Question 1

Other things constant, if a labor union is able to successfully increase the wages of autoworkers, there will be
A)an increase in the supply of automobiles causing the price of automobiles to fall.
B)an increase in the supply of automobiles causing the price of automobiles to rise.
C)a decrease in the supply of automobiles causing the price of automobiles to fall.
D)a decrease in the supply of automobiles causing the price of automobiles to rise.

Accepted Answer

The answer of Other things constant, if a labor union...

Question 2

The imposition of price ceilings on a market often results in
A)an increase in investment in the industry.
B)a persistent surplus in the market.
C)an increase in expenditures in the black-market.
D)lower prices being offered on the black market.

Accepted Answer

The answer of The imposition of price ceilings on a...

Question 3

Rent controls tend to cause persistent imbalances in the market for housing because
A)Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage.
B)Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus.
C)Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage.
D)Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Accepted Answer

The answer of Rent controls tend to cause persistent imbalances...

Question 4

An increase in the demand for a product will cause the
A)demand for and prices of the resources used to produce the product to increase.
B)demand for and prices of the resources used to produce the product to decrease.
C)demand for and prices of the resources used to produce the product to remain unchanged.
D)price of the product to decrease.

Accepted Answer

An increase in demand for a product will typically result in an increase in the demand for resources used to produce the product. This will lead to an increase in prices of these resources as firms strive to purchase more of them to increase production of the product in question.

Question 5

Which of the following would tend to increase the price of lumber?
A)a technological advance that lowers the cost of cutting timber
B)an increase in the demand for newly constructed homes
C)a decrease in the demand for wooden rocking chairs
D)a decrease in the tax imposed on firms who produce lumber

Accepted Answer

An increase in the demand for newly constructed homes would increase the demand for lumber, leading to an increase in its price.

Other choices:
A) would decrease the cost of producing lumber and potentially lead to a decrease in price 
C) would decrease the demand for lumber and potentially lead to a decrease in price 
D) may have no direct impact on the price of lumber.

Question 6

A price ceiling set below an equilibrium price tends to cause persistent imbalances in the market because
A)Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage.
B)Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus.
C)Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage.
D)Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Accepted Answer

The answer of A price ceiling set below an equilibrium...

Question 7

An increase in the number of students graduating with a major in psychology would result in
A)a decrease in the supply of psychologists that would increase the wage of psychologists and decrease the number employed.
B)an increase in the supply of psychologists that would decrease the wage of psychologists and increase the number employed.
C)a decrease in the demand for psychologists that would decrease the wage of psychologists and decrease the number employed.
D)an increase in the demand for psychologists that would increase the wage of psychologists and increase the number employed.

Accepted Answer

When the number of students graduating with a major in psychology increases, it leads to an increase in the supply of psychologists as there are more individuals with the qualifications to work in the field. This increase in supply means that there is more competition for jobs, which leads to a decrease in wages and an increase in the number employed. Thus, choice B is the correct answer.

Question 8

Other things constant, how will a decrease in the wages of teenagers affect the market for fast food hamburgers?
A)The supply of fast food hamburgers will increase, leading to an increase in the price of hamburgers.
B)The supply of fast food hamburgers will increase, leading to a reduction in the price of hamburgers.
C)The supply of fast food hamburgers will decrease, leading to an increase in the price of hamburgers.
D)The supply of fast food hamburgers will decrease, leading to a reduction in the price of hamburgers.

Accepted Answer

The answer of Other things constant, how will a decrease...

Question 9

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,
A)the demand curve for physicals shifts to the right.
B)the supply curve for physicals shifts to the left.
C)the quantity demanded of physicals increases and the quantity supplied of physicals decreases.
D)the number of physicals performed will increase.

Accepted Answer

When a price ceiling is imposed below the equilibrium price, the quantity demanded of the good increases, while the quantity supplied of the good decreases. This leads to a shortage in the market, which means that not all consumers who want the good can buy it at the lower price. Therefore, the quantity demanded of physicals will increase and the quantity supplied of physicals will decrease, leading to a shortage of physicals in the market.

Question 10

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?
A)an increase in the demand for accountants
B)an increase in the employment of accountants
C)a decrease in the wage rate of accountants
D)an increase in the number of students choosing to major in accounting

Accepted Answer

The answer of A substantial revision of the income tax...

Question 11

If a government price control succeeds in affecting price, it can be expected to lead to a corresponding
A)decrease in the quantity of sales only if the price is forced down.
B)decrease in the quantity of sales if the price is forced down and an increase in the volume of sales if the price is forced up.
C)decrease in the quantity of sales whether the price is forced up or down.
D)increase in the quantity of sales whether the price is forced up or down.

Accepted Answer

The answer of If a government price control succeeds in...

Question 12

An increase in the number of students attending college would tend to
A)reduce the demand for college professors.
B)decrease the number of college professors employed.
C)increase the demand for college professors.
D)reduce the wage for college professors.

Accepted Answer

An increase in the number of students attending college would increase the demand for college professors as more professors will be needed to teach the additional students. Thus, options A, B, and D can be eliminated.

Question 13

Price controls will tend to cause misallocation of resources because
A)production (or opportunity) cost no longer corresponds to market price.
B)people are unable to determine their preferences at the high or low price.
C)producers no longer have incentive to be profitable.
D)consumers no longer have incentive to spend their income efficiently.

Accepted Answer

When price controls are imposed, the market price no longer reflects the production cost, which can lead to a misallocation of resources. Producers may no longer find it profitable to produce certain goods or services because the price is too low, while at the same time consumers may demand more of those goods or services, leading to shortages. This can result in an inefficient allocation of resources. B, C, and D may also be true to some extent, but they do not directly address the issue of resource misallocation caused by price controls.

Question 14

How would an increase in the price of paper influence the market for college textbooks?
A)The supply of textbooks would increase causing the price of textbooks to fall.
B)The supply of textbooks would increase causing the price of textbooks to rise.
C)The supply of textbooks would decrease causing the price of textbooks to fall.
D)The supply of textbooks would decrease causing the price of textbooks to rise.

Accepted Answer

An increase in the price of paper, which is an input in the production of textbooks, would result in a decrease in the supply of textbooks. As a result, the market for college textbooks will experience a decrease in supply, causing the price of textbooks to rise.

Question 15

Which of the following would tend to increase the wage of coal miners?
A)new environmental laws that make it more costly for firms to use coal in their production process
B)an increase in the price of oil, a substitute for coal
C)a decrease in the demand for coal
D)an increase in the supply of coal miners

Accepted Answer

The answer of Which of the following would tend to...

Question 16

How would a decrease in lumber prices influence the home construction market?
A)The demand for newly constructed homes will increase.
B)The demand for newly constructed homes will decrease.
C)The supply of newly constructed homes will increase.
D)The supply of newly constructed homes will decrease.

Accepted Answer

A decrease in lumber prices would likely cause a decrease in the cost of home construction. This would make it more profitable for home builders to construct new homes, leading to an increase in the supply of newly constructed homes. This would also make it more affordable for individuals and families to purchase new homes, potentially increasing demand as well.

Question 17

A new law requiring plumbers to pass strict certification tests that reduce the number of plumbers would
A)increase the wage rate of plumbers.
B)decrease the wage rate of plumbers.
C)increase the employment of plumbers.
D)cause no change in the labor market for plumbers.

Accepted Answer

By reducing the number of plumbers through stricter certification tests, the supply of plumbers in the labor market will decrease. This will lead to an increase in the wage rate of plumbers, as there will be fewer workers available to perform the job. This is a classic example of how a decrease in the supply of labor leads to an increase in the wage rate.

Question 18

The presence of price controls in a market usually is an indication that
A)an insufficient quantity of a good or service was being produced in that market to meet the public's need.
B)the usual forces of supply and demand were not able to establish an equilibrium price in that market.
C)policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.
D)policymakers correctly believed that, in that market, price controls would generate no inequities of their own.

Accepted Answer

The answer of The presence of price controls in a...

Question 19

Other things constant, an increase in the demand for bicycles will
A)decrease the price of bicycles.
B)decrease the quantity of bicycles bought and sold.
C)decrease the demand for bicycle workers and lower their wages.
D)increase the demand for bicycle workers and increase their wages.

Accepted Answer

An increase in demand for bicycles will lead to an increase in production and sales of bicycles, therefore increasing the demand for bicycle workers. As the demand for bicycle workers increases, their wages will increase as well. Therefore, choice D is the correct answer.

Question 20

When policymakers impose price controls, they
A)are usually following the advice of mainstream economists.
B)usually improve the efficiency of economic activity.
C)distort the signals that normally guide the allocation of resources.
D)demonstrate a willingness to sacrifice equity in order to improve efficiency.

Accepted Answer

Price controls, such as price ceilings or price floors, interfere with the natural supply and demand signals that guide free market economies. This leads to imbalances in the allocation of resources and can result in shortages, surpluses, and market distortions. Therefore, policymakers who impose price controls are likely to distort the signals that normally guide the allocation of resources.

Quiz 4: Supply and Demand: Applications and Extensions

Other things constant, if a labor union is able to successfully increase the wages of autoworkers, there will be

The imposition of price ceilings on a market often results in

Rent controls tend to cause persistent imbalances in the market for housing because

An increase in the demand for a product will cause the

Which of the following would tend to increase the price of lumber?

A price ceiling set below an equilibrium price tends to cause persistent imbalances in the market because

An increase in the number of students graduating with a major in psychology would result in

Other things constant, how will a decrease in the wages of teenagers affect the market for fast food hamburgers?

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,

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?

If a government price control succeeds in affecting price, it can be expected to lead to a corresponding

An increase in the number of students attending college would tend to

Price controls will tend to cause misallocation of resources because

How would an increase in the price of paper influence the market for college textbooks?

Which of the following would tend to increase the wage of coal miners?

How would a decrease in lumber prices influence the home construction market?

A new law requiring plumbers to pass strict certification tests that reduce the number of plumbers would

The presence of price controls in a market usually is an indication that

Other things constant, an increase in the demand for bicycles will

When policymakers impose price controls, they