ECON 201: WVU Modules 9&10

When external benefits are significant: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a market output is too low. b market output is too high. c market output is at the efficient level. d social surplus is maximized.

a market output is too low.

An example of a common resource would be: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a street light. b the environment. c clothing. d cable TV.

b the environment.

Figure: Price Ceilings and Consumer Surplus Reference: Ref 8-13 (Figure: Price Ceilings and Consumer Surplus) Refer to the figure. There is a price ceiling of $20. What is the value of consumer surplus if all units of the good are allocated to the highest valued uses? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $40 b $120 c $200 d $210

c $200

Figure: Effects of Price Ceilings Reference: Ref 8-5 (Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2 per unit, consumers are willing to pay a maximum of: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $2.00. b $2.50. c $3.00. d $4.00.

c $3.00.

Since the price of antibiotics does not include all the costs of using antibiotics, the price is too: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a high, and so antibiotics are overused. b high, and so antibiotics are underused. c low, and so antibiotics are overused. d low, and so antibiotics are underused.

c low, and so antibiotics are overused.

An excludable good is: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a one that is excluded from the common basket of goods consumed by households. b one that producers will exclude from production. c one where people can be prevented from using the good. d not necessary to consume, that is a luxury.

c one where people can be prevented from using the good.

Mosquito control is an example of a good that: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a people still get to enjoy even without paying for it, that is a nonrival good. b if used by one person cannot be used by another, that is a nonrival good. c people still get to enjoy even without paying for it, that is a nonexcludable good. d people must pay for to enjoy, that is an excludable good.

c people still get to enjoy even without paying for it, that is a nonexcludable good.

A rent control is a regulation that: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a ensures that there are apartments available for rent. b controls rents at constant levels. c upholds rents to above equilibrium levels. d prevents rents from rising to equilibrium levels.

d prevents rents from rising to equilibrium levels.

Because there are external benefits from higher education: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a private markets will oversupply college classes. b government intervention cannot improve the market for college classes. c the government should impose a tax on college students. d private markets will undersupply college classes.

d private markets will undersupply college classes.

An efficient equilibrium occurs when: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a private costs equals private benefits. b social costs equals private benefits. c private costs equals social benefits. d social costs equals social benefits.

d social costs equals social benefits.

Figure: Price Ceilings and Consumer Surplus Reference: Ref 8-13 (Figure: Price Ceilings and Consumer Surplus) Refer to the figure. There is a price ceiling of $20. What is the value of consumer surplus if all the goods are allocated randomly? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $120 b $180 c $80 d None of the answers are correct.

a $120

Figure: Dishwashing DetergentReference: Ref 10-7 (Figure: Dishwashing Detergent) Refer to the figure. Dishwashing detergent contains phosphates that harm marine life. In this figure, what is the external cost of using dishwashing detergent? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $6 b $9 c $12 d $18

a $6

Figure: Market for Bathroom Cleaner Reference: Ref 10-4 (Figure: Market for Bathroom Cleaner) Refer to the figure. The figure shows a market for cans of a bathroom cleaner that causes environmental damage, imposing costs on people other than the consumers and producers of the cleaner. What is the external cost of the bathroom cleaner? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $6 b $9 c $12 d $3

a $6

Ben is willing to work for $4/hour and an employer is willing to hire Ben for $7/hour. Which statements is TRUE? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A minimum wage of $7.50/hour would prevent this mutually beneficial exchange. b Minimum wages do not prevent mutually beneficial exchanges. c A minimum wage of $4.50/hour would prevent this mutually beneficial exchange. d A minimum wage of $3.50/hour would prevent this mutually beneficial exchange.

a A minimum wage of $7.50/hour would prevent this mutually beneficial exchange.

Which of the following scenarios best describes a tragedy of the commons problem? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Neighborhood residents discover strawberry plants in the flower beds at the city park. b Illegal immigrants who do not pay taxes benefit from tax-funded police patrols. c Pacifists become forced riders in tax hikes to fund national defense plans. d There is overcrowding on otherwise nice public beaches.

a Neighborhood residents discover strawberry plants in the flower beds at the city park.

The market price for Good X is $10.75, and every time Good X is consumed it creates an external benefit of $3.00. Therefore, which statement is correct? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The social benefit of Good X is $13.75, a justification for the government to give buyers a $3.00 subsidy. b The social benefit of Good X is $7.75, a justification for the government to give buyers a $3.00 subsidy. c The social benefit of Good X is $7.75, a justification for the government to tax sellers $13.75 per unit. d The social benefit of Good X is $13.75, a justification for the government to tax sellers $3.00 per unit.

a The social benefit of Good X is $13.75, a justification for the government to give buyers a $3.00 subsidy.

Figure: Effects of Price Ceilings Reference: Ref 8-5 (Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a bribes of $1 per unit may be common. b seller discounts of $1 may be common. c bribes of $3 per unit may be common. d seller discounts of $3 per unit may be common.

a bribes of $1 per unit may be common.

(Figure: Market for Vaccines) Refer to the figure. The figure represents the market for vaccines with external benefits. The market's outcome generates a(n): Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a deadweight loss of approximately $750. b shortage of 1,800 vaccines. c equilibrium price of $20. d All of the answers are correct.

a deadweight loss of approximately $750.

Free riders are people who: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a enjoy public goods without paying for them. b pay for public goods but do not end up enjoying them. c pay for both private and public goods. d ride public transportation without paying.

a enjoy public goods without paying for them.

If an American teenager will work for $5 an hour and an employer is willing to pay that wage, but the minimum wage is $7.25 an hour and the employer is not willing to pay that much, the teenager goes unemployed and the market experiences: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a lost gains from trade. b wasteful increases in quality. c resource misallocations. d reductions in product quality.

a lost gains from trade.

If the price of a good does not take into account all of the relevant costs of its production, then the price of that good is too: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a low, and the product will be overproduced. b high, and the product will be underproduced. c high, and the product will be overproduced. d low, and the product will be underproduced.

a low, and the product will be overproduced.

The influence of the minimum wage in the American economy is very small because MOST workers earn: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a more than the minimum wage. b less than the minimum wage. c more or less than the minimum wage. d near the minimum wage.

a more than the minimum wage.

Figure: Supply and Demand 5 Reference: Ref 8-18 (Figure: Supply and Demand 5) Refer to the figure. In the figure, representing a market for apartments, with a rent-controlled price of $800, the long-run supply curve will be __ elastic than the short-run supply curve, causing the _. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a more; shortage to increase to 6,000 apartments b more; shortage to decrease to 3,000 apartments c less; shortage to increase to 6,000 apartments d less; surplus to decrease to 8,000 apartments

a more; shortage to increase to 6,000 apartments

Street lights are an example of a good that is: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a nonexcludable and nonrival. b nonexcludable and rival. c excludable and nonrival. d excludable and rival.

a nonexcludable and nonrival.

A public good is: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a nonrival and nonexcludable. b rival and nonexcludable. c rival and excludable. d nonrival and excludable.

a nonrival and nonexcludable.

Fewer people get flu shots than is efficient because: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a people usually perceive that the private cost of getting flu shots is higher than their private benefit. b people usually perceive that the private benefit of getting flu shots is higher than their private cost. c the cost of producing flu shots is too high in relation to profits. d there are always more people getting flu shots than the amount of flu shots available.

a people usually perceive that the private cost of getting flu shots is higher than their private benefit.

Bluefin tuna are: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a rival and nonexcludable. b nonrival and excludable. c rival and excludable. d nonrival and nonexcludable.

a rival and nonexcludable.

Price ceilings create five important effects: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a shortages, reductions in product quality, wasteful lineups, a loss from gains to trade, and a misallocation of resources. b surpluses, increases in product quality, search costs, gains from trade, and resource attrition. c excess demand, long lines, poor service, efficiency, and arbitrage. d

a shortages, reductions in product quality, wasteful lineups, a loss from gains to trade, and a misallocation of resources.

Which statement is NOT an effect of a price ceiling? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a surpluses b misallocation of resources c loss of gains from trade d wasteful lineups

a surpluses

The Centers for Disease Control and Prevention (CDC) wants at least 90% of the population vaccinated against preventable diseases, since the chance of a disease outbreak decreases as vaccine coverage increases. We can conclude that: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the external benefits of vaccination likely decrease as more and more people are vaccinated. b the private benefits of vaccination increase with vaccine coverage. c vaccines create a negative externality once the vaccine covers 90% of the population. d vaccines create a positive externality once the vaccine covers 90% of the population.

a the external benefits of vaccination likely decrease as more and more people are vaccinated.

Figure: Effects of Price Ceilings Reference: Ref 8-5 (Figure: Effects of Price Ceilings) Refer to the figure. Suppose that the data represent the retail gasoline market. At a price ceiling of $2, the total value of wasted time from waiting in line is: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $5. b $10. c $15. d $20.

b $10.

Figure: Minimum Wage Reference: Ref 8-19 (Figure: Minimum Wage) Refer to the figure. How many workers are unemployed at a minimum wage of $8? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 10 b 20 c 25 d 35

b 20

Figure: Minimum Wage Reference: Ref 8-19 (Figure: Minimum Wage) Refer to the figure. At a minimum wage of $8, firms are willing to hire ____ workers. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 45 b 25 c 35 d more than 45

b 25

Figure: Short and Long Run Shortages Use the figure. At a rent-controlled price of $800, the short-run shortage of apartments is ____ and the long-run shortage is ____. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 12,000; 4,000 b 4,000; 12,000 c 8,000; 4,000 d 8,000; 12,000

b 4,000; 12,000

Figure: Market for Bathroom Cleaner Reference: Ref 10-4 (Figure: Market for Bathroom Cleaner) Refer to the figure. The figure shows a market for cans of a bathroom cleaner that causes environmental damage, imposing costs on people other than the consumers and producers of the cleaner. What is the efficient quantity in this market? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 100 b 85 c 15 d 9

b 85

Some researchers estimate that all saltwater fish will be extinct by 2048, in large part due to overfishing. But surveys also show that more households eat chicken and beef than fish; however, neither chickens nor beef are in danger of extinction. Which of the following best explains these observations? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The supply of fish has always been less than the supply of chicken and beef. b Fish tend to be nonexcludable resources, whereas chicken and beef are excludable. c Fish tend to be nonrival resources, whereas chicken and beef are rival. d The price of fish is much higher than the price of chicken and beef.

b Fish tend to be nonexcludable resources, whereas chicken and beef are excludable.

Figure: External Cost 1 Reference: Ref 10-5 (Figure: External Cost 1) Refer to the figure. Paper mills are notorious for emitting horrible smells that impose external costs on those living around the mills. According to the figure, what is the efficient price and quantity of paper? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a P = $4; Q = 30 b P = $5; Q = 30 c P = $6; Q = 50 d P = $4; Q = 50

b P = $5; Q = 30

Which is the MOST correct statement about the impact of rent controls? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The short-run supply curve for apartments is inelastic, so rent controls create larger shortages in the short run than in the long run. b The short-run supply curve for apartments is inelastic, so rent controls create smaller shortages in the short run than in the long run. c The long-run supply curve for apartments is inelastic, so rent controls create larger shortages in the long run than in the short run. d The long-run supply curve for apartments is inelastic, so rent controls create smaller shortages in the long run than in the short run.

b The short-run supply curve for apartments is inelastic, so rent controls create smaller shortages in the short run than in the long

A price floor is: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a maximum price allowed by law. b a minimum price allowed by law. c able to produce an efficient outcome. d a tool used to increase government revenues.

b a minimum price allowed by law.

A shortage results when: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a price floor is imposed. b a price ceiling is imposed. c there is excess supply without any price controls. d a price floor is imposed but it is not binding.

b a price ceiling is imposed.

Economists call the maximum legal price a price ceiling because the price: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a cannot legally go lower than the ceiling. b cannot legally go higher than the ceiling. c must match the legally established ceiling price. d All of these answers are correct.

b cannot legally go higher than the ceiling.

A legal maximum price at which a good can be sold is a price: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a stabilization. b ceiling. c support. d floor.

b ceiling.

A free market with externalities __ social surplus. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a maximizes b does not maximize c sometimes maximizes d precludes

b does not maximize

If a steel manufacturer does NOT bear the entire cost of the sulfur dioxide it emits, it will: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a emit a lower level of sulfur dioxide than is socially efficient. b emit a higher level of sulfur dioxide than is socially efficient. c emit an acceptable level of sulfur dioxide d not emit any sulfur dioxide in an attempt to avoid paying the entire cost.

b emit a higher level of sulfur dioxide than is socially efficient.

The tragedy of commons is more likely to apply to: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a oil, natural gas, and coal. b forests, fish, and elephants. c chickens and other farm animals. d microchips, semiconductors, and relay switches.

b forests, fish, and elephants.

Over time, housing shortages caused by rent control __ because the supply of housing is __ elastic in the long run. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a increase; less b increase; more c decrease; less d decrease; more

b increase; more

New housing takes some time to build, so rent control creates larger shortages in the: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a long run than in the short run because short-run supply is more elastic. b long run than in the short run because long-run supply is more elastic. c short run than in the long run because short-run supply is more elastic. d short run than in the long run because long-run supply is more elastic.

b long run than in the short run because long-run supply is more elastic.

Under rent control, tenants can expect: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a lower rent and higher-quality housing. b lower rent and lower-quality housing. c higher rent and a shortage of housing. d higher rent and a surplus of housing.

b lower rent and lower-quality housing.

When external costs are present in a market: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a market prices are still able to send the correct signals. b market prices send incorrect signals. c social surplus is maximized. d consumer surplus is not maximized.

b market prices send incorrect signals.

In the presence of significant externalities, a market equilibrium maximizes: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a social surplus. b nothing. c consumer surplus plus producer surplus plus everybody else's surplus. d consumer surplus plus producer surplus.

b nothing.

A rival good is one where: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a one person's use does not impinge on another person's ability to enjoy the same good. b one person's use prevents another person's ability to use that good at the same time. c two people can use the same good at the same time. d the good is simultaneously nonexcludable and public.

b one person's use prevents another person's ability to use that good at the same time.

In situations of excess demand, sellers might lower quality when they are unable to raise prices because they wish to: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a reduce excess demand. b raise their profit levels. c decrease surpluses. d raise their sales.

b raise their profit levels.

Public roads sometimes get congested, suggesting that public roads are: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a public goods. b rival. c private goods. d experiencing a free rider problem.

b rival.

Price ceilings reduce quality because: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a buyers are willing to accept a lower quality of goods with lower prices. b sellers facing excess demand cannot raise prices to increase profit. c the law would mandate the quality of goods to match the price of the goods. d None of the answers are correct.

b sellers facing excess demand cannot raise prices to increase profit.

Figure: Price CeilingReference: Ref 8-1 (Figure: Price Ceiling) Refer to the figure. A price ceiling of $10 results in a: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a shortage of 270 units. b shortage of 40 units. c surplus of 270 units. d surplus of 40 units.

b shortage of 40 units.

Figure: Dishwashing DetergentReference: Ref 10-7 (Figure: Dishwashing Detergent) Refer to the figure. Dishwashing detergent contains phosphates that harm marine life. In this figure, SC represents the: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a private cost of production plus the social cost of production. b social cost of production: the private cost plus the external cost. c social cost of production: the external cost less the private cost. d private cost of production.

b social cost of production: the private cost plus the external cost.

The price controls of the early 1970s caused: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a lead to be removed from gasoline. b the disappearance of the full-service gas station. c gas stations to stay open for more hours. d an excess supply of gasoline.

b the disappearance of the full-service gas station.

Small tribes may be able to solve the tragedy of the commons by: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a subsidizing the activity that creates the tragedy. b using social norms to punish and ostracize those that overuse a common resource. c setting price controls below the equilibrium price to clear the market. d All of the answers are correct.

b using social norms to punish and ostracize those that overuse a common resource.

Figure: Market for Bathroom Cleaner Reference: Ref 10-4 (Figure: Market for Bathroom Cleaner) Refer to the figure. The figure shows a market for cans of a bathroom cleaner that causes environmental damage, imposing costs on people other than the consumers and producers of the cleaner. If consumers were taxed such that they only purchased the efficient quantity of the product, how much deadweight loss would be removed from this market? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $90 b $180 c $45 d $255

c $45

Figure: Price CeilingReference: Ref 8-1 (Figure: Price Ceiling) Refer to the figure. When a price ceiling of $10 is instituted by the government, consumers are able to buy how many units of the product? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 290 units b 310 units c 270 units d 40 units

c 270 units

Figure: Dishwashing DetergentReference: Ref 10-7 (Figure: Dishwashing Detergent) Refer to the figure. Dishwashing detergent contains phosphates that harm marine life. In this figure, the market equilibrium quantity is __ units, and the efficient quantity is __. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 6; 9 b 12; 6 c 9; 6 d 12; 9

c 9; 6

Figure: Efficient Market Outcome Reference: Ref 10-3 (Figure: Efficient Market Outcome) Refer to the figure. Which point represents the efficient equilibrium? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A b B c C d None of the answers is correct.

c C

Why is national defense a public good?I. It is expensive to produce.II. People who don't pay for national defense still benefit from having it.III. One person's benefit from national defense doesn't reduce anyone else's benefit from it.IV. It is provided by the government. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a I only b I and IV only c II and III only d II, III, and IV only e I, II, and III only

c II and III only

Figure: Efficient Market Outcome Reference: Ref 10-3 (Figure: Efficient Market Outcome) Refer to the figure. The efficient price and quantity are, respectively: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a P1 and Q1. b P1 and Q2. c P2 and Q1. d P3 and Q2.

c P2 and Q1.

Which statement illustrates the concept of external cost? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Margaret purchases all her food and clothing in the big city outside her residence. b A small business owner frequently buys raw materials by using her bank's line of credit. c Raymond cannot open his windows at times because he lives downwind from a mushroom farm. d Felicia, an economics major, asks the most insightful questions in class.

c Raymond cannot open his windows at times because he lives downwind from a mushroom farm.

At a price ceiling of $6 per sheet of drywall, quantity demanded is 100 and quantity supplied is 75. What will happen in the drywall market if there is an increased demand for drywall in the construction industry? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Equilibrium will be restored. b The shortage of drywall will fall below 25 units. c The shortage of drywall will increase above 25 units. d The surplus of drywall will increase above 25 units.

c The shortage of drywall will increase above 25 units.

If the social cost of an activity equals the private cost, what kind of externality exists? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a an external cost b an external benefit c There is no externality. d This cannot be determined by the information given.

c There is no externality.

If a seller facing excess demand is unable to raise the price of the good due to a price ceiling, a likely result will be: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a an increase in the quantity supplied of the product. b an increase in the price of the product. c a decrease in the quality of the product. d a further decrease in the price of the product.

c a decrease in the quality of the product.

The Edict on Maximum Prices, established by the Roman Emperor Diocletian, created price ceilings on various jobs and goods in a failed effort to curb inflation. For example, legal pay for a farm laborer could be no more than 10.8¢ a day (payment set in modern currency). If the market rate of farm labor was 12¢ a day, which would be a plausible consequence of this law? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a farms would produce more food than they otherwise would b nothing unusual c a laborer would work less hard than he otherwise would d an increase in unemployment for farm hands

c a laborer would work less hard than he otherwise would

Figure: Supply and Demand 5 Reference: Ref 8-18 (Figure: Supply and Demand 5) Refer to the figure. In the figure, representing a market for apartments, a rent-controlled price of $800 will cause: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a short-run shortage of 6,000 apartments. b a short-run shortage of 8,000 apartments. c a short-run shortage of 3,000 apartments. d a short-run surplus of 14,000 apartments.

c a short-run shortage of 3,000 apartments.

Rent controls are: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a an efficient and equitable way to help the poor. b inefficient, but a pretty good way to solve a serious social problem. c an inefficient way to help the poor in raising their standard of living. d an efficient way to allocate housing.

c an inefficient way to help the poor in raising their standard of living.

In Puerto Rico in 1938, the market wage was 3¢ to 4¢ per hour when Congress passed a law raising it to 25¢ per hour. Workers in Puerto Rico were: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a happy with their raise. b hoping for a higher minimum wage. c devastated. d indifferent.

c devastated.

Which would MOST LIKELY result after setting a price ceiling on automobiles? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a surplus of automobiles b more friendly automobile salesmen c fewer safety features d an increase in demand for automobiles

c fewer safety features

A price ceiling is a(n): Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a legally established minimum price that can be charged for a good. b illegally established minimum price that can be charged for a good. c legally established maximum price that can be charged for a good. d illegally established maximum price that can be charged for a good.

c legally established maximum price that can be charged for a good.

An external benefit in a market will cause the market to produce: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a more than the same market would produce in the presence of a negative externality. b more than is socially desirable. c less than is socially desirable. d the socially optimal equilibrium amount.

c less than is socially desirable.

Figure: Government Price Controls Reference: Ref 8-3 (Figure: Government Price Controls) Refer to the figure. The government enacts a price control causing a shortage of 15 units of the good. Therefore, the ____ is set at ____. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a price floor; $31 b price floor; $17 c price ceiling; $10 d price ceiling; $17

c price ceiling; $10

The presence of price floors in a market usually is an indication that: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a there is an insufficient quantity of a good or service being produced. b the forces of supply and demand are unable to establish an equilibrium price. c sellers of the good or service outnumber the buyers. d policymakers believe the price floor does not involve inequities.

c sellers of the good or service outnumber the buyers.

Figure: Price CeilingReference: Ref 8-1 (Figure: Price Ceiling) Refer to the figure. If a price ceiling were set at $12, there would be a: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a shortage of 50 units. b surplus of 40 units. c shortage of 0 units. d surplus of 20 units.

c shortage of 0 units.

A price ceiling creates a ____ when it is set ____.FAVORITE QUESTION Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a surplus; below the equilibrium price b surplus; above the equilibrium price c shortage; below the equilibrium price d shortage; above the equilibrium price

c shortage; below the equilibrium price

The incentive to dedicate private resources to maintaining a common resource is low because: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a there is no benefit from maintenance of a common resource. b entrepreneurs have not found a way to profit from common resources. c the benefits of maintenance are external, not private benefits. d maintenance is very expensive.

c the benefits of maintenance are external, not private benefits.

Price ceilings do not have much effect: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a in times of high inflation. b ever. c when market prices are at or below the ceiling. d in nonmarket economies.

c when market prices are at or below the ceiling.

(Figure: Market for Vaccines) Refer to the figure. The figure represents the market for vaccines with external benefits. The efficient level of output is ____ vaccines, which is ____ than the market's output. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 1,200; greater b 1,800; less c 2,400; greater d 1,800; greater

d 1,800; greater

Because of government price controls, a business must now sell soft-serve ice cream at half its original price. This business might respond by: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a offering smaller servings of ice cream. b skimping on toppings of nuts, fudge sauce, and cherries. c reducing hours of operation. d All of the answers are correct.

d All of the answers are correct.

Which of the following statements is TRUE?I. Overfishing results from fish being privately owned by profit-maximizing firms.II. If a fisherman catches a lot of fish, he creates a negative externality because there are less fish to catch for everyone else.III. There is no incentive for an individual to fish less simply to leave more fish for everyone else to catch. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a None of these are true b I, II, and III c II only d II and III only e I only

d II and III only

Suppose that a firm plans to provide defense against asteroids striking the earth. Which of the following is TRUE? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Most people will find it in their self-interest to pay the firm to protect the earth. b Asteroid protection is a private good, so the firm will make a lot of profit. c In case of an earth-bound asteroid, the firm will not protect people who refused to pay for asteroid defense. d Most people will not pay a firm for asteroid defense.

d Most people will not pay a firm for asteroid defense.

Which observation would be consistent with the impact of price ceilings? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Books are printed on higher-quality paper. b Full-service gasoline stations stay open for 24 hours. c New automobiles are painted with more coats of paint. d Newspapers switch to a smaller font size in order to decrease bulk.

d Newspapers switch to a smaller font size in order to decrease bulk.

Figure: External Cost 1 Reference: Ref 10-5 (Figure: External Cost 1) Refer to the figure. Paper mills are notorious for emitting horrible smells that impose external costs on those living around the mills. According to the figure, what is the market price and quantity of paper? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a P = $4; Q = 30 b P = $5; Q = 30 c P = $6; Q = 50 d P = $4; Q = 50

d P = $4; Q = 50

Which is an example of an external benefit? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a You get a raise that increases your pay 20%. b Your neighbor's rooster wakes you up every morning before your alarm clock goes off, reducing the amount of sleep you get at night. c Researchers at Johnson & Johnson are working on a cure for cancer. d Your neighbors fix up their homes, which raises property values on the entire street.

d Your neighbors fix up their homes, which raises property values on the entire street.

For a price floor to prevent market forces from finding the equilibrium price, it must be set: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a above the equilibrium price, causing a market shortage. b below the equilibrium price, causing a market shortage. c below the equilibrium price, causing a market surplus. d above the equilibrium price, causing a market surplus.

d above the equilibrium price, causing a market surplus.

Suppose your city has had an increase in crime and the city government decides that more police are needed to patrol at night. Which of the following funding solutions avoids the free-rider problem involved with additional police officers? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a taxation of the city's top 50% of income earners b donation-based police service c voluntary police officers d an increase in the city's sales tax

d an increase in the city's sales tax

Because rent controls on apartments reduce profits: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a developers build and rent more apartments to make up for lost profit. b condominiums are converted into apartments. c landlords are less likely to discriminate against minorities in renting out apartments. d apartment managers will give less consideration to renters' complaints.

d apartment managers will give less consideration to renters' complaints.

Refer to the figure. (Figure: Market for Vaccines) The figure represents the market for vaccines with external benefits. The external ____ of vaccination is ____. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a cost; $15 b cost; $10 c benefit; $20 d benefit; $5

d benefit; $5

When the maximum legal price is below the market price we say that there is a price: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a floor. b stabilization. c support. d ceiling.

d ceiling.

During the Middle Ages, many villages had areas reserved for families to take their cows or sheep to graze. All families were welcome to use this land without charge. The land for grazing can be characterized as a: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a public good. b private good. c natural resource. d common resource.

d common resource.

Which would NOT happen as the result of a price floor? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a surplus of the good b lost gains from trade c misallocation of resources d decreases in product quality

d decreases in product quality

Price ceilings would create all of the following effects EXCEPT: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a shortages. b reductions in product quality. c a misallocation of resources. d maximum gains from trade.

d maximum gains from trade.

Figure: Government Price Controls Reference: Ref 8-3 (Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a shortage of 15 units. b a surplus of 15 units. c a supply of 20 units. d no effect on the market.

d no effect on the market.

The tragedy of the commons refers to the: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a underproduction of public goods in economic markets. b underproduction of a common good. c overuse of a nonrival and nonexcludable good. d overuse of a rival but nonexcludable good.

d overuse of a rival but nonexcludable good.

An external cost is a cost paid by: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the consumers trading in the market b the producers trading in the market. c the government regulating the market. d people other than the consumer and the producer trading in the market.

d people other than the consumer and the producer trading in the market.

How can sellers increase profits when they face a price ceiling? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a charge a higher price for the good b charge a lower price for the good to undercut rival sellers c produce and sell more output d reduce the quality of the product and provide less customer service

d reduce the quality of the product and provide less customer service