Deck 3: Market in Motion and Price Controls

Question 1

Exhibit
The diagram below represents the market for butter.


-Refer to Exhibit. If a price floor of $4 is imposed, ____ units of butter will be purchased.

A) 7,000
B)5,000
C)4,000
D)3,000

Answer 1

3,000

Question 2

Exhibit
The diagram below represents the market for butter.


-Refer to Exhibit. If a price ceiling of $2 is imposed, ____ units of butter will be purchased.

A)8,000
B)5,000
C)4,000
D)3,000

Answer 2

3,000

Question 3

?Exhibit
?
Use the following information about demand and supply schedules to answer the question.
$\begin{array}{ccccc} \text{Price} & D1 & D2 & S1 & S2 \\\hline\$ 12 & 5 & 9 & 19 & 14 \\\$ 10& 8 & 12 & 17 & 12 \\\$ 8 & 11 & 15 & 15 & 10 \\\$ 6 & 13 & 18 & 13 & 8 \\\$ 4 & 16 & 21 & 11 & 6 \\\$ 2 & 18 & 24 & 9 & 4\end{array}$

-Refer to Exhibit. If D₁ and S₁ represent the demand and supply schedules in a particular market, the equilibrium price and quantity are ____ and ____, respectively.

A)$8; 15
B)$6; 13
C)$4; 16
D)$4; 11

Answer 3

$6; 13

Question 4

?Exhibit
?
Use the following information about demand and supply schedules to answer the question.
$\begin{array}{ccccc} \text{Price} & D1 & D2 & S1 & S2 \\\hline\$ 12 & 5 & 9 & 19 & 14 \\\$ 10& 8 & 12 & 17 & 12 \\\$ 8 & 11 & 15 & 15 & 10 \\\$ 6 & 13 & 18 & 13 & 8 \\\$ 4 & 16 & 21 & 11 & 6 \\\$ 2 & 18 & 24 & 9 & 4\end{array}$

-?Refer to Exhibit. Suppose that D₁ and S₁ are the prevailing demand and supply curves for a product. If the demand schedule changes from D₁ to D₂, then:

A)equilibrium price decreases from $6 to $4.
B)equilibrium quantity decreases from 15 to 13.
C)equilibrium quantity increases from 13 to 18.
D)equilibrium price increases from $6 to $8.

Question 5

?Exhibit
?
Use the following information about demand and supply schedules to answer the question.
$\begin{array}{ccccc} \text{Price} & D1 & D2 & S1 & S2 \\\hline\$ 12 & 5 & 9 & 19 & 14 \\\$ 10& 8 & 12 & 17 & 12 \\\$ 8 & 11 & 15 & 15 & 10 \\\$ 6 & 13 & 18 & 13 & 8 \\\$ 4 & 16 & 21 & 11 & 6 \\\$ 2 & 18 & 24 & 9 & 4\end{array}$

-Refer to Exhibit. Suppose that D₂ and S₁ are the prevailing demand and supply curves for a product. If the demand schedule changes from D₂ to D₁, then:

A)equilibrium price decreases from $6 to $4.
B)equilibrium quantity decreases from 15 to 13.
C)equilibrium quantity increases from 13 to 18.
D)equilibrium price increases from $6 to $8.

Question 6

?Exhibit
?
Use the following information about demand and supply schedules to answer the question.
$\begin{array}{ccccc} \text{Price} & D1 & D2 & S1 & S2 \\\hline\$ 12 & 5 & 9 & 19 & 14 \\\$ 10& 8 & 12 & 17 & 12 \\\$ 8 & 11 & 15 & 15 & 10 \\\$ 6 & 13 & 18 & 13 & 8 \\\$ 4 & 16 & 21 & 11 & 6 \\\$ 2 & 18 & 24 & 9 & 4\end{array}$

-Refer to Exhibit. Suppose that D₂ and S₁ are the prevailing demand and supply curves for a product. If the supply schedule changes from S₁ to S₂, then:

A)equilibrium price decreases from $10 to $8.
B)equilibrium quantity decreases from 15 to 12.
C)equilibrium quantity increases from 10 to 12.
D)equilibrium price increases from $10 to $12.

Question 7

?Exhibit
?
Use the following information about demand and supply schedules to answer the question.
$\begin{array}{ccccc} \text{Price} & D1 & D2 & S1 & S2 \\\hline\$ 12 & 5 & 9 & 19 & 14 \\\$ 10& 8 & 12 & 17 & 12 \\\$ 8 & 11 & 15 & 15 & 10 \\\$ 6 & 13 & 18 & 13 & 8 \\\$ 4 & 16 & 21 & 11 & 6 \\\$ 2 & 18 & 24 & 9 & 4\end{array}$

-Refer to Exhibit Suppose that D₁ and S₂ are the demand and supply schedules for Product A. If the government imposes a price ceiling of $4:

A)a 5 unit shortage will result.
B)a 5 unit surplus will result.
C)a 10 unit surplus will result.
D)a 10 unit shortage will result.

Question 8

?Exhibit
?
Use the following information about demand and supply schedules to answer the question.
$\begin{array}{ccccc} \text{Price} & D1 & D2 & S1 & S2 \\\hline\$ 12 & 5 & 9 & 19 & 14 \\\$ 10& 8 & 12 & 17 & 12 \\\$ 8 & 11 & 15 & 15 & 10 \\\$ 6 & 13 & 18 & 13 & 8 \\\$ 4 & 16 & 21 & 11 & 6 \\\$ 2 & 18 & 24 & 9 & 4\end{array}$

-Refer to Exhibit. Suppose that D₁ and S₂ are the demand and supply schedules for Product A. If the government imposes a price ceiling of $6:

A)producers will be unable to sell all the units that they desire to at that price.
B)consumers will be able to purchase as many units as desired at that price.
C)equilibrium will be achieved.
D)only 8 units of output will be exchanged between buyers and sellers.

Question 9

?Exhibit
?
Use the following information about demand and supply schedules to answer the question.
$\begin{array}{ccccc} \text{Price} & D1 & D2 & S1 & S2 \\\hline\$ 12 & 5 & 9 & 19 & 14 \\\$ 10& 8 & 12 & 17 & 12 \\\$ 8 & 11 & 15 & 15 & 10 \\\$ 6 & 13 & 18 & 13 & 8 \\\$ 4 & 16 & 21 & 11 & 6 \\\$ 2 & 18 & 24 & 9 & 4\end{array}$

-Refer to Exhibit. Suppose that D₁ and S₂ are the demand and supply schedules for Product A. If the government imposes a price floor of $6:

A)a shortage of 5 units results.
B)a surplus of 5 units results.
C)a shortage of 10 units results.
D)the floor will have no impact on the quantity of Product A traded.

Question 10

In general, an increase in price could be caused by either:

A)an increase in demand or a decrease in supply.
B)an increase in demand or an increase in supply
C)a decrease in demand or an increase in supply.
D)an increase in demand or an increase in supply.

Question 11

Exhibit
$\begin{array}{ccc} \text{Price per gallon} & \begin{array}{c} \text{Quantity Demanded }\\\text{(thousands of gallons)}\end{array} & \begin{array}{c} \text{Quantity Supplied} \\\text{of ga soline }\\\text{(thousands of gallons)}\end{array} \\\hline\$ 4.50 & 600 & 2,000 \\\$ 4.25 & 700 & 1,900 \\\$ 4.00 & 800 & 1,800 \\\$ 3.75 & 950 & 1,700 \\\$ 3.50 & 1,200 & 1,600 \\\$ 3.25 & 1,500 & 1,500 \\ \$ 3.00 & 1,800 & 1,400 \\\$ 2.75 & 2,100 & 1,300 \\\$ 2.50& 2,400 & 1,200\end{array}$

-Refer to Exhibit. According to the data in the above table, the equilibrium price of gasoline is:

A)$3.00
B)$3.25
C)$3.50
D)$3.75
E) $4.00

Question 12

Exhibit
$\begin{array}{ccc} \text{Price per gallon} & \begin{array}{c} \text{Quantity Demanded }\\\text{(thousands of gallons)}\end{array} & \begin{array}{c} \text{Quantity Supplied} \\\text{of ga soline }\\\text{(thousands of gallons)}\end{array} \\\hline\$ 4.50 & 600 & 2,000 \\\$ 4.25 & 700 & 1,900 \\\$ 4.00 & 800 & 1,800 \\\$ 3.75 & 950 & 1,700 \\\$ 3.50 & 1,200 & 1,600 \\\$ 3.25 & 1,500 & 1,500 \\ \$ 3.00 & 1,800 & 1,400 \\\$ 2.75 & 2,100 & 1,300 \\\$ 2.50& 2,400 & 1,200\end{array}$

-Refer to Exhibit. Assuming the market for gasoline is initially in equilibrium, what is likely to happen when there is a significant decrease in the price of sport utility vehicles? (Assume that sport utility vehicles get very low gas mileage.)

A)The market price and quantity of gasoline exchanged will both decrease.
B)The market price for gasoline will increase and the quantity demanded will decrease.
C)The market price of gasoline will decrease and the quantity demanded will increase.
D)Both the market price and quantity of gasoline exchanged will increase.

Question 13

Exhibit
$\begin{array}{ccc} \text{Price per gallon} & \begin{array}{c} \text{Quantity Demanded }\\\text{(thousands of gallons)}\end{array} & \begin{array}{c} \text{Quantity Supplied} \\\text{of ga soline }\\\text{(thousands of gallons)}\end{array} \\\hline\$ 4.50 & 600 & 2,000 \\\$ 4.25 & 700 & 1,900 \\\$ 4.00 & 800 & 1,800 \\\$ 3.75 & 950 & 1,700 \\\$ 3.50 & 1,200 & 1,600 \\\$ 3.25 & 1,500 & 1,500 \\ \$ 3.00 & 1,800 & 1,400 \\\$ 2.75 & 2,100 & 1,300 \\\$ 2.50& 2,400 & 1,200\end{array}$

-Refer to Exhibit. If the government imposes a $2.50 price ceiling:

A)a 1,200,000 gallon surplus will result
B)a 2,400,00 gallon surplus will result.
C)a 1,200,000 gallon shortage will result.
D)a 2,400,000 gallon shortage will result.

Question 14

Exhibit
$\begin{array}{ccc} \text{Price per gallon} & \begin{array}{c} \text{Quantity Demanded }\\\text{(thousands of gallons)}\end{array} & \begin{array}{c} \text{Quantity Supplied} \\\text{of ga soline }\\\text{(thousands of gallons)}\end{array} \\\hline\$ 4.50 & 600 & 2,000 \\\$ 4.25 & 700 & 1,900 \\\$ 4.00 & 800 & 1,800 \\\$ 3.75 & 950 & 1,700 \\\$ 3.50 & 1,200 & 1,600 \\\$ 3.25 & 1,500 & 1,500 \\ \$ 3.00 & 1,800 & 1,400 \\\$ 2.75 & 2,100 & 1,300 \\\$ 2.50& 2,400 & 1,200\end{array}$

-Refer to Exhibit. The government imposes a $3.25 price ceiling at the same time there is a substantial decrease in the price of sport utility vehicles. (Assume that sport utility vehicles get very low mileage per gallon.) As a result, the:

A)price of gasoline equals $3.25 per gallon and the quantity demanded equals the quantity supplied
B)price of gasoline rises above $3.25 per gallon and a surplus of gasoline is created
C)price of gasoline will fall below $3.25 per gallon and a shortage of gasoline is created.
D)legal price of gasoline will equal $3.25 per gallon and a shortage of gasoline is created.

Question 15

Which of the following is likely to result in a higher equilibrium price?

A)An increase in both demand and supply.
B)A decrease in both demand and supply.
C)An increase in demand and a decrease in supply.
D)A decrease in demand and an increase in supply.

Question 16

Which of the following is likely to result in a lower equilibrium price?

A)An increase in both demand and supply.
B)A decrease in both demand and supply.
C)An increase in demand and a decrease in supply.
D)A decrease in demand and an increase in supply.

Question 17

Which of the following is likely to result in a smaller equilibrium quantity exchanged?

A)An increase in both demand and supply.
B)A decrease in both demand and supply.
C)An increase in demand and a decrease in supply.
D)A decrease in demand and an increase in supply.