Econ Chapters 4 Quiz Review

(Exhibit: Supply and Demand in Agriculture) If a price floor at P 4 is set to help farmers in terms of income and government wants to assure farmers that their output will be purchased, the government would have to purchase an amount of output equal to: a. Q3 - Q0. b. Q3 - Q1. c. Q2 - Q1. d. None of the above are true.

a. Q3 - Q0

Exhibit: Rent Controls) If rent controls are imposed, they will most likely be set at either _______ or _______. a. Rent0; Rent1 b. Rent1; Rent3 c. Rent3; Rent4 d. All of the above are equally likely rent control levels.

a. Rent0; Rent1

Exhibit: Rent Controls) Without rent controls, the equilibrium rent is _______ and the equilibrium quantity is _______. a. Rent2; Q2 b. Rent1; Q1 c. Rent2; Q1 d. Rent3; Q3

a. Rent2; Q2

Exhibit: Rent Controls) If rent controls are set at Rent 0: a. some renters would be willing to pay a price as high as Rent4 for Q0 units. b. no one would have to pay a higher actual price than Rent0 nor would anyone be willing to do so. c. there would be a shortage of rental units, but it is impossible to tell how large the shortage is based on the information provided. d. the shortage of rental units is Q2 to Q0.

a. some renters would be willing to pay a price as high as Rent4 for Q0 units.

Governments often impose taxes because they need money to fund their operations. This rationale for the tax is called: a. the revenue argument. b. paternalism. c. rent seeking. d. correcting a market failure.

a. the revenue argument.

Exhibit: A Tax) Consider the demand and supply for movie tickets in a small town. When the government imposes a $5 tax on the sale of movie tickets, the (net) price ultimately paid by buyers will be: a. $8 b. $13 c. $7 d. $12

b. $13

Rent controls: a. almost always help low-income families find low-cost housing. b. often help high-income families. c. cause the quantity supplied to exceed the quantity demanded. d. result in all of the above.

b. often help high-income families.

Governments often impose taxes because they want to discourage behaviors that officials believe is undesirable. This rationale for the tax is called: a. the revenue argument. b. paternalism. c. correcting a market failure. d. rent seeking.

b. paternalism.

Suppose an oil producer wants to ensure her business by lobbying her government to tax electric cars. This rationale for the tax—handicapping the business of one's competitors—is called: a. correcting a market failure. b. rent seeking. c. paternalism. d. the revenue argument.

b. rent-seeking.

Most firms in the United States today are: a. owned by shareholders. b. sole proprietorships and partnerships. c. corporations. d. owned by government.

b. sole proprietorships and partnerships.

When the government imposes a tax on a product, buyers will be most negatively impacted if: a. the tax is collected from the seller. b. the burden does not depend on who the government collects the tax from. c. the burden of the tax will always be felt most heavily by the seller. d. the tax is collected from the buyer.

b. the burden does not depend on who the government collects the tax from.

Exhibit: A Tax) Consider the demand and supply for movie tickets in a small town. When the government imposes a $5 tax on the sale of movie tickets, the (net) price ultimately received by sellers will be: a. $7 b. $12 c. $8 d. $13

c. 8

Price controls: a. always increase economic efficiency. b. always lead to more equitable results. c. can result in inequitable outcomes. d. All of the above are true.

c. can result in inequitable outcomes.

The bulk of the nation's output is produced by: a. partnerships. b. proprietorships. c. corporations. d. None of the above are true.

c. corporations

A firm owned by one individual is called a: a. corporation. b. partnership. c. sole proprietorship. d. none of the above.

c. sole proprietorship

The relationship between the value and price of a stock suggests that: a. the equilibrium price of a stock strikes a balance between those who think the stock is worth more and those who think it's worth less at the current price. b. it is the market's best guess regarding the expected value of the company's future profits. c. stocks are overvalued. d. A and B are true.

d. A and B are true.

A tax: a. is mandatory. b. is generally linked to some activity, such as a purchase. c. discourages the activity being taxed. d. All of the above are true.

d. All of the above are true.

Exhibit: Supply and Demand in Agriculture) To help farmers: a. a price ceiling would be set at P4, causing a surplus of Q2 - Q1. b. a price floor would be set at P2, causing a surplus of Q2 - Q0. c. a price floor would be set at P1, causing a shortage of Q3 - Q0. d. a price floor would be set at P4, causing a surplus of Q3 - Q0.

d. a price floor would be set at P4, causing a surplus of Q3 - Q0.

Exhibit: A Tax) Consider the demand and supply for movie tickets in a small town. When the government imposes a $5 tax on the sale of movie tickets, the quantity traded in the marketplace: a. rises from 80 to 130. b. falls from 180 to 80. c. rises from 130 to 180. d. falls from 130 to 80.

d. falls from 130 to 80.

In the personal computer industry, the reason for the fall in prices and the increase in quantity after 1980 was: a. a result of a dramatic decrease in U.S. wages. b. a result of a dramatic decrease in foreign wages. c. mainly a function of resource prices. d. primarily due to technological change and an increase in the number of sellers.

d. primarily due to technological change and an increase in the number of sellers.