homework 2

Those who make economic policy concerning price controls often do so in order to: A.establish a more equitable result based on normative judgments. B.raise revenues to support the activities of government. C.change the facts on which economic theory is built. D.do all of the above.

A.establish a more equitable result based on normative judgments.

SEE EXHIBIT 3 The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing handheld calculators improves. Which panel best describes how this will affect the market for handheld calculators? A.Panel (a) B.Panel (b) C.Panel (c) D.Panel (d)

A.Panel (a)

A decrease in supply means: A.a shift to the left of the entire supply curve. B.moving downward (to the left) along the supply curve with lower prices. C.less will be demanded at every price. D.more will be supplied at every price.

A.a shift to the left of the entire supply curve.

It is true that the equilibrium quantity will always go up if supply: A.and demand both increase. B.increases and demand decreases. C.and demand both decrease. D.decreases and demand remains unchanged

A.and demand both increase.

A market is a set of arrangements where: A.buyers and sellers can get together and buy and sell. B.buyers compete with sellers. C.sellers compete with buyers. D.A and C are true, but B is not true.

A.buyers and sellers can get together and buy and sell.

A negative relationship between the quantity demanded and price is called the law of ______. A.demand B.diminishing marginal returns C.market clearing D.supply

A.demand

A market shortage occurs if the quantity: A.demanded is greater than the quantity supplied. B.demanded is less than the quantity supplied. C.demanded is equal to the quantity supplied. D.supplied is greater than the quantity demanded.

A.demanded is greater than the quantity supplied.

Which of the following will result in an increased price of milk? A.A shift to the right of the supply curve for milk. B.A shift to the right of the demand curve for milk. C.An increase in the number of milk suppliers. D.A decrease in the number of milk buyers.

B.A shift to the right of the demand curve for milk.

The equilibrium price in a market is established subject to the all other things unchanged condition (ceterius paribus) and, therefore, very well may change due to: A.a change in the price of the good. B.a change in the quantity of the good. C.a change in the price of resource inputs used to produce the good. D.any of the above.

C.a change in the price of resource inputs used to produce the good.

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.both A and B are true.

D.both A and B are true.

Price ceilings which lead to shortages will impose costs on society because they: A.will lead to long waiting lines. B.may result in black market prices, which are higher than the market-determined price would be. C.lead to a smaller quantity offered on the market. D.do all of the above.

D.do all of the above.

The U.S. economy can be characterized as A.command economy B.socialism C.pure capitalism D.mixed economy

D.mixed economy

A maximum price set below the equilibrium price is a: A.demand price. B.supply price. C.price floor. D.price ceiling.

D.price ceiling.

If demand and supply both shift to the right, then: A.both price and quantity will go up. B.price will go down and quantity will go up. C.quantity will go down and price will go up. D.quantity will go up, but price could go up, down, or stay the same

D.quantity will go up, but price could go up, down, or stay the same

According the idea of Laissez Faire A.governments should not intervene in markets without a good economic reason B.markets lead to equilibrium C.government must intervene in markets, always D.the invisible hand is irrelevant

A.governments should not intervene in markets without a good economic reason

A shift of a demand curve to the right, all other things unchanged, will: A.increase equilibrium price and quantity. B.decrease equilibrium price and quantity. C.decrease quantity and increase price. D.increase quantity and decrease price.

A.increase equilibrium price and quantity.

A decrease in the price of eggs, all other things unchanged, will result in a(n): A.increase in the demand for eggs. B.increase in the supply of eggs. C.greater quantity of eggs supplied. D.greater quantity of eggs demanded.

A.increase in the demand for eggs.

An increase in demand, all other things unchanged, will result in a(n) ________ in the equilibrium price and a(n) ________ in the equilibrium quantity. A.increase; increase B.decrease; decrease C.decrease; increase D.increase; decrease

A.increase; increase

A price ceiling will have no effect if: A.it is set above the equilibrium price. B.the equilibrium price is above the price ceiling. C.set below the equilibrium price. D.it creates a shortage.

A.it is set above the equilibrium price.

The intersection of the supply and demand curves indicates: A.the equilibrium solution in the market. B.a surplus that will cause the price to fall. C.a shortage that will cause the price to rise. D.the quantity demanded exceeds the quantity supplied.

A.the equilibrium solution in the market.

A persistent shortage may occur if: A.the government imposes a price ceiling. B.a price floor is imposed. C.demand keeps falling. D.all of the above occur.

A.the government imposes a price ceiling.

In sketching market supply and demand curves, which of the following is true? A.the vertical axis is Price, the horizontal axis Quantity, the upward sloping curve is Supply and the downward sloping curve is Demand B.the vertical axis is Quantity, the horizontal axis Price, the upward sloping curve is Supply and the downward sloping curve is Demand C.the vertical axis is Quantity, the horizontal axis Price, the upward sloping curve is Demand and the downward sloping curve is Supply D.the vertical axis is Price, the horizontal axis Quantity, the upward sloping curve is Demand and the downward sloping curve is Supply

A.the vertical axis is Price, the horizontal axis Quantity, the upward sloping curve is Supply and the downward sloping curve is Demand B.the vertical

The primary difference between a change in demand and a change in the quantity demanded is: A.a change in demand is a movement along the demand curve, and a change in quantity demanded is a shift in the demand curve. B.a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve. C.both a change in quantity demanded and a change in demand are shifts in the demand curve, only in different directions. D.both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions.

B.a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.

Which of the following would not change the demand for automobiles? A.a change in the price of gasoline B.a change in the cost of steel C.a change in the price of motorcycles D.a change in tastes

B.a change in the cost of steel

If the government sets out to help low-income people by establishing a maximum amount for rent: A.a price floor has been set and a shortage of rental units may occur. B.a price ceiling has been set and a shortage of rental units may occur. C.in the long run more rental units will appear. D.poor people will definitely be helped.

B.a price ceiling has been set and a shortage of rental units may occur.

Which of the following always results in an increase in price and quantity? A.an increase in supply and a decrease in demand B.an increase in demand with no change in supply C.an increase in supply with no change in demand D.all of the above

B.an increase in demand with no change in supply

Dramatic reductions in costs of producing computers in the 1980's and equally dramatic increases in demand for computers resulted in A.increases in quantity of computers and in the price of computers. B.increases in quantity of computers and reductions in the price of computers. C.decreases in quantity of computers and decreases in the price of computers. D.decreases in quantity of computers and increases in the price of computers.

B.increases in quantity of computers and reductions in the price of computers.

A ceiling price set in the policy of rent controls: A.will be set at a price above the equilibrium price. B.may result in some people who rent out units to leave the business because they cannot cover costs. C.will lead to rental units being higher in quality because landlords are guaranteed a high price. D.will create a surplus of housing.

B.may result in some people who rent out units to leave the business because they cannot cover costs.

In he 'standard' supply and demand graph, which of the following is correct A.price goes on the horizontal axis while quantity goes on the vertical axis B.quantity goes on the horizontal axis while price goes on the vertical C.the upward sloping curve is demand D.the downward sloping curve is income

B.quantity goes on the horizontal axis while price goes on the vertical

If economists say, "the price is too high," they mean that: A.quantity demanded is greater than quantity supplied. B.quantity supplied is greater than quantity demanded. C.the equilibrium price exceeds the current price. D.the price of a good will tend to increase.

B.quantity supplied is greater than quantity demanded.

It's certain that the equilibrium price will fall when: A.the supply curve and the demand curve both shift to the right. B.the supply curve shifts to the right and the demand curve shifts to the left. C.supply and demand both increase. D.supply decreases and demand stays the same.

B.the supply curve shifts to the right and the demand curve shifts to the left.

Without rent controls, the equilibrium rent is _______ and the equilibrium quantity is _______ A. Rent2; Q1 B. Rent1; Q1 C. Rent2; Q2 D. Rent3; Q3

C. Rent2; Q2

If Barbara is only able to purchase 20 bags of chocolate-covered peanuts, the maximum price she is willing and able to pay for each bag is ________ cents. EXHIBIT 1 Quantity Demanded (bags per month) Price (per bag) G B D 90 10 0 60 80 15 10 80 70 20 20 100 60 25 30 120 50 30 40 140 40 35 50 160 30 40 60 180 A.90 B.80 C.70 D.60

C.70

Which of the following would shift the demand curve for new textbooks to the right? A.A decrease in the price of paper. B.A fall in the price of used textbooks. C.An increase in college enrollments. D.A fall in the price of new textbooks.

C.An increase in college enrollments.

SEE EXHIBIT 3 The exhibit shows how supply and demand might shift in response to specific events. Suppose the Surgeon General announces that eating chocolate prevents heart disease. Which panel best describes how this will affect the market for chocolate? A.Panel (a) B.Panel (b) C.Panel (c) D.Panel (d)

C.Panel (c)

Which of the following would result in a MOVEMENT ALONG the demand curve? A.a change in tastes B.a change in income C.a change in costs of production D.a change in demand

C.a change in costs of production

The primary difference between a change in supply and a change in the quantity supplied is: A.a change in quantity supplied is a shift in the supply curve, and a change in supply is a movement along the supply curve. B.both a change in quantity supplied and a change in supply are movements along the supply curve, only in different directions. C.a change in quantity supplied is a movement along the supply curve, and a change in supply is a shift of the supply curve. D.a change in supply is a movement to the left along the supply curve and a change in quantity supplied is a movement to the right along the supply curve.

C.a change in quantity supplied is a movement along the supply curve, and a change in supply is a shift of the supply curve.

If a demand curve shifts to the left, then: A.the equilibrium price would go up and the equilibrium quantity would go down. B.the equilibrium price would go down and the equilibrium quantity would go up. C.a lower equilibrium price and quantity would result. D.a higher equilibrium price and quantity would result.

C.a lower equilibrium price and quantity would result.

Demand is defined as: A.an amount that is purchased at a specific price, given supply. B.a schedule that establishes the price of a good. C.a schedule that shows how much will be purchased at various prices during a particular period, all other things unchanged. D.the amount that will be bought at a specific price.

C.a schedule that shows how much will be purchased at various prices during a particular period, all other things unchanged.

A decrease in the price of a good will, all other things unchanged, result in: A.an increase in demand. B.an increase in supply. C.an increase in the quantity demanded. D.more being supplied.

C.an increase in the quantity demanded.

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 statements are true.

C.can result in inequitable outcomes.

According to the concept of the invisible hand A.competitive free market systems are always efficient B.competitive free market systems are always equitable (fair) C.competitive free market systems are efficient under certain conditions D.competitive free market systems will never be efficient

C.competitive free market systems are efficient under certain conditions

The bulk of the nation's output is produced by: A.partnerships. B.proprietorship. C.corporations. D.none of the above.

C.corporations.

Supply is best defined as the: A.relationship between the quantity of a good or service buyers are able to purchase and the independent variables that determine quantity. B.relationship between the quantity of a good or service buyers are willing to purchase and the independent variables that determine quantity. C.relationship between the quantity of a good or service sellers are willing to offer for sale and the independent variables that determine quantity. D.quantity of a good or service sellers are willing and able to offer for sale at a specific price.

C.relationship between the quantity of a good or service sellers are willing to offer for sale and the independent variables that determine quantity.

In a competitive market, when price is below the equilibrium price, there will be pressure for the price to: A.fall. B.stay the same. C.rise. D.change only if demand and/or supply change.

C.rise.

A supply curve that is upward sloping means that: A.demand is being ignored. B.consumers will buy less at lower prices. C.suppliers will want to sell more at higher prices. D.suppliers will want to sell less at higher prices.

C.suppliers will want to sell more at higher prices.

If the price of chocolate-covered peanuts is 60 cents, the quantity demanded by George is ________ bags per month. Quantity Demanded (bags per month) Price (per bag) G B D 90 10 0 60 80 15 10 80 70 20 20 100 60 25 30 120 50 30 40 140 40 35 50 160 30 40 60 180 A.10 B.15 C.20 D.25

D.25

A decrease in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price. A.an increase; an increase B.an increase; a decrease C.a decrease; an increase D.a decrease; a decrease

D.a decrease; a decrease

The concept of the invisible hand is important because A.it underlies belief in free markets B.is suggests that market systems are efficient C.is leads to laissez faire D.all of the above

D.all of the above

There is equilibrium in the market when: A.there is no shortage. B.there is no surplus. C.price is established where the supply curve and the demand curve intersect. D.all of the above are true.

D.all of the above are true.