Macro HW Ch 3, 4, 5

Which of the following is a contribution of economist Vernon Smith? a) the idea of movements along the supply and demand curves b) the theory of demand shocks c) experimental evidence of equilibrium price d) the discovery of equilibrium price

experimental evidence of equilibrium price

In free markets, shortages lead to: a) lower prices. b) surpluses. c) higher prices. d) unexploited gains from trade.

higher prices.

One result of the North American Free Trade Agreement was that the number of Canadian lumber companies selling in United States markets _____, causing a(n) _____ in the total market supply of lumber in the United States. a) decreased; decrease b) increased; increase c) increased; decrease d) decreased; increase

increased; increase

The law of supply states that there is a _____ relationship between price and quantity ______. a) positive; demanded b) negative; demanded c) negative; supplied d) positive; supplied

positive; supplied

Dramatic price increases, such as those seen in the markets for gas and oil in the 1970s, are typically the result of: a) foreign intervention in markets. b) price gouging by big businesses. c) reductions in supply. d) shortages.

reductions in supply.

The demand curve: a) shows how much buyers are willing and able to buy at different prices. b) shows how much sellers are willing and able to sell at different prices. c) is the amount that buyers are willing and able to buy at a particular price. d) is the amount that sellers are willing and able to sell at a particular price.

shows how much buyers are willing and able to buy at different prices.

In a free market when there are unexploited gains from trade: a) an equilibrium price and quantity have been reached. b) there are sellers who are unwilling to sell at prices buyers are willing to pay. c) there are buyers who are willing to pay more for goods than sellers are asking. d) the market is slow to adjust to this situation.

there are buyers who are willing to pay more for goods than sellers are asking.

Price controls are usually imposed in response to an: a) unexpected increase in prices. b) expected decrease in prices. c) unexpected decrease in prices. d) expected increase in prices.

unexpected increase in prices.

(Figure: Quantity of Good X) Refer to the figure. As the price falls from $200 to $100, consumer surplus changes by: a) $10,000. b) $5,000. c) $12,500. d) -$25,000.

$12,500.

Figure: Supply and Demand 3 Which of the following statements applies to the diagram? a) An increase in supply causes an increase in demand. b) A decrease in supply causes an increase in quantity demanded. c) An increase in supply causes an increase in quantity demanded. d) A decrease in supply causes a decrease in demand.

An increase in supply causes an increase in quantity demanded.

Which statement about consumer surplus is correct? a) Consumer surplus is the gross benefit to consumers from the exchange that occurs in a market. b) Consumer surplus is the gains from trade on the part of the consumer that result from a market transaction. c) Total consumer surplus is equal to the price the consumers paid multiplied by the quantity they purchased. d) Consumer surplus is the difference between the minimum price the consumer is willing to pay and the market price.

Consumer surplus is the gains from trade on the part of the consumer that result from a market transaction.

An increase in supply refers to: a) a leftward shift of the supply curve. b) an upward movement along the supply curve. c) a rightward shift of the supply curve. d) a downward movement along the supply curve.

a rightward shift of the supply curve.

A free market maximizes the gains from trade, the sum of consumer and producer surplus, meeting all of the following conditions EXCEPT: a) the supply of goods is sold by the sellers with the lowest costs. b) there are no unexploited gains from trade between buyers and sellers. c) all buyers who are willing to pay positive prices are able to receive goods from trade. d) the supply of goods is bought by the buyers with the highest willingness to pay.

all buyers who are willing to pay positive prices are able to receive goods from trade.

In the week before Hurricane Katrina, the price of flashlights rose in New Orleans because of: a) a decrease in supply. b) an increase in demand. c) a decrease in demand. d) an increase in supply.

an increase in demand.

When the price of a good increases, demand for the good will: a) decrease. b) depend on the corresponding change in supply. c) increase. d) be unaffected.

be unaffected.

Rent control in New York City has resulted in: a) people having difficulty finding apartments. b) people living in luxury apartments and paying low rents. c) All of the answers are correct. d) people having to bribe landlords to get apartments.

All of the answers are correct.

In Ancient Egypt, the "Bronze Law" set maximum prices for wages, preventing them from rising above what rulers perceived as the minimum needed to survive. If this was 10¢ a day for a porter (someone who carries things short distances) and the market wage was 8¢ a day, which of the following would be a plausible consequence of this law? a) Unemployment for porters would decrease. b) Nothing unusual would happen. c) Porters would travel less quickly than they otherwise would. d) Porters would transport items they normally would not.

Nothing unusual would happen.

If the market price is below the equilibrium price, which of the following will occur? a) Quantity supplied will exceed quantity demanded and the market price will eventually fall. b) Quantity supplied will exceed quantity demanded and the market price will eventually rise. c) Quantity demanded will exceed quantity supplied and the market price will eventually rise. d) Quantity demanded will exceed quantity supplied and the market price will eventually fall.

Quantity demanded will exceed quantity supplied and the market price will eventually rise.

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity? a) The equilibrium price increases; the change in the equilibrium quantity is uncertain. b) The equilibrium price decreases; the change in the equilibrium quantity is uncertain. c) The equilibrium price increases; the equilibrium quantity decreases. d) The equilibrium price decreases; the equilibrium quantity increases.

The equilibrium price decreases; the change in the equilibrium quantity is uncertain.