MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Transcription

1 Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In the short run, it is necessary to non-price ration a good whenever exists. 1) A) market equilibrium B) excess supply C) a surplus D) excess demand 2) Among the methods of nonprice rationing are 2) A) favored customers. B) coupons. C) waiting in line. D) all of the above 3) The price system 3) A) automatically distributes scarce goods. B) is the only way to allocate goods. C) is inefficient. D) requires government help to allocate goods. 4) In a "black market," 4) A) only illegal goods and services are traded. B) illegal trading at market prices takes place. C) suppliers take advantage of buyers. D) price is illegally below market price. 5) If the government imposes a maximum price that is above the equilibrium price, 5) A) demand will be greater than supply. B) the available supply will have to be rationed with a nonprice rationing mechanism. C) quantity demanded will be less than quantity supplied. D) this maximum price will have no economic impact. 1

2 Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1 6) Refer to Figure 4.1. At the world price of 30 cents per apple the United States imports million apples per day. A) 2 B) 4 C) 6 D) 10 6) 7) Refer to Figure 4.1. If a 10-cent-per-apple tax is levied on imported apples, the United States will 7) A) import 2 million apples per day. B) import 4 million apples per day. C) import 6 million apples per day. D) import 8 million apples per day. 8) Refer to Figure 4.1. If the United States levies no taxes on apples, the price of apples in the United States would fall to, and the United States would import. A) 20 cents per apple; 10 million apples per day B) 30 cents per apple; 6 million apples per day C) 40 cents per apple; 2 million apples per day D) The price of apples in the United States after the U.S. government eliminated all taxes on imported apples cannot be determined from this information. 8) 9) An example of an ineffective price ceiling would be the government setting the price of wheat at per bushel when the market price is at $5.00 per bushel. A) $2.25 B) $3.00 C) $4.75 D) $6.00 9) 10) If the equilibrium price of gasoline is $4.00 per gallon and the government will not allow oil companies to charge more than $3.00 per gallon of gasoline, which of the following will happen? A) Supply must eventually increase so that the market will come into equilibrium at a price of $3.00. B) The market will be in equilibrium at a price of $3.00. C) A nonprice rationing system such as ration coupons must be used to ration the available supply of gasoline. D) Demand must eventually decrease so that the market will come into equilibrium at a price of $ ) 11) An example of a price ceiling would be the government setting the price of sugar 11) A) below the equilibrium market price. B) at the equilibrium market price. C) above the equilibrium market price. D) none of the above 2

3 12) If the market price of coffee is $3.00 per pound but the government will not allow coffee growers to charge more than $2.00 per pound of coffee, which of the following will happen? A) There will be a shortage of coffee. B) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.50. C) Supply must eventually increase so that the market will come into equilibrium at a price of $2.50. D) The market will be in equilibrium at a price of $ ) 13) It is necessary to ration a good whenever exists. 13) A) a surplus B) market equilibrium C) excess demand D) excess supply 14) A price ceiling is 14) A) the minimum price that consumers are willing to pay for a good. B) the difference between the initial equilibrium price and the equilibrium price after a decrease in supply. C) a minimum price set by government that sellers must charge for a good. D) a maximum price set by government that sellers may charge for a good. 15) A price floor is 15) A) a maximum price set by government that sellers may charge for a good. B) a minimum price set by government that sellers must charge for a good. C) the difference between the initial equilibrium price and the equilibrium price after a decrease in supply. D) the minimum price that consumers are willing to pay for a good. Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure ) Refer to Figure 4.3. An example of an effective price ceiling would be government setting the price of pencils at A) $0.40. B) $0.45. C) $0.50. D) $ ) 17) Refer to Figure 4.3. An example of an effective price floor would be the government setting the price of pencils at A) $0.00. B) $0.40. C) $0.45. D) $ ) 3

4 18) Refer to Figure 4.3. At an effective price ceiling for pencils, 18) A) quantity demanded is less than quantity supplied. B) quantity demanded is greater than quantity supplied. C) quantity demanded is equal to quantity supplied. D) price is above equilibrium. 19) If the price ceiling is set below the equilibrium price, 19) A) there will be a surplus. B) quantity demanded will equal quantity supplied. C) there will be a shortage. D) demand will be less than supply. 20) If the price floor is set below the equilibrium price, 20) A) the floor will be ineffective. B) quantity demanded will be less than quantity supplied. C) there will be a surplus. D) there will be a shortage. 21) Producer surplus is 21) A) the difference between current market price and full costs of production for the firm. B) the difference between willingness to sell and full costs of productions for the firm. C) current market price. D) the difference between the maximum a person is willing to pay and current market price. 22) Consumer surplus is 22) A) current market price. B) the difference between the maximum a person is willing to pay and current market price. C) the difference between the maximum a person is willing to pay and full costs of productions for the firm. D) the difference between current market price and full costs of production for the firm. 23) If the most someone is willing to pay for ticket to see their favorite team is $100 and the market price of the ticket is $35, then this buyer will get consumer surplus of A) 1 ticket. B) $35. C) $65. D) $ ) 24) The market price of a basketball is $35 and the full cost of producing it is $20, then a basketball producing firm gets producer surplus of A) 1 basketball. B) $35. C) $20. D) $15. 24) 4

5 Refer to the information provided in Figure 4.6 below to answer the questions that follow. Equilibrium in this market occurs at the intersection of curves S and D. Figure ) In figure 4.6 at equilibrium, consumer surplus is area 25) A) A+B+C. B) E+F+G. C) A. D) G. 26) In figure 4.6 at equilibrium, producer surplus is area 26) A) G. B) A. C) A+B+C. D) E+F+G. 27) In figure 4.6 if price is P1, consumer surplus is area 27) A) A. B) A+B+E. C) B+C+E+F+G. D) G. 28) In figure 4.6 if price is P1, producer surplus is area 28) A) A+B+E. B) B+E+G. C) G. D) A. 29) In figure 4.6 if price is P1, the deadweight loss due to under production is area 29) A) C+F B) F+G. C) A+C. D) E+G. 30) In figure 4.6 if price goes from equilibrium to P1, producer surplus changes by the area 30) A) C+E B) E-C. C) B-F. D) E+F. 5

6 Answer Key Testname: EXERCISES CH 4 1) D 2) D 3) A 4) B 5) D 6) C 7) A 8) B 9) D 10) C 11) A 12) A 13) C 14) D 15) B 16) A 17) D 18) B 19) C 20) A 21) A 22) B 23) C 24) D 25) A 26) D 27) B 28) C 29) A 30) D 6