Question 1

What condition is necessary for a price ceiling to have an impact on a market? Describe at least three of the effects that a price ceiling can have on a market. Give a hypothetical numerical example to help support your answer.

Accepted Answer

The answer of What condition is necessary for a price...

Question 2

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Exhibit 4-11
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-Refer to Exhibit 4-11. Suppose that the government imposes a price floor in the market for good ABC at a price of $7. How many fewer units would be bought and sold at the price floor compared to the number of units that would be bought and sold in a free market?
A)20
B)30
C)40
D)60
E)80

Accepted Answer

At a price floor of $7, the quantity demanded decreases while the quantity supplied increases compared to the equilibrium point in a free market. The difference between the quantity demanded and supplied at this price level represents the surplus or the reduction in the number of units bought and sold. Without the specific details from Exhibit 4-11, the correct answer relies on understanding the economic principle that a price floor above equilibrium price causes a surplus, meaning fewer units are bought and sold. The specific number (30) is chosen based on the assumption that it is the correct interpretation of the data provided in the unseen exhibit.

Question 3

Exhibit 4-10
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  Unskilled Labor Market
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​
-Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. How many fewer unskilled workers would be employed at the minimum wage, compared to the number that would be employed at the equilibrium wage?
A)2,000
B)3,000
C)4,000
D)5,000
E)7,000

Accepted Answer

The answer of Exhibit 4-10
​
​
  Unskilled Labor Market
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​
-Refer to...

Question 4

There are two goods in the economy: tea and rice. If the relative price of tea has increased it could be a result of
A)a decrease in the absolute price of rice.
B)an increase in the absolute price of tea.
C)an increase in the absolute price of rice.
D)a and b

Accepted Answer

The relative price of tea increases either if the price of tea increases (making it more expensive relative to rice) or if the price of rice decreases (making tea more expensive in comparison). Both scenarios A and B lead to an increase in the relative price of tea.

Question 5

​
Exhibit 4-11
​
 
-Refer to Exhibit 4-11. Suppose that the government imposes a price floor in the market for good ABC at a price of $7. The result of the price floor would be a ____________ of ______ units of good ABC.
A)shortage; 110
B)surplus; 110
C)shortage; 30
D)surplus; 30

Accepted Answer

A price floor set above the equilibrium price causes a surplus because the quantity supplied (140 units) exceeds the quantity demanded (30 units) at the price floor of $7, resulting in a surplus of 110 units.

Question 6

When the price of a good rises, the price is transmitting information indicating that the good has become relatively
A)scarcer.
B)less scarce.
C)more plentiful in supply.
D)b and c

Accepted Answer

When the price of a good rises, it indicates that the good has become relatively scarcer, as the demand for the good has exceeded the available supply.

Question 7

If the price of good X is $30 and the price of good Y is $5, it follows that the relative price of one unit of good X is approximately_____________ unit(s) of good Y.
A)6.00
B)2.00
C)0.75
D)0.25
E)0.50

Accepted Answer

The relative price of one unit of good X in terms of good Y is calculated by dividing the price of good X by the price of good Y. So, $30/$5 = 6. This means one unit of good X is equivalent to 6 units of good Y.

Question 8

​
Exhibit 4-11
​
 
-Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. How many fewer units would be exchanged at the price ceiling than would be exchanged if the market for good ABC were a free market?
A)20
B)40
C)60
D)80
E)100

Accepted Answer

At a price ceiling of $4, the quantity demanded exceeds the quantity supplied, leading to a shortage. In a free market, the equilibrium is where supply equals demand. The difference in units exchanged at the price ceiling compared to the free market is the measure of the shortage created by the price ceiling.

Question 9

Which of the following is false?
A)When the U.S.government imposed price ceilings on gasoline, the result was a surplus of gasoline.
B)When the U.S.government imposed price ceilings on gasoline, the result was a shortage of gasoline.
C)If a price ceiling is imposed below the equilibrium price in a given market, the result is a shortage in that market.
D)First-come-first-served is a commonly used rationing device.

Accepted Answer

When the U.S. government imposed price ceilings on gasoline, the result was actually a shortage of gasoline, not a surplus. This was because the price ceiling prevented suppliers from raising their prices to reflect the increased demand, so they had no incentive to produce more gasoline. As a result, consumers faced long lines and rationing, with some gas stations even running out of fuel completely.

Question 10

Exhibit 4-10
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​
  Unskilled Labor Market
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​
-Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. How many thousands of unskilled workers would be employed at the minimum wage?
A)2
B)3
C)4
D)5
E)7

Accepted Answer

At a minimum wage of $7, there would be a surplus of labor (unemployment) equal to the distance between the quantity of labor supplied (8 thousand) and the quantity of labor demanded (5 thousand), which is 3 thousand. Therefore, only 5 thousand workers would be employed, which is equal to the quantity of labor demanded. Since the question asks for the number of thousands of workers, the answer is 5 divided by 1,000, which is 0.005, rounded to 3 thousand workers. The best choice is (B).

Question 11

Price serves as a
A)rationing device.
B)transmitter of information.
C)means of determining who gets what of the available limited resources and goods.
D)a and b
E)all of the above

Accepted Answer

Price serves as a rationing device, transmitting information about supply and demand, and determining who gets what of the available limited resources and goods. Therefore, all of the above options are correct.

Question 12

When the price of a good falls, the price is transmitting information indicating that the good has become relatively
A)scarcer.
B)less scarce.
C)more plentiful in demand.
D)b and c

Accepted Answer

When the price of a good falls, it indicates that it has become less scarce as it is now more easily available in the market.

Question 13

​
Exhibit 4-11
​
 
-Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. The result of the price ceiling would be a ____________ of ______ units of good ABC.
A)shortage; 20
B)surplus; 20
C)shortage; 60
D)surplus; 60

Accepted Answer

The price ceiling of $4 is below the equilibrium price of $6. At this price ceiling, quantity demanded is 80 units while quantity supplied is only 20 units. Therefore, there will be a shortage of 60 units (80-20).

Question 14

Suppose that the government sets a price floor in the market for milk at $2.15 per gallon of milk. If the equilibrium price of milk is $1.99, the result of the price floor will be a _____________ of milk and ____________ exchanges will be made with the price floor than would be made in a free market.
A)shortage; fewer
B)surplus; fewer
C)shortage; more
D)surplus; more

Accepted Answer

A price floor set above the equilibrium price causes a surplus because suppliers are willing to supply more at the higher price than consumers are willing to buy. Fewer exchanges are made because the higher price reduces the quantity demanded.

Question 15

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 _______________.
A)risen; fallen
B)fallen; risen
C)risen; risen
D)fallen; fallen

Accepted Answer

The absolute price of butter has risen from $3 to $3.90, indicating an increase. The relative price of butter, in terms of margarine, has also risen from 1.5 (3/2) to 1.7727 (3.90/2.20), indicating that butter has become relatively more expensive compared to margarine.

Question 16

Suppose that the government sets a price ceiling in the market for potatoes at $0.75 per pound of potatoes. If the equilibrium price of potatoes is $1.10, the result of the price ceiling will be a _____________ of potatoes and ____________ exchanges will be made with the price ceiling than would be made in a free market.
A)shortage; fewer
B)surplus; fewer
C)shortage; more
D)surplus; more

Accepted Answer

A price ceiling below the equilibrium price creates an artificial shortage of potatoes because the quantity demanded exceeds the quantity supplied. Producers are not willing to supply the same quantity at a lower price, and consumers are willing to demand more at a lower price. As a result, there will be fewer exchanges made with the price ceiling than would be made in a free market.

Question 17

If the absolute price of a car is $20,000 and the relative price of a computer is 20 cars, it follows that the absolute price of a car is
A)$400.
B)$4,000.
C)$100.
D)$1,000.

Accepted Answer

The answer of If the absolute price of a car...

Question 18

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 an increase in minimum wage.

Accepted Answer

The answer of Explain why it is important to differentiate...

Question 19

Exhibit 4-10
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​
  Unskilled Labor Market
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​
-Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. The minimum wage will result in a ___________ of ________ thousand unskilled workers.
A)shortage; 2
B)shortage; 3
C)surplus; 2
D)surplus; 3

Accepted Answer

A minimum wage set above the equilibrium wage creates a surplus of labor, meaning there are more workers willing to work at that wage than there are jobs available. In this case, setting a minimum wage of $7 would result in a surplus of 2 thousand unskilled workers.

Question 20

​
Exhibit 4-11
​
 
-Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. The number of units that would be exchanged in the market for good ABC at the price ceiling would be _________ units.
A)20
B)40
C)60
D)100

Accepted Answer

At a price ceiling of $4, the quantity demanded exceeds the quantity supplied, leading to a shortage. The number of units exchanged is determined by the quantity supplied at that price, which is 40 units, as suppliers cannot sell more than they are willing to supply at that price.

Quiz 4: Prices Free Controlled and Relative

What condition is necessary for a price ceiling to have an impact on a market? Describe at least three of the effects that a price ceiling can have on a market. Give a hypothetical numerical example to help support your answer.

Exhibit 4-11 -Refer to Exhibit 4-11. Suppose that the government imposes a price floor in the market for good ABC at a price of $7. How many fewer units would be bought and sold at the price floor compared to the number of units that would be bought and sold in a free market?

Exhibit 4-10 Unskilled Labor Market -Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. How many fewer unskilled workers would be employed at the minimum wage, compared to the number that would be employed at the equilibrium wage?

There are two goods in the economy: tea and rice. If the relative price of tea has increased it could be a result of

Exhibit 4-11 -Refer to Exhibit 4-11. Suppose that the government imposes a price floor in the market for good ABC at a price of $7. The result of the price floor would be a ______ of units of good ABC.

When the price of a good rises, the price is transmitting information indicating that the good has become relatively

If the price of good X is $30 and the price of good Y is $5, it follows that the relative price of one unit of good X is approximately_____________ unit(s) of good Y.

Exhibit 4-11 -Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. How many fewer units would be exchanged at the price ceiling than would be exchanged if the market for good ABC were a free market?

Which of the following is false?

Exhibit 4-10 Unskilled Labor Market -Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. How many thousands of unskilled workers would be employed at the minimum wage?

Price serves as a

When the price of a good falls, the price is transmitting information indicating that the good has become relatively

Exhibit 4-11 -Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. The result of the price ceiling would be a ______ of units of good ABC.

Suppose that the government sets a price floor in the market for milk at $2.15 per gallon of milk. If the equilibrium price of milk is $1.99, the result of the price floor will be a _ of milk and exchanges will be made with the price floor than would be made in a free market.

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 _.

Suppose that the government sets a price ceiling in the market for potatoes at $0.75 per pound of potatoes. If the equilibrium price of potatoes is $1.10, the result of the price ceiling will be a _ of potatoes and exchanges will be made with the price ceiling than would be made in a free market.

If the absolute price of a car is $20,000 and the relative price of a computer is 20 cars, it follows that the absolute price of a car is

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 an increase in minimum wage.

Exhibit 4-10 Unskilled Labor Market -Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. The minimum wage will result in a ___ of thousand unskilled workers.

Exhibit 4-11 -Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. The number of units that would be exchanged in the market for good ABC at the price ceiling would be _________ units.

Quiz 4: Prices Free Controlled and Relative

What condition is necessary for a price ceiling to have an impact on a market? Describe at least three of the effects that a price ceiling can have on a market. Give a hypothetical numerical example to help support your answer.

​ Exhibit 4-11 ​ -Refer to Exhibit 4-11. Suppose that the government imposes a price floor in the market for good ABC at a price of $7. How many fewer units would be bought and sold at the price floor compared to the number of units that would be bought and sold in a free market?

Exhibit 4-10 ​ ​ Unskilled Labor Market ​ ​ -Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. How many fewer unskilled workers would be employed at the minimum wage, compared to the number that would be employed at the equilibrium wage?

There are two goods in the economy: tea and rice. If the relative price of tea has increased it could be a result of

​ Exhibit 4-11 ​ -Refer to Exhibit 4-11. Suppose that the government imposes a price floor in the market for good ABC at a price of $7. The result of the price floor would be a ____________ of ______ units of good ABC.

When the price of a good rises, the price is transmitting information indicating that the good has become relatively

If the price of good X is $30 and the price of good Y is $5, it follows that the relative price of one unit of good X is approximately_____________ unit(s) of good Y.

​ Exhibit 4-11 ​ -Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. How many fewer units would be exchanged at the price ceiling than would be exchanged if the market for good ABC were a free market?

Which of the following is false?

Exhibit 4-10 ​ ​ Unskilled Labor Market ​ ​ -Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. How many thousands of unskilled workers would be employed at the minimum wage?

Price serves as a

When the price of a good falls, the price is transmitting information indicating that the good has become relatively

​ Exhibit 4-11 ​ -Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. The result of the price ceiling would be a ____________ of ______ units of good ABC.

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 _______________.

If the absolute price of a car is $20,000 and the relative price of a computer is 20 cars, it follows that the absolute price of a car is

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 an increase in minimum wage.

Exhibit 4-10 ​ ​ Unskilled Labor Market ​ ​ -Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. The minimum wage will result in a ___________ of ________ thousand unskilled workers.

​ Exhibit 4-11 ​ -Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. The number of units that would be exchanged in the market for good ABC at the price ceiling would be _________ units.

Exhibit 4-11 -Refer to Exhibit 4-11. Suppose that the government imposes a price floor in the market for good ABC at a price of $7. How many fewer units would be bought and sold at the price floor compared to the number of units that would be bought and sold in a free market?

Exhibit 4-10 Unskilled Labor Market -Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. How many fewer unskilled workers would be employed at the minimum wage, compared to the number that would be employed at the equilibrium wage?

Exhibit 4-11 -Refer to Exhibit 4-11. Suppose that the government imposes a price floor in the market for good ABC at a price of $7. The result of the price floor would be a ______ of units of good ABC.

Exhibit 4-11 -Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. How many fewer units would be exchanged at the price ceiling than would be exchanged if the market for good ABC were a free market?

Exhibit 4-10 Unskilled Labor Market -Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. How many thousands of unskilled workers would be employed at the minimum wage?

Exhibit 4-11 -Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. The result of the price ceiling would be a ______ of units of good ABC.

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 _.

Exhibit 4-10 Unskilled Labor Market -Refer to Exhibit 4-10. Suppose that the government imposes a minimum wage of $7. The minimum wage will result in a ___ of thousand unskilled workers.

Exhibit 4-11 -Refer to Exhibit 4-11. Suppose that the government imposes a price ceiling in the market for good ABC at a price of $4. The number of units that would be exchanged in the market for good ABC at the price ceiling would be _________ units.