ECON201 Quiz 3

A price floor means that: a. government is imposing a minimum legal price that is typically above the equilibrium price. b. sellers are artificially restricting supply to raise price. c.inflation is severe in this particular market. d. government is imposing a maximum legal price that is typically below the equilibrium price.

a. government is imposing a minimum legal price that is typically above the equilibrium price.

A demand curve: a. indicates the quantity demanded at each price in a series of prices: b. graphs as an unsloping line. c. shows the relationship between price and quantity supplied. d. shows the relationship between income and spending.

a. indicates the quantity demanded at each price in a series of prices

Refer to the above diagram. A government-set price floor is best illustrated by: a. price C b. price A c. price B d. price E

a. price C

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes: a. the income effect b. the inflationary effect c. the cost effect d. the substitution effect

a. the income effect

Which of the following is most likely to be an inferior good? a. used clothing b. fur coats c. ocean cruises d. steak

a. used clothing

If the demand for a normal good (for example steak) shifts to the left, the most likely reason is that: a. the price of steak has risen b. consumer incomes have fallen. c. the price of cattle feed has gone up. d. cattle production has declined.

b. consumer incomes have fallen.

An increase in the price of a product will reduce the amount of it purchased because: a. the higher price means that real incomes have risen. b. consumers will substitute other products for the one whose price has risen. c. supply curve are upsloping d. consumers substitute relatively high-priced for relatively low-priced products.

b. consumers will substitute other products for the one whose price has risen.

If X is a normal good, a rise in money income will shift the: a. supply curve for X to the left b. demand curve for X to the right c. supply curve for X to the right d. demand curve for X to the left

b. demand curve for X to the right

If the supply and demand curves for a product both decrease, then equilibrium: a. quantity must fall and equilibrium price must rise. b. quantity must decline, but equilibrium price may either rise, fall, or remain unchanged. c. price must fall but equilibrium quantity may either rise, fall, or remain unchanged. d. quantity and equilibrium price must both decline

b. quantity must decline, but equilibrium price may either rise, fall or remain unchanged

In a competitive market the equilibrium price and quantity occur where: a. quantity demanded exceeds quantity supplied or vice verse: b. the downsloping demand curve interects the upsloping supply curve. c. consumers and suppliers bargain to a mutually acceptable price. d. the upsloping demand curve intersects the downsloping supply curve.

b. the downsloping demand curve intersects the upsloping supply curve.

At the equilibrium price: a. there are forces that cause price to rise. b. there are no pressures on price to either rise or fall. c. there are forces that cause price to fall. d. quantity supplied may exceed quantity demanded or vice versa

b. there are no pressures on price to either raise or fall.

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that: a. there are few goods that are substututes for bicycles. b. there are many goods that are complementary to bicycles. c. bicycles are normal goods. d. there are many goods that are substitues for bicycles.

c. bicycles are normal goods

An unusually large crop of coffee beans might: a. increase the price of tea b. increase the price of coffee c. increase the supply of coffee d. decrease the quantity of coffee consumed

c. increase the supply of coffee

If the price of K declines, and the demand curve for the complementary product J will: a. shift to the left b. decrease c. shift to the right d. remain unchanged

c. shift to the right

Black markets are associated with: a. ceiling prices and the resulting product surpluses. b. price floors and the resulting product surpluses. c. price floors and the resulting product shortages. d. ceiling prices and the resulting product shortages

d. ceiling prices and the resulting product shortages

Cameras and film are: a. inferior goods b. substitute goods c. independent goods d. complementary goods

d. complementary goods

If an economy produces its most wanted goods but uses outdated production methods it is: a. achieving both productive and allocative efficiency. b. engaged in roundabout prodution. c. achieving productive efficiency, but not allocative efficiency. d. not achieving productive efficiency.

d. not achieving productive efficiency