Question 1

If an effective legal ceiling is imposed on credit card interest rates:

Accepted Answer

If a legal ceiling is imposed on credit card interest rates, credit card companies may find it less profitable to offer credit, which could lead to a reduction in the availability of credit for consumers.

Question 2

Refer to the above graph, which shows the supply and demand for rental housing in a city.If over time the supply curve shifts to S₂ because landlords abandon rental units, but rent controls remain, the quantity demanded for housing would be at point:

Accepted Answer

With the supply curve shifting to S₂ due to landlords abandoning rental units, the quantity supplied decreases from Q2 to Q1 and the equilibrium point shifts from E to G. At point G, the quantity demanded for housing is at its highest because of the price ceiling imposed by rent controls, while the quantity supplied is lower due to the shift in the supply curve. Therefore, the market will experience a shortage of rental units, and the quantity supplied will be at point a as it is the amount that landlords are willing and able to supply at the capped rent level.

Question 3

An increase in the price of corn:

Accepted Answer

An increase in the price of corn will eventually increase the cost of corn-fed beef as it becomes more expensive for farmers to feed their livestock. This increased cost will then be passed on to consumers, leading to higher prices for hamburgers and other beef products.

Question 4

Price floors and ceiling prices:

Accepted Answer

Price floors and ceiling prices interfere with the rationing function of prices by setting a minimum or maximum price that might not reflect the actual equilibrium price determined by supply and demand. This can lead to market inefficiencies and distortions, such as shortages or surpluses, and prevent prices from properly allocating goods and services among consumers.

Question 5

The equation for the supply curve in the above diagram:

Accepted Answer

The equation for the supply curve in the diagram is given by P = 5 + ¹/₃Q.

Question 6

Suppose that a severe freeze destroys a sizable portion of the lettuce crop.As a result:

Accepted Answer

The severe freeze will reduce the supply of lettuce, leading to a decrease in quantity supplied. This will cause an increase in the equilibrium price since there will be less of the good available at the same demand level. The decrease in supply will also cause a decrease in quantity demanded since there will be less lettuce available for consumers to purchase. Therefore, option C, supply will decrease, equilibrium price will increase and quantity demanded will decrease, is the correct answer.

Question 7

An effective price floor on wheat will:

Accepted Answer

An effective price floor on wheat would set a minimum price above the equilibrium price. This would lead to a surplus of wheat since producers would be willing to supply more than consumers would be willing to buy at the higher price. Therefore, choice C is the correct answer.

Question 8

A government set minimum wage:

Accepted Answer

A government set minimum wage imposes a legal floor (minimum) under the wage of the least skilled worker. This means that employers cannot pay their workers less than the minimum wage set by the government. It is meant to protect workers from exploitation and provide them with a basic standard of living.

Question 9

Price ceilings and price floors:

Accepted Answer

Price ceilings and price floors interfere with the rationing function of prices by setting a maximum or minimum price that may not reflect the true market value. This can lead to surpluses or shortages as demand and supply are not allowed to adjust to each other freely.

Question 10

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.If demand changes from P = 10 - .2Q to P = 7 - .3Q, we can conclude that:

Accepted Answer

The change in demand from P = 10 - 0.2Q to P = 7 - 0.3Q indicates a decrease in demand as the price decreases at a faster rate with a decrease in quantity demanded.

Question 11

Which would be an example of a government price ceiling?

Accepted Answer

A government price ceiling is a legal limit on how high a price can be charged for a good or service. Limits on interest rates charged by credit card companies are an example of a price ceiling because they prevent companies from charging too much interest to consumers. Subsidies for apartment rent in major cities, minimum-wage laws for unskilled workers, and price supports for agricultural products are not examples of price ceilings.

Question 12

The following graph represents a competitive market for a product.where the government now has introduced a price floor of 0C.Which area in the graph represents the producers' revenue after the imposition of the price floor?

Accepted Answer

The answer of The following graph represents a competitive market...

Question 13

Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?

Accepted Answer

When legal ceilings are imposed on residential rents, landlords have less incentive to maintain or provide rental housing. As a result, the quantity and quality of rental housing will decrease. This will make it harder for people moving into the community to find residential space to rent. Options A, B, and C are unlikely to happen because legal ceilings will reduce the incentive to supply the housing needed in the community.

Question 14

In recent years, there has been a rapid increase in consumption of sushi in Canada and yet, the price of sushi has remained relatively stable.An explanation for this phenomenon could be:

Accepted Answer

The stable price of sushi despite an increase in consumption suggests that the supply of sushi has increased by a similar magnitude as the demand, resulting in a relatively stable price.

Question 15

Shortages and surpluses can occur in markets other than those in which government imposes the price floors and ceilings.This phenomenon could be explained by the action of seller(s):

Accepted Answer

Shortages and surpluses can occur when sellers set prices in advance of sales and these prices happen to be above or below equilibrium prices. This can be caused by a variety of factors such as incorrect market analysis, changes in supply or demand, or pricing strategies aimed at maximizing profits in the short term.

Question 16

The equation for the demand curve in the above diagram:

Accepted Answer

The demand curve has a y-intercept of 35, indicating that at a price of zero, consumers would be willing to buy 35 units. The slope of the demand curve is -.5, indicating that for every unit increase in price, there is a half-unit decrease in quantity demanded. Therefore, the equation for the demand curve is P = 35 - .5Q.

Question 17

When the government sets a price that is above the equilibrium price in a market:

Accepted Answer

When the government sets a price that is above the equilibrium price in a market, it creates a situation where the quantity supplied exceeds the quantity demanded, leading to a surplus in the market. This is because producers are willing to supply more goods/services at the higher price, but consumers are not willing to purchase as much at that price.  As a result, there will be excess supply or surplus in the market.

Question 18

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.The equilibrium price for X is:

Accepted Answer

The answer of The demand for commodity X is represented...

Question 19

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.The equilibrium quantity is:

Accepted Answer

The answer of The demand for commodity X is represented...

Question 20

An effective price floor will:

Accepted Answer

The answer of An effective price floor will:
...

Quiz 3: B: Demand, Supply, and Market Equilibrium

If an effective legal ceiling is imposed on credit card interest rates:

Refer to the above graph, which shows the supply and demand for rental housing in a city.If over time the supply curve shifts to S₂ because landlords abandon rental units, but rent controls remain, the quantity demanded for housing would be at point:

An increase in the price of corn:

Price floors and ceiling prices:

The equation for the supply curve in the above diagram:

Suppose that a severe freeze destroys a sizable portion of the lettuce crop.As a result:

An effective price floor on wheat will:

A government set minimum wage:

Price ceilings and price floors:

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.If demand changes from P = 10 - .2Q to P = 7 - .3Q, we can conclude that:

Which would be an example of a government price ceiling?

The following graph represents a competitive market for a product.where the government now has introduced a price floor of 0C.Which area in the graph represents the producers' revenue after the imposition of the price floor?

Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?

In recent years, there has been a rapid increase in consumption of sushi in Canada and yet, the price of sushi has remained relatively stable.An explanation for this phenomenon could be:

Shortages and surpluses can occur in markets other than those in which government imposes the price floors and ceilings.This phenomenon could be explained by the action of seller(s) :

The equation for the demand curve in the above diagram:

When the government sets a price that is above the equilibrium price in a market:

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.The equilibrium price for X is:

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.The equilibrium quantity is:

An effective price floor will:

Quiz 3: B: Demand, Supply, and Market Equilibrium

If an effective legal ceiling is imposed on credit card interest rates:

Refer to the above graph, which shows the supply and demand for rental housing in a city.If over time the supply curve shifts to S2 because landlords abandon rental units, but rent controls remain, the quantity demanded for housing would be at point:

An increase in the price of corn:

Price floors and ceiling prices:

The equation for the supply curve in the above diagram:

Suppose that a severe freeze destroys a sizable portion of the lettuce crop.As a result:

An effective price floor on wheat will:

A government set minimum wage:

Price ceilings and price floors:

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.If demand changes from P = 10 - .2Q to P = 7 - .3Q, we can conclude that:

Which would be an example of a government price ceiling?

The following graph represents a competitive market for a product.where the government now has introduced a price floor of 0C.Which area in the graph represents the producers' revenue after the imposition of the price floor?

Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?

In recent years, there has been a rapid increase in consumption of sushi in Canada and yet, the price of sushi has remained relatively stable.An explanation for this phenomenon could be:

Shortages and surpluses can occur in markets other than those in which government imposes the price floors and ceilings.This phenomenon could be explained by the action of seller(s) :

The equation for the demand curve in the above diagram:

When the government sets a price that is above the equilibrium price in a market:

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.The equilibrium price for X is:

The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q.Refer to the above information.The equilibrium quantity is:

An effective price floor will:

Refer to the above graph, which shows the supply and demand for rental housing in a city.If over time the supply curve shifts to S₂ because landlords abandon rental units, but rent controls remain, the quantity demanded for housing would be at point: