ECON 202 Midterm Answers
Refer to thefourgraphs above. Select the graph that best shows the changes in demandand supply in the market specified in the following situation: the market for music CDs sold in stores, if more consumers switchto music-downloads from the Internet and the cost of making music CDs decreasesbecause of technological improvement in production.
Graph A
Graph B
C. Graph C
D. Graph D
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
If a price ceiling is set below the equilibrium price in a market,
rationing will be unnecessary.
surpluses of the commoditywill develop.
C. the quantity demandedwillexceed the quantity supplied.
D. the quantity suppliedwill exceed the quantity demanded.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
A government-set price floor on a product
does not interfere with the rationing function of price in a market system.
will drive resources away from the production of the product.
C. will attract more resources toward the production of the product.
D. is intendedto benefit the buyers of the product.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
Which is most likelyto be observed in a communitywhere legal ceilings are imposed on residential rents?
Poor peoplewill be able to findadequate housing.
Homeowners will reduce their own use of housing space, making more available to others.
Those whose needs for housing are most urgent will be able to obtainthe space they want.
D. People moving into the community will have difficulty locating residential space to rent.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
358.
In a competitive market illustratedbythe diagram above, aprice floor of $25 per unit will result in
A. a shortageof 200 units.
B. a surplus of 200 units.
a surplus of 250 units.
a shortageof 250 units.
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
359.
In a competitive market illustratedbythe diagram above, aprice ceiling of $10 perunit will result in
A. ashortage of 200units.
a surplus of 200 units.
a surplus of 250 units.
a shortageof 250 units.
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
360.
In a competitive market illustratedbythe diagram above, aprice ceiling of $25 perunit will result in
A. the market staying at an equilibrium price of $15.
a surplus of 200 units.
a shortage of 200 units.
a shortageof 150 units.
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
361.
In a competitive market illustratedbythe diagram above, for a price floor to be effectiveand alter the market situation, it must be set
at $15.
below $15.
C. above $15.
D. at $10.
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
362.
In a market with supplyand demand curvesas shown above, a price ceiling of $2.50 will resultin
a surplus of 10 units.
a shortage of 10 units.
C. no shortage or surplus.
D. a black market pricegreater than $2.50.
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
363.
Refer to themarket graph shown above. Ablack market wherethe price is $2.00 could result from a price
A. ceilingset at $2.50.
B. ceiling set at $1.50.
floor set at $1.50.
floor set at $2.00.
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
364.
Consider the supply and demandcurves depicted in the diagramabove. If the government imposed a price ceiling of $15, then buyers will be intending tobuy , but they will be able to legally buy .
A. 30 units; 24 units
B. 36 units; 24 units
36 units; 30 units
24 units; more than 24 units
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
365.
Consider the supply and demandcurves depicted in the diagramabove. If the government imposed a price ceiling of $15, then sellers will be willingto sell , anda black market could develop where the price would be .
24 units; below $15
36 units; above $15
C. 24units; above $15
D. 36 units; below $15
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
366.
Answer thequestion based on thefollowing supply and demandschedules in units per week for a product.
Price
Quantity Demanded
Quantity Supplied
$60
100
400
50
140
340
40
180
280
30
220
220
20
260
160
10
300
100
If the government introduced a guaranteed price floor of $40 andagreed to purchasesurplus output, then the government's total support payments to producers would be
$3,000 per week.
$3,500 per week.
C. $4,000 per week.
D. $2,500 per week.
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
367.
Answer thequestion based on thefollowing supply and demandschedules in units per week for a product.
Price
Quantity Demanded
Quantity Supplied
$60
100
400
50
140
340
40
180
280
30
220
220
20
260
160
10
300
100
Refer to the above table. If demand increased by 100 units at each pricelevel and thegovernment set a price ceiling of $40, then there would be
a shortage.
a surplus.
C. no shortage or surplus.
D. a decrease in supply.
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
Which of the following is an example of a price ceiling?
A. limits on interestrates charged by credit card companies
subsidies for apartment rent in major cities
minimum-wage laws for unskilled workers
price supportsfor agricultural products
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
A black market could arise as a result of
the imposition of a legal price floor below the equilibrium price.
the imposition of a legal price ceiling above the equilibrium price.
the imposition of a legal price floor at the equilibrium price.
D. the imposition of a legal price ceiling below the equilibrium price.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
A governmentwill create a surplus in a market when it
A. sets a price ceiling above theequilibrium price.
B. sets a price floor above the equilibrium price.
sets a price floor below the equilibrium price.
sets a price ceiling below the equilibrium price.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
371.
The graph above represents a competitive market for a productwhere the government has set a price ceiling of 0A. What quantity will buyers be able to buy after the imposition of the price ceiling?
A. 0J
0L
JL
KL
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
372.
The graph above represents a competitive market for a productwhere the government now has introduced a price floor of 0C.Which area in the graph represents the producers' sales revenueafter the imposition of the price floor?
A. 0CFL
B. 0CEJ
0BGK
0BHL
AACSB: KnowledgeApplication
Blooms: Remember Difficulty: 01 Easy
LearningObjective: 03-06 Identifywhat government-set prices are and how they can cause product surpluses and shortages.
Test Bank: II Topic: Application: Government-Set Prices
Government-subsidizedstudent loans tend to
A. increase demandforhigher education, causingthe price of educationto rise.
reduce the price ofhigher education, because supply increases.
raise the price of higher education, because supply decreases.
reduce demand for higher education,causing the price ofeducation to fall.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
True / False Questions
Buyers and sellers do not have to deal face-to-face with one another in markets.
TRUE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-01 Characterize and give examplesof markets.
Test Bank: II Topic: Markets
The law of demand states that if price increases, other things being equal, thedemand for the product will decrease.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
"Price" in the statement of the Law of Demand refers to the same conceptas the cost of producing theproduct.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
When a fruit or vegetable(such as strawberries or lentils)is in season,the demand for it will increase as it becomes cheaper.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
An increase in consumer incomes will cause a decrease in the demand for an inferior good.
TRUE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
Two goods areconsidered to be related goods by many buyers: if the price of one increases, buyers buy more of the other.Thisindicates that thetwo goods are complements.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
If twogoods are substitutes, a declinein the price ofone will cause a decrease in the demand for theother.
TRUE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-02 Describedemand and explain how it can change.
Test Bank: II Topic: Demand
The law of supplystates that, ceteris paribus, if the price of loans (known as "interest rate") rises then the quantitysupplied of loans will increase.
TRUE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
A decrease in the price ofmulti-touch screens for electronic tablets will increase the supplyof electronic tablets.
TRUE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
The development of a new production technique that lowers the cost of producing 3-D movies will shift the supplycurve of 3-D movies to the right.
TRUE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-03 Describesupply and explain how it can change.
Test Bank: II Topic: Supply
A surplus indicatesthat the quantity demanded is greater than the quantitysupplied at that price.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
If we observethe price of a good in a competitive market rising,then we can conclude that therehadbeen a shortagein the market.
TRUE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
If the newspapers report that there is a shortage of strawberries, it must mean that the current price of strawberries is below the equilibrium price.
TRUE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
If there is a surplus in a market,competition among the sellers will drive price down.
TRUE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 03-04 Relate how supply and demand interactto determine market equilibrium.
Test Bank: II Topic: Market Equilibrium
If we observethat the price ofgold is rising and the quantity of gold traded in the market is falling,thenthis must be the result of an increasein the supply of gold.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
When thegovernment pushes for expandeduse of corn, such as requiringethanol from corn to be used as an additiveto gasoline, the impact in the market is that the supplyof corn decreases.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
If the government subsidizes the car makers in the production of cars, then the supplyof steel increases.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
An increase in both supply and demandwill lead to an increasein the equilibrium price and an indeterminate change in the equilibrium quantity.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
A decrease in the price ofdigital cameras will cause the demand for memory cards to shift to the left.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
If the demandforelectronic readersand tablets increases, then their supplywill increase as price rises.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
If the decreasein supply is less than the decreasein demand, then the equilibrium price will decrease.
TRUE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
A price ceiling imposed by the government is intendedto benefit the sellers of the product.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
An effectiveprice ceiling will lower the equilibrium price and cause a surplus.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
In response tothe general public's complaints about "price gouging" by sellers, thegovernment could impose aprice floor.
FALSE
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
Multiple Choice Questions
A headline reads "Perfect WeatherBrings Record-High Coffee Harvest." This situation would lead to a(n)
increase in theprice and in the quantitypurchased of coffee.
decrease in the price and in thequantity purchased of coffee.
increase in the price and a decrease in thequantity purchased of coffee.
D. decrease in theprice and an increase in quantity purchased of coffee.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
What will happen to the equilibrium quantity and price of salmon in a competitive market when there is an equal decreasein demand and supply?
Equilibrium quantity andprice will both increase.
Equilibrium quantity and price will both decrease.
C. Equilibrium quantity will decrease and equilibrium price will stay the same.
D. Equilibrium quantity will stay the same and equilibrium price will increase.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
A television station reportsthat the price of orange juicehas declined but the quantity traded has increased. This situation could be caused by a(n)
increased preferencefororange juice among buyers.
significant decreasein the harvest of orangesin the nation's orchards.
C. improvement in the technology of producingorange juice.
D. decreasein income, and orange juice is a normal good.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
If there's a huge increasein the number of Americanstraveling to Europe (say, for the Olympics), then the effect on the foreignexchange market is that the
A. demandforeuros would increase.
supply of euros wouldincrease.
demand for euros would decrease.
supply of euros would decrease.
AACSB: KnowledgeApplication Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
In thedollar-yen foreign exchange market,ifJapanese companies sharply increase their importation of U.S. products,thenthe
A. supply of yen will decrease and the yen will appreciate.
B. supply of yen will increaseand the yen will depreciate.