Question 1

An increase in demand and a decrease in supply cause which of the following?
A)Equilibrium price change is indeterminate.
B)Equilibrium quantity decreases.
C)Equilibrium price falls.
D)Equilibrium price rises.
E)Equilibrium quantity increases.

Accepted Answer

The answer of An increase in demand and a decrease...

Question 2

Exhibit 4-8 Demand and supply curves  In Exhibit 4-8, a movement from A to B is best explained by:
A)an increase in income and in the number of suppliers.
B)an increase in the price of other goods.
C)an increase in the population.
D)a decrease in income and an improvement in the technology used to produce the good.
E)equilibrium quantity increases and the equilibrium price change is indeterminate.

Accepted Answer

The answer of Exhibit 4-8 Demand and supply curves ...

Question 3

There was an extensive black market (illegal market)for many consumer products in the United States during World War II. A likely explanation of the black market is that:
A)the prices of goods were artificially held down by price controls.
B)black markets were legal during the war.
C)goods were not subject to price controls.
D)gasoline rationing greatly restricted civilians from driving to stores.

Accepted Answer

The price controls meant that the prices of goods were kept artificially low, leading to shortages and a high demand for products. The black market arose to meet this demand and take advantage of the higher prices that could be charged.

Question 4

If the equilibrium price of aspirins is $2.50 and a price ceiling is imposed at $3.00, the eventual result after market adjustment will be a(n):
A)surplus.
B)shortage.
C)accumulation of inventories.
D)equilibrium.

Accepted Answer

The imposed price ceiling of $3.00 is above the equilibrium price of $2.50, so it will not affect the market. Therefore, the market will continue to operate at the equilibrium price, and there will be no surplus, shortage, or accumulation of inventories. The eventual result will be equilibrium.

Question 5

An increase in the wages paid to fishermen will have what effect on the fish market equilibrium?
A)Price will decrease, and quantity will decrease.
B)Price will increase, and quantity will increase.
C)Price will decrease, and quantity will increase.
D)Price will increase, and quantity will decrease.
E)Price and quantity will stay the same.

Accepted Answer

An increase in wages for fishermen will increase the cost of production for fishing companies. This will lead to a decrease in the supply of fish, shifting the supply curve to the left. As a result, the equilibrium price will increase, and the equilibrium quantity will decrease.

Question 6

Exhibit 4-7 Demand and supply schedules for movie tickets
 In Exhibit 4-7, the equilibrium price of a movie ticket is:
A)$10.
B)$8.
C)$6.
D)$4.
E)$2.

Accepted Answer

The answer of Exhibit 4-7 Demand and supply schedules for...

Question 7

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that a below-equilibrium price established by rent control:
A)creates a surplus of rental housing.
B)promotes a rapid increase in the future supply of housing.
C)results in poor service and quality deterioration of many rental units.
D)leads to a reduction in housing discrimination against minorities.

Accepted Answer

Economic theory suggests that a below-equilibrium price established by rent control can lead to a reduction in the quantity and quality of rental housing. Landlords may not have the incentive to maintain or improve their properties, as they cannot charge a higher rent to cover the costs. This can result in poor service and quality deterioration of many rental units.

Question 8

A price ceiling that sets the price of a good below market equilibrium will cause:
A)An increase in quantity demanded of the good.
B)A decrease in quantity supplied of the good.
C)A shortage of the good.
D)All of these.

Accepted Answer

When a price ceiling is set below the market equilibrium price, it creates an excess demand or shortage as the quantity demanded would exceed the quantity supplied. This leads to a decrease in quantity supplied of the good as suppliers do not find it profitable to supply the good at the lower price, and an increase in quantity demanded as consumers find it attractive to purchase the good at the lower price. Therefore, both option A and B are correct. As a result of the shortage, some consumers will be unable to purchase the good and will have to go without it. Therefore, option C is also correct. Thus, the correct answer is D.

Question 9

If consumers switch away from eating margarine at the same time that the number of margarine suppliers increases, then:
A)these two effects cancel each other out and there is no change in the margarine market equilibrium.
B)the demand curve shifts left and the supply curve shifts right.
C)there is a margarine price increase.
D)there is an excess demand for margarine.
E)the equilibrium quantity of margarine must increase.

Accepted Answer

The decrease in demand for margarine will cause a shift to the left in the demand curve, resulting in a lower equilibrium quantity and price. However, the increase in the number of suppliers will shift the supply curve to the right, resulting in a higher equilibrium quantity and lower price. The two effects combined will result in a lower quantity and uncertain change in the price.

Question 10

Ceteris paribus , if consumer tastes change so that more people are eating broccoli, then what will happen to the market equilibrium for cabbage, a substitute good for broccoli?
A)Price will increase, and quantity will increase.
B)Price and quantity will stay the same.
C)Price will decrease, and quantity will increase.
D)Price will increase, and quantity will decrease.
E)Price will decrease, and quantity will decrease.

Accepted Answer

If more people are eating broccoli, the demand for cabbage (a substitute good for broccoli) will decrease, leading to a decrease in both price and quantity demanded of cabbage. This will result in a decrease in market equilibrium for cabbage. Therefore, the correct answer is E, which reflects a decrease in price and quantity of cabbage.

Question 11

Suppose the market for "soda X" is in equilibrium. If the FDA announced today that this soda has been proven to cause a fatal disease, what would be most likely to happen to the equilibrium price and equilibrium quantity of soda X?
A)Price increases and quantity increases
B)Price decreases and quantity increases
C)Price decreases and quantity decreases
D)No change in price and quantity

Accepted Answer

The announcement that soda X causes a fatal disease would decrease the demand for soda X, causing the demand curve to shift to the left. This would result in a decrease in both the equilibrium price and quantity of soda X. Therefore, the best choice is C.

Question 12

An increase in both supply and demand causes which of the following?
A)Equilibrium price falls.
B)Equilibrium price rises.
C)Equilibrium price change is indeterminate.
D)Equilibrium quantity decreases.
E)Equilibrium quantity change is indeterminate.

Accepted Answer

The answer of An increase in both supply and demand...

Question 13

If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen?
A)The quantity of beef demanded will decrease.
B)The quantity of beef supplied will increase.
C)There will be a surplus of beef.
D)There will be a shortage of beef.

Accepted Answer

When the government sets a price ceiling below the market equilibrium price, it creates a situation where the quantity demanded of beef will increase while the quantity supplied will decrease. This mismatch between supply and demand will lead to a shortage of beef in the market.

Question 14

Ceteris paribus , an increase in the supply of a good causes which of the following?
A)Lowers the equilibrium price, and reduces the quantity bought and sold.
B)Raises the equilibrium price, and raises the quantity bought and sold.
C)Raises the equilibrium price, and increases the quantity bought and sold.
D)Lowers the equilibrium price, and increases the quantity bought and sold.
E)Equilibrium price and equilibrium quantity change are indeterminate.

Accepted Answer

According to the law of supply, an increase in supply causes a decrease in price and an increase in quantity. Therefore, the correct option is D which states that the equilibrium price decreases and the quantity bought and sold increases.

Question 15

Exhibit 4-8 Demand and supply curves  In Exhibit 4-8, a movement from A to B in which price has decreased and quantity has increased is best explained by a(n):
A)increase in supply and demand.
B)decrease in supply and demand.
C)increase in supply that dominates a decrease in demand.
D)increase in demand that dominates a decrease supply.
E)decrease in demand that dominates an increase in supply.

Accepted Answer

The answer of Exhibit 4-8 Demand and supply curves ...

Question 16

Many student government candidates at colleges and universities propose rent controls on local rental housing as a way to help students afford rental housing. Economic theory suggests that this policy would harm students as a whole despite the fact that some students who are able to find housing at the reduced price would benefit. Which of the following are some of the offsetting secondary effects of the rent controls that would work to the disadvantage of students?
A)There would be a shortage of rental housing, making it very difficult for students to find places to rent and causing increased discrimination in the rental housing market.
B)There would be a reduction in the quality of rental housing.
C)There would be a reduction in the future supply of rental housing.
D)All of these would be secondary effects of the rent controls.

Accepted Answer

Rent controls create a shortage of rental housing because landlords have less incentive to maintain or improve their properties, and fewer landlords are willing to rent out their properties at a reduced price. This shortage of rental housing makes it difficult for students to find affordable housing and can increase discrimination in the rental housing market. Rent controls also lead to a reduction in the quality of rental housing because landlords have less money to spend on maintenance and repairs. Additionally, rent controls decrease the future supply of rental housing because landlords are less likely to invest in new rental properties if they cannot charge market rents to recoup their costs. Therefore, all of these would be secondary effects of rent controls.

Question 17

If the equilibrium price of natural gas is $4 per thousand cubic feet and a price ceiling is imposed at $3 per thousand cubic feet, the result will be:
A)a surplus of natural gas.
B)a shortage of natural gas.
C)an accumulation of inventories of unsold gas.
D)None of these.

Accepted Answer

When a price ceiling is imposed below the equilibrium price, it creates a situation where the quantity demanded exceeds the quantity supplied. In other words, there will be a shortage of natural gas as consumers try to buy more at the lower price but producers are not willing to supply as much at that price. This can lead to rationing, long lines, or black markets.

Question 18

Exhibit 4-7 Demand and supply schedules for movie tickets  In Exhibit 4-7, a 100 decrease in quantity demanded at every price level would cause the new equilibrium price to become:
A)$10.
B)$8.
C)$6.
D)$4.
E)$2.

Accepted Answer

The answer of Exhibit 4-7 Demand and supply schedules for...

Question 19

Exhibit 4-8 Demand and supply curves  In Exhibit 4-8, a movement from A to D is best described as a(n):
A)increase in the quantity demanded and an increase in supply.
B)increase in supply and demand.
C)increase in both the quantity demanded and supplied.
D)increase in the quantity supplied and in the demand.
E)decrease in the quantity demanded and a decrease in supply.

Accepted Answer

The answer of Exhibit 4-8 Demand and supply curves ...

Question 20

Exhibit 4-8 Demand and supply curves  In Exhibit 4-8, a movement from A to C is best described as a(n):
A)increase in the quantity supplied and an increase in the demand.
B)decrease in the quantity supplied and a decrease in demand.
C)decrease in the quantity supplied and an increase in demand.
D)decrease in the quantity demanded and a decrease in supply.
E)decrease in both quantity demanded and quantity supplied.

Accepted Answer

The answer of Exhibit 4-8 Demand and supply curves ...

Quiz 4: Markets in Action

An increase in demand and a decrease in supply cause which of the following?

Exhibit 4-8 Demand and supply curves In Exhibit 4-8, a movement from A to B is best explained by:

There was an extensive black market (illegal market) for many consumer products in the United States during World War II. A likely explanation of the black market is that:

If the equilibrium price of aspirins is $2.50 and a price ceiling is imposed at $3.00, the eventual result after market adjustment will be a(n) :

An increase in the wages paid to fishermen will have what effect on the fish market equilibrium?

Exhibit 4-7 Demand and supply schedules for movie tickets In Exhibit 4-7, the equilibrium price of a movie ticket is:

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that a below-equilibrium price established by rent control:

A price ceiling that sets the price of a good below market equilibrium will cause:

If consumers switch away from eating margarine at the same time that the number of margarine suppliers increases, then:

Ceteris paribus , if consumer tastes change so that more people are eating broccoli, then what will happen to the market equilibrium for cabbage, a substitute good for broccoli?

Suppose the market for "soda X" is in equilibrium. If the FDA announced today that this soda has been proven to cause a fatal disease, what would be most likely to happen to the equilibrium price and equilibrium quantity of soda X?

An increase in both supply and demand causes which of the following?

If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen?

Ceteris paribus , an increase in the supply of a good causes which of the following?

Exhibit 4-8 Demand and supply curves In Exhibit 4-8, a movement from A to B in which price has decreased and quantity has increased is best explained by a(n) :

If the equilibrium price of natural gas is $4 per thousand cubic feet and a price ceiling is imposed at $3 per thousand cubic feet, the result will be:

Exhibit 4-7 Demand and supply schedules for movie tickets In Exhibit 4-7, a 100 decrease in quantity demanded at every price level would cause the new equilibrium price to become:

Exhibit 4-8 Demand and supply curves In Exhibit 4-8, a movement from A to D is best described as a(n) :

Exhibit 4-8 Demand and supply curves In Exhibit 4-8, a movement from A to C is best described as a(n) :