Multiple Choice 1. Competitive markets are characterized as having A. many buyers and a single seller B. many buyers and a few sellers. C. many buyers and many sellers D. a few buyers and many sellers 2. Sue goes to the store to purchase a bottle of shampoo. When she gets to the store, she discovers her brand of shampoo is on sale for $4 a bottle. According to the law of demand, we can expect that A. Sue will purchase one bottle of shampoo. B. Sue will not purchase the shampoo C. Sue will likely purchase more than one bottle of shampoo. D. Sue will substitute for her usual brand of shampoo with an alternative brand. 3. Consider the market for mangos. Suppose researchers discover that eating mangos generates significant health benefits. Which of the following statements is true? This discovery will A. not affect the market for mangos B. cause the demand for mangos to shift to the right C. cause the price of mangos to decrease due to a movement along the demand curve. D. cause a movement along the demand curve for mangos 4. Consider the demand curve for automobiles. An increase in the price of automobiles due to a shift in the supply curve will A. cause a movement along the demand curve for automobiles B. result in an increase in the quantity of automobiles demanded C. have no effect on the quantity of automobiles demanded because the change was in supply D. Answers (A) and (B) are both true statements 5. Ham and turkey are considered to be substitutes in the diet of many people. Holding everything else constant, if the price of ham decreases, then the demand for A. turkey will shift to the left B. turkey will shift to the right C. ham will shift to the left D. ham will shift to the right 6. Consider two goods: good X and good Y. Holding everything else constant, the price of good Y increases and the demand for good X decreases. Good X and good Y are A. Complements B. substitutes C. not related to one another D. cannot be determined 7. Consider a supply curve. An increase in the price of the good causes a movement along the supply curve, resulting in a greater A. supply of the good. B. quantity supplied 8. Research and development result in the discovery of a new technology for electricity generation. Holding everything else constant, this discovery will A. increase the supply of electricity B. increase the quantity supplied of electricity C. decrease the supply of electricity D. decrease the quantity supplied of electricity
9. The sawmill industry expects lumber prices to rise next year due to growing demand for the construction of new homes. Holding everything else constant, this expectation will shift A. the supply curve for lumber this year to the left. B. the supply curve for lumber this year to the right 10. Which of the following statements is true about equilibrium in a competitive market for a good? I. In equilibrium, the quantity demanded equals the quantity supplied. II. The equilibrium price and quantity are found where the demand and supply curves intersect. III. In equilibrium, every consumer who wishes to consume the product is satisfied A. Statement I B. Statement II C. Statement III D. Statement I and II E. Statement I, II and III 11. Consumers in Mayville consider houses and apartments to be substitutes. There is an increase in the price of houses at the same time three new apartment buildings are opened in Mayville. In the market for apartments there, the equilibrium A. price will rise relative to its level before these two events. B. price will fall relative to its level before these two events. C. quantity will rise relative to its level before these two events. D. quantity will fall relative to its level before these two events 12. The implementation of an effective price floor A. decreases the price of the product B. increases the price of the product 13. A price floor has been implemented greater than the equilibrium market wage. Which of the following groups is more likely to have advocated for this legislation? A. Demanders of labor B. Suppliers of labor 14. Suppose a price floor of $40 is implemented in this market. This results in A. an excess demand of 100 units B. an excess supply of 100 units C. no effect in this market because the price floor is set below the equilibrium price D. no effect in this market because the price floor is set above the equilibrium price 15. Suppose a price ceiling of $40 is implemented in this market. This results in A. an excess demand of 100 units B. an excess supply of 100 units C. no effect in this market because the price ceiling is set below the equilibrium price D. a temporary shortage of the good while prices rise
16. Black market or illegal activities increase with the imposition of price controls in markets. Black markets A. improve the situation of all participants in the price-controlled market B. worsen the situation for those people who obey the rules imposed by the government C. have little or no real impact on price-controlled markets D. create greater respect in society for the need to obey all laws 17. An effective quantity control, or quota, A. limits the price that suppliers can charge for the good or service in the regulated market B. limits the price that consumers must pay for the good or service in the regulated market C. limits the amount of the good or service available in the regulated market D. increases the quantity of the good in the regulated market to a quantity above equilibrium 18. A quota imposed on a market A. restricts the amount of the good available in that market B. results in a payment being made by the government to the license holder. C. places a lower limit on the amount of the good provided in the regulated market. D. places an upper limit on the price of the good provided in the regulated market. 19. Which of the following statements is true? Quantity controls I. are inefficient because they prevent mutually beneficial transactions II. result in too many resources being allocated to that market. III. result in a wedge: the demand price is less than the supply price for the last unit. A. Statement I B. Statement II C. Statement I and III D. Statement I, II, and III 20. Quantity controls A. provide an incentive to engage in illegal activities B. result in underproduction of the good in the market with the quota limit C. result in a less efficient outcome than the market outcome D. Answers (A), (B), and (C) are all correct 21. If there is an increase in demand for a good, what will most likely happen to the price and quantity of the good exchanged? B IS CORRECT 22. An increase in the price of gasoline will cause the demand curve for tires to shift in which direction? A. To the left, because gasoline and tires are substitutes B. To the left, because gasoline and tires are complements C. To the right, because gasoline and tires are substitutes D. To the right, because gasoline and tires are complements E. To the right, because an increase in the price of gasoline makes consumers poorer and thus not willing to pay as much for tires
23. The local government limits the number of hotel rooms rented each night to 150. The resulting quota rent per room is equal to: A. $130. B. $100. C. $110. D. $30. E. $0. 24. If the quota rent per room is equal to $45, we know the quota limit is equal to: A. 100. B. 150 C. 200 D. 250 E. 300 25. Quota limits cause: A. the demand price to be greater than the supply price. B. the quantity demanded to be greater than the quantity supplied. C. the quantity demanded to be less than the quantity supplied. D. the demand price to be less than the supply price. E. maximum efficiency in the market
26. If the government does not impose a price control, the price of a can of soda will equal A. $.50 B. $.75 C. $1.00 D. $1.25 E. $1.50 27. If the government imposes a price ceiling of $0.50 per can of soda, the quantity of soda demanded will be: A. 10 units B. 6 units C. 8 units D. 4 units E. 7 units 28. If the government imposes a price ceiling of $0.50 per can of soda, there will be A. a shortage of 2 units B. a shortage of 3 units. C. a surplus of 3 units D. equilibrium in the market for soda E. a total of 17 units produced 29. If the government imposes a price ceiling of $1.00 per can of soda, the quantity of soda supplied will be: A. 7 units B. 8 units C. 9 units D. 10 units E. 16 units 30. If the government imposes a price ceiling of $1.00 per can of soda, the quantity of soda demanded will be: A. 10 units B. 8 units C. 6 units D. 4 units E. 16 units 31. Producers may supply a good with an inefficiently low quality if the government imposes a(n): A. price control. B. excise tax. C. binding price floor. D. binding price ceiling. E. per-unit subsidy.
32. In the soft drink market, an increase in the price of sugar, a necessary ingredient for soft drinks, and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following? A. There will be an increase in both the equilibrium price and quantity. B. Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same. C. There will be a decrease in both equilibrium price and quantity. D. Equilibrium quantity will increase, but equilibrium price may decrease, increase, or stay the same. E. Equilibrium quantity will decrease, but equilibrium price will increase. 33. The figure shows the weekend rental market for DVDs in Collegetown. The equilibrium price for DVD rentals is and the equilibrium quantity is A. $5; 50 B. $3; 30 C. $9; 90 D. $6; 40 E. $7; 30 34. At a rental price of $3, there will be A. equilibrium in the rental market for DVDs. B. an increase in demand. C. an excess supply of 40 DVD rentals. D. an excess demand of 40 DVD rentals. E. an excess demand of 10 DVD rentals. 35. At a rental price of $6, there will be: A. equilibrium in the rental market for DVDs. B. a decrease in demand. C. an excess supply of 20 DVD rentals. D. an excess demand of 20 DVD rentals. E. an excess supply of 40 DVD rentals.
36. The initial price and quantity (at intersection of S1 and D) of gasoline in equilibrium are A. $2.00 and 450 gallons B. $1.50 and 400 gallons. C. $2.00 and 200 gallons. D. $2.50 and 300 gallons. E. $4.00 and 100 gallons 37. A factor that may have changed supply from S1 to S2 is: A. better technology in the production of gasoline. B. increased income and gasoline is a normal good. C. lower labor productivity. D. increased prices of substitutes for gasoline. E. fewer producers of gasoline in the market. 38. Given the initial equilibrium of S1 and D, any price lower than will create pressure for the price to. A. $2.00; fall B. $2.50; rise C. $3.00; rise D. $2.50; fall E. $1.00; fall 39. The market equilibrium is found at the: A. price where quantity demanded exceeds quantity supplied. B. price where quantity demanded equals quantity supplied. C. price where quantity supplied exceeds quantity demanded. D. highest price the market will bear. E. price where the demand curve intersects the vertical axis. 40. Researchers find a new strain of genetically modified seeds results in a higher yield for corn producers. Holding all other things constant, this research will: A. shift the supply curve for corn left. B. increase the quantity supplied of corn. C. decrease the quantity supplied of corn. D. shift the supply curve for corn to the right. E. shift the demand curve for corn to the right.