Economics 002 - Principles of Economics II » Spring 2021 » Chapter 4 Practice Quiz

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Question #1
Markets tend to
A.   reduce transaction costs.
B.   make exchange more difficult.
C.   increase transaction costs.
D.   exist primarily in towns or cities.
Question #2
Which one of the following statements is TRUE?
A.   The market clearing price of a good reflects its relative scarcity.
B.   When the market clearing price of a good is the equilibrium, then everyone can afford it.
C.   An effective price ceiling results in a surplus of the good.
D.   An effective price floor results in a shortage of the good.
Question #3
If the government sets a minimum price at which a good or service can be sold, it thereby creates
A.   a price floor.
B.   a black market price.
C.   an illegal price control.
D.   a price ceiling.
Question #4
If both the demand curve and the supply curve shift to the right, we can unambiguously conclude that the
A.   equilibrium quantity will increase.
B.   market clearing price will decrease.
C.   equilibrium quantity will decrease.
D.   market clearing price will increase.
Question #5
A limit on the amount of strawberries that can be imported into the United States is an example of
A.   a price floor set by the government.
B.   a price ceiling set by government.
C.   an import quota.
D.   the rationing function of prices protecting domestic strawberry farmers.
Question #6
As demand for MP3 music downloads increases, other things being equal, we can expect
A.   a decrease in the supply of MP3 music downloads.
B.   more MP3 music downloads to be produced.
C.   a decrease in both the relative price and quantity of MP3 music downloads.
D.   an excess number of MP3 music downloads in the market.
Question #7
The adverse effects of rent controls include
A.   keeping rental rates too high in a normal market.
B.   increased incentives for people to purchase their own homes.
C.   excessive construction of new rental housing.
D.   reduced incentive to construct new rental housing.
Question #8
In the market for domestic avocados, what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas?
A.   The market clearing price would rise, and the equilibrium quantity would rise.
B.   The market clearing price would fall, and the equilibrium quantity would rise.
C.   The market clearing price would rise, and the equilibrium quantity would fall.
D.   The market clearing price would fall, and the equilibrium quantity would fall.
Question #9
As compared to the market clearing price, the total amount of consumer surplus and producer surplus is
A.   the same as a government-imposed price floor that is higher than that market clearing price.
B.   smaller for a government-imposed price ceiling that is lower than that market clearing price.
C.   greater for a government-imposed price ceiling that is lower than that market clearing price.
D.   greater for a government-imposed price floor that is higher than that market clearing price.
Question #10
In a world of scarcity, there has to be some way to ration the available resources. According to economists, the most efficient use of available resources occurs when rationing occurs via
A.   lotteries.
B.   political power.
C.   the price system.
D.   queuing.
Question #11
Suppose that consumer income decreases and that hamburger is an inferior good. Which of the following will occur in the market for hamburger?
A.   Market clearing price will fall, and equilibrium quantity will fall.
B.   Market clearing price will fall, and equilibrium quantity will rise.
C.   Market clearing price will rise, and equilibrium quantity will fall.
D.   Market clearing price will rise, and equilibrium quantity will rise.
Question #12
Under rent controls
A.   apartments tend to be nicer than they would be under freely competitive markets.
B.   the quantity demanded of rental units is less than it would be under freely competitive markets.
C.   the number of rental units available for rent is lower than under freely competitive markets.
D.   landlord-tenant relationships are more harmonious than under freely competitive markets.
Question #13
In a market system, intermediaries in the exchange process are known as
A.   consumers.
B.   middlemen.
C.   producers.
D.   free agents.
Question #14
A supply restriction that restricts the amount of a good that can be imported is a(n)
A.   import quota.
B.   price floor.
C.   black market.
D.   price ceiling.
Question #15
One result of the agriculture price supports cited in the text is that
A.   sometimes surplus food is given away.
B.   food shortages result in most cases.
C.   None of these.
D.   small farms receive most of the benefits.
Question #16
When producers would have been willing to accept lower prices at various quantities produced than the market clearing price, the differences are called
A.   deadweight loss.
B.   monopoly profits.
C.   opportunity cost.
D.   producer surplus.
Question #17
The total amount of consumer surplus and producer surplus is at its maximum when
A.   the government imposes a price floor that is higher than the market clearing price.
B.   free market exchanges do not exist.
C.   the government imposes a price ceiling that is lower than the market clearing price.
D.   consumers and producers are allowed to trade at the market clearing price.
Question #18
An unexpected import restriction imposed on mangoes by the USDA
A.   will reduce the price of mango juice in the United States.
B.   will increase the price of mangoes in the United States.
C.   will discourage American producers of mangoes.
D.   will reduce the price of mangoes in the United States.

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