers derive from purchasing the item.
C) the total difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay.
D) the total difference between the utility consumers derive from purchasing an item and the total costs firms incur in producing the item.

E) C) and D)
F) A) and B)

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Which of the following statement is FALSE?


A) Only the price system can be used to ration goods.
B) Random assignment can be a method of rationing.
C) Coupons can be used to ration goods.
D) Queuing can be used for rationing.

E) A) and D)
F) A) and C)

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Which of the following will tend to occur when a surplus exists in a market?


A) supply will increase and demand will decrease until the surplus disappears.
B) supply will decrease and demand will increase until the surplus disappears.
C) the price will tend to rise over time.
D) the price will tend to decrease over time.

E) B) and C)
F) B) and D)

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Total producer surplus in a market is measured as the


A) area bounded above the market clearing price and beneath the market demand curve.
B) area bounded below the market clearing price and above the market supply curve.
C) vertical distance from the horizontal (quantity) axis to the market clearing price.
D) horizontal distance from the vertical (price) axis to the equilibrium quantity.

E) A) and C)
F) A) and D)

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A price floor above the market clearing price typically results in I. an excess quantity supplied II) a shortage III) an excess quantity demand


A) I only
B) II only
C) III only
D) II and III only

E) A) and B)
F) A) and C)

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Suppose there is a simultaneous increase in demand and increase in supply. Given this information, we know with certainty that


A) both the equilibrium price and the equilibrium quantity will increase.
B) the equilibrium price will increase, and the equilibrium quantity will increase.
C) the equilibrium quantity will increase.
D) the equilibrium price will increase.

E) B) and D)
F) A) and B)

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Who ultimately benefits from price supports in agriculture?


A) consumers
B) grocery store owners
C) farmers
D) exporters

E) All of the above
F) C) and D)

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An import quota is a limit on the


A) number of foreign workers allowed to work in a country.
B) number of container ships allowed to enter the territorial waters of the United States.
C) value of low-priced foreign goods that are allowed to be imported into the United States.
D) amount of a product that may be imported.

E) B) and C)
F) None of the above

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Amazon's Home Services website connects customers of appliances with professionals who can install appliances for those customers. As a result of this service, Amazon is a


A) loss leader.
B) platform firm.
C) voluntary firm.
D) supermarket.

E) A) and B)
F) All of the above

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Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of the following to occur?


A) The shortage in the market will decrease.
B) The shortage in the market will increase.
C) The surplus in the market will decrease.
D) The surplus in the market will increase.

E) A) and C)
F) A) and D)

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If the federal government sets a minimum price for wheat at $5.00 per bushel when the equilibrium price is $4.50, then


A) a surplus will be created causing the price to fall to the equilibrium price of $4.50.
B) a permanent surplus will develop because the government established the minimum price at $5.00.
C) a shortage will be created causing the price to rise to the equilibrium price of $4.50.
D) a permanent shortage will develop because the government established the minimum price at $5.00.

E) All of the above
F) B) and C)

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If demand increases and supply decreases


A) the market clearing price definitely will increase, and the equilibrium quantity definitely will increase.
B) the market clearing price definitely will increase, and the equilibrium quantity definitely will decrease.
C) the market clearing price definitely will increase, but the change in the equilibrium quantity cannot be determined without more information.
D) the equilibrium quantity definitely will decrease, but the change in the market clearing price cannot be determined without more information.

E) A) and C)
F) B) and C)

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The minimum wage laws seek to


A) penalize employers that are not complying with labor laws.
B) assure a minimum standard of payment for work.
C) assure that all workers are paid the same wage rate.
D) help teenagers find work.

E) A) and B)
F) B) and C)

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In which of the following situations will both market clearing price and the equilibrium quantity decrease?


A) an increase in demand and no change in supply
B) an increase in supply with no change in demand
C) a decrease in supply with no change in demand
D) a decrease in demand with no change in supply

E) All of the above
F) A) and C)

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