Econ Test 2 Part 1

Other things constant, how will a decrease in the wages of teenagers affect the market for fast food hamburgers? a. The supply of fast food hamburgers will increase, leading to an increase in the price of hamburgers. b. The supply of fast food hamburgers will increase, leading to a reduction in the price of hamburgers. c. The supply of fast food hamburgers will decrease, leading to an increase in the price of hamburgers. d. The supply of fast food hamburgers will decrease, leading to a reduction in the price of hamburgers.

B) The supply of fast food hamburgers will increase, leading to a reduction in the price of hamburgers.

When a price floor is above the equilibrium price, a. quantity demanded will exceed quantity supplied, so there will be a shortage. b. quantity supplied will exceed quantity demanded, so there will be a surplus. c. the market will be in equilibrium. d. This is a trick question because price floors are generally set below the equilibrium price.

B. Quantity supplied will exceed quantity demanded, so there will be a surplus.

Which of the following would tend to increase the price of lumber? a. a technological advance that lowers the cost of cutting timber b. an increase in the demand for newly constructed homes c. a decrease in the demand for wooden rocking chairs d. a decrease in the tax imposed on firms who produce lumber

B. an increase in the demand for newly constructed homes

The more elastic the supply of a product, the more likely it is that the a. burden of a tax on the product will fall on sellers. b. burden of a tax on the product will fall on buyers. c. burden of a tax on the product will fall equally on both buyers and sellers. d. deadweight loss of the tax will be smaller.

B. burden of a tax on the product will fall on buyers.

The market pricing system corrects an excess supply by a. raising the product price and increasing producer profits. b. lowering the product price and decreasing producer profits. c. raising the product price and decreasing producer profits. d. lowering the product price and increasing producer profits.

B. lowering the product price and decreasing producer profits.

An increase in the number of students graduating with a major in engineering would result in a. a decrease in the supply of engineers that would increase the wage of engineers and decrease the number employed. b. an increase in the supply of engineers that would decrease the wage of engineers and increase the number employed. c. a decrease in the demand for engineers that would decrease the wage of engineers and decrease the number employed. d. an increase in the demand for engineers that would increase the wage of engineers and increase the number employed.

B.an increase in the supply of engineers that would decrease the wage of engineers and increase the number employed.

Which of the following is a major disadvantage of setting the price of a good below equilibrium and using waiting in line rather than price to ration the good? a. Compared to price rationing, waiting in line is unfair since it is easier for those with higher incomes to wait in line. b. Waiting in line imposes a cost on the consumer; paying higher prices does not. c. Both waiting in line and higher prices are costly to consumers, but unlike the payment of a higher price, waiting in line does not provide suppliers with an incentive to expand future output. d. Waiting in line benefits consumers at the expense of producers.

C. Both waiting in line and higher prices are costly to consumers, but unlike the payment of a higher price, waiting in line does not provide suppliers with an incentive to expand future output.

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that the below-equilibrium prices established by rent controls would a. create a surplus of rental housing. b. promote a rapid increase in the future supply of housing. c. result in poor service and quality deterioration of many rental units. d. lead to a reduction in housing discrimination against minorities.

C. result in poor service and quality deterioration of many rental units.

Other things constant, if a labor union is able to successfully increase the wages of autoworkers, there will be a. an increase in the supply of automobiles causing the price of automobiles to fall. b. an increase in the supply of automobiles causing the price of automobiles to rise. c. a decrease in the supply of automobiles causing the price of automobiles to fall. d. a decrease in the supply of automobiles causing the price of automobiles to rise.

D) a decrease in the supply of automobiles causing the price of automobiles to rise.

Which of the following is the most likely result of an increase in the minimum wage? a. an increase in the employment of unskilled workers b. a decrease in the number of workers seeking minimum wage jobs c. an increase in the demand for unskilled workers d. a decrease in the employment of unskilled workers

D. a decrease in the employment of unskilled workers

Other things constant, a decrease in the demand for computers will a. increase the price of computers. b. increase the quantity supplied of computers. c. increase the demand for computer manufacturing workers. d. decrease the demand for computer manufacturing workers.

D. decrease the demand for computer manufacturing workers.

Which of the following statements is true? a. In both black markets and legal markets, supply and demand determine price. b. The quality of products sold in black markets and legal markets are similar. c. The price of products in black markets tends to be the same as those in legal markets for otherwise identical products. d. The rate of violence is similar in black markets and legal markets.

a. In both black markets and legal markets, supply and demand determine price.

Rent controls tend to cause persistent imbalances in the market for housing because a. Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. b. Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. c. Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. d. Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

a. Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage.

Suppose the market equilibrium price of corn is $5 per bushel, and the government sets a price ceiling of $4 per bushel. What is the most likely result of this action? a. There will be a shortage of corn. b. There will be a surplus of corn. c. There will be a decrease in the quantity of corn demanded as the result of the price ceiling. d. There will be an increase in the quantity of corn supplied as the result of the price ceiling.

a. There will be a shortage of corn.

Suppose that a tax is placed on textbooks. If the buyers end up bearing most of the tax burden, this indicates that the a. demand is more inelastic than the supply. b. supply is more inelastic than the demand. c. government has required that buyers remit the tax payments. d. government has required that buyers remit the tax payments.

a. demand is more inelastic than the supply.

If there was an increase in the excise tax imposed on beer suppliers, what would be the effect on the equilibrium price and quantity of beer? a. price increases; quantity decreases c. price increases; quantity increases b. price decreases; quantity decreases d. price decreases; quantity increases

a. price increases; quantity decreases

The large amount of violence associated with the current drug trade is mostly caused by a. the fact that drug markets must operate outside the normal legal system. b. buyers and sellers often being under the influence of drugs at the time of the transaction. c. buyers and sellers who are often unfamiliar with conducting normal transactions within the legal system. d. the lack of quantity supplied and quantity demand being in balance in black markets because there is no equilibrium price in these markets.

a. the fact that drug markets must operate outside the normal legal system.

When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because a. the market price of the product will fall in response to the subsidy. b. the market price of the product will rise in response to the subsidy. c. the market price of the product will not change in response to the subsidy. d. producers will reduce the supply of the product.

a. the market price of the product will fall in response to the subsidy.

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because a. with shortages and waiting lists, they have no incentive to maintain and improve their property. b. they become resigned to the fact that many of their apartments are going to be vacant at any given time. c. with rent control the government guarantees landlords a minimal level of profit. d. with rent control it becomes the government's responsibility to maintain rental housing.

a. with shortages and waiting lists, they have no incentive to maintain and improve their property.

Which of the following would tend to increase the wage of coal miners? a. new environmental laws that make it more costly for firms to use coal in their production process b. an increase in the price of oil, a substitute for coal c. a decrease in the demand for coal d. an increase in the supply of coal miners

b. an increase in the price of oil, a substitute for coal

Taxes create deadweight losses because they a. reduce profits of firms. b. distort incentives. c. cause prices to rise. d. create revenue for the government.

b. distort incentives.

Because of price controls in the former Soviet Union, people often waited in long lines for food and other necessities. Modern economic theory would indicate that, relative to price rationing, waiting in line is a. just as efficient. b. less efficient because the time spent waiting in line imposes an opportunity cost on the buyer that does not generate revenue for the seller. c. more efficient since waiting in line reduces the transaction costs of purchasing goods. d. more efficient since waiting in line reduces the cost of the goods to the consumer.

b. less efficient because the time spent waiting in line imposes an opportunity cost on the

A deadweight loss results from the imposition of a tax on a good because the tax a. induces the government to increase its expenditures. b. reduces the quantity of exchanges between buyers and sellers. c. causes a disequilibrium in the market. d. imposes a loss on buyers that is greater than the loss to sellers.

b. reduces the quantity of exchanges between buyers and sellers.

Suppose the demand curve for a good is highly elastic and the supply curve is highly inelastic. If the government taxes this good, a. buyers and sellers will each share 50 percent of the burden, regardless of the elasticities of the demand and supply curves. b. sellers will bear a larger share of the tax burden. c. the distribution of the burden will depend upon whether the buyers or the sellers are required to send the tax to the government. d. buyers will bear a larger share of the tax burden.

b. sellers will bear a larger share of the tax burden.

Which of the following statements about rent control in New York City is accurate? a. Rent control has proven successful in providing low-cost housing for poor people. b. Rent control has produced an increase in available rental units. c. Many well-to-do people live in rent-controlled apartments. d. All of the above are accurate statements.

c. Many well-to-do people live in rent-controlled apartments.

After a natural disaster, such as a hurricane, the increased demand for certain items (like lumber, electric generators, and chainsaws) causes their prices to rise. These higher prices a. discourage the flow of these items into the area. b. encourage consumers to purchase the items even if they do not plan to use them. c. help to direct the items toward their highest valued uses. d. do all of the above.

c. help to direct the items toward their highest valued uses.

When a price ceiling prevents a higher market price from rationing a good, a. a surplus of the good will develop. b. scarcity of the good will be eliminated. c. non-price factors will play a more important role in the rationing process. d. the future supply of the good will expand rapidly.

c. non-price factors will play a more important role in the rationing process.

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, a. the demand curve for physicals shifts to the right. b. the supply curve for physicals shifts to the left. c. the quantity demanded of physicals increases and the quantity supplied of physicals decreases. d. the number of physicals performed will increase.

c. the quantity demanded of physicals increases and the quantity supplied of physicals decreases.