Deck 3: Applications of Demand and Supply

Question 1

As the wage rate increases, the quantity demanded of labor in a market will

A) increase.
B) decrease.
C) first increase and then decrease.
D) first decrease and then increase.
E) remain constant.

Answer 1

decrease.

Question 2

According to the text, the constantly rising standards of living can be attributed to the

A) Unfettered market
B) "Sputnik moment"
C) War on Terrorism
D) Efficient American farmers
E) Growth in the IT sector

Answer 2

Unfettered market

Question 3

The fact that the market labor supply curve is upward sloping at all wage rates illustrates that

A) all people supply more labor as the wage rate increases.
B) the combined effect of individual labor supply curves results in a greater number of labor hours being supplied at a higher wage rate.
C) the compensating wage differential works.
D) at high wages, people will decrease labor supply when wages rise further and thus make aggregate labor supply decrease.
E) the marginal benefits of leisure decrease as wages increase.

Answer 3

the combined effect of individual labor supply curves results in a greater number of labor hours being supplied at a higher wage rate.

Question 4

"Efficiency" means

A) a producer is using the very best production techniques
B) everyone pays his fair share
C) those who cannot pay will not get any
D) the consumer is always right
E) All of these.

Question 5

____ ensures that resources are allocated to their highest-valued uses.

A) Monopoly
B) Government
C) The consumer
D) Competition
E) Arbitrage

Question 6

As the wage rate increases, the quantity supplied of labor in a market will

A) increase.
B) decrease.
C) first increase and then decrease.
D) first decrease and then increase.
E) remain constant.

Question 7

Figure 3.1

According to Figure 3.1, as represented by the shift from D₁ to D₂,

A) the demand for low-fat meals has risen.
B) the quantity of resources used in the production of low-fat meals has risen.
C) consumer income may have risen.
D) consumer tastes for low-fat meals may have declined.
E) consumer tastes for resources may have fallen.

Question 8

In response to an increase in demand for low-carb food, producers would

A) increase the quantity supplied.
B) reduce resources in order to conserve carbohydrates.
C) decrease supply of low-carb food.
D) advertise low-fat food to shift consumer preferences.
E) increase supply of low-carb food.

Question 9

Specialization according to comparative advantage can

A) generate more output than being self-sufficient
B) make economies be less dependent on others
C) is very costly and hard to implement
D) cause too much of one type of good to be produced
E) All of these

Question 10

Figure 3.1

According to Figure 3.1, as represented by the shift from D₁ to D₂,

A) the demand for low-fat food has risen.
B) the quantity of low-fat food supplied has declined.
C) eating low-fat food may have become popular.
D) consumer tastes for low-fat food may have risen.
E) consumer tastes for high-fat food may have fallen.

Question 11

The process of buying identical products in one market and selling them in another at virtually the same time is called

A) free enterprise
B) the profit motive
C) arbitrage
D) competition
E) unfettered market

Question 12

Which of the following influence the level of wages?

A) Training and Education
B) Amount of time required to be away from home
C) Risk of the occupation
D) Experience
E) All of these

Question 13

The market system is better than other systems because

A) there is no need for a central planning authority
B) buyers and sellers do not have to be coordinated
C) all players act in their own self-interest
D) inefficient producers shut down
E) all of these

Question 14

A change in consumer tastes for low-carb food and a decrease in their preferences for low-fat meals does not lead to which of the following?

A) An inward shift of the demand curve for low-fat meals
B) An outward shift of the demand curve for low-carb food
C) An increase in the amount of resources used to produce low-carb food
D) A decrease in the amount of resources used to produce low-fat meals
E) A reduction in the value of resources used in low-carb food

Question 15

In a market system, resources flow from lower-valued uses to higher-valued uses because of

A) the dictates of the government.
B) the desires of business to make a profit.
C) first come, first served.
D) the consumer is always right.
E) comparative advantage.

Question 16

In a market system, ____ decide what will be produced.

A) producers
B) consumers
C) politicians
D) government authorities
E) central planning agencies

Question 17

The compensating wage differential shows a labor supply curve for a risky occupation located to the ____ of the labor supply curve for a less risky occupation. If the differential is too low, a ____ would prevail in the risky occupation.

A) Left; surplus
B) Right; surplus
C) Left; shortage
D) Right; shortage
E) Left; price ceiling

Question 18

On a graph showing the supply and demand for low-carb food, an increase in consumer demand for low-carb food would be portrayed by

A) a shift to the right of the demand for high-carb food.
B) a shift to the right of the demand curve for low-carb food.
C) a shift to the left of the supply curve for low-carb food.
D) a shift to the left of the demand curve for low-carb food.
E) a shift to the right of the supply curve for low-carb food.

Question 19

As shown in the text, in the market for the Mazda Miata,

A) consumers acted irrationally.
B) producers dictated market tastes through advertising.
C) Mazda misread the market for the Miata.
D) the government intervened in the automobile market.
E) changing demand caused the shortage in Los Angeles.

Question 20

Many companies have moved jobs from the U.S. to foreign countries. This has resulted in

A) The demand for American labor to decrease, and the demand for foreign labor to increase
B) The demand for American labor to increase, and the demand for foreign labor to increase
C) The demand for American labor to decrease, and the demand for foreign labor to decrease
D) The demand for American labor to increase, and the demand for foreign labor to decrease
E) The exchange rate for the American dollar to increase.

Question 21

A compensating wage differential is a wage difference that

A) makes up for the high risk or poor working conditions of a job.
B) results because of women and minorities being paid less.
C) leads to more risks taken on the job.
D) is attributable to different demands for labor.
E) is due to discrimination.

Question 22

Figure 3.2

In Figure 3.2, assume that we have labor market demand and supply curves of D₁ and S₂, respectively. What is the equilibrium wage and employment level?

A) $5; 30 workers
B) $10; 20 workers
C) $10; 40 workers
D) $15; 30 workers
E) $5; 20 workers

Question 23

In 1900 about ____ of all Americans worked in farming or ranching; today less than ____ of the population is involved in these industries.

A) 80%; 20%
B) 75%; 10%
C) 60%; 10%
D) 50%; 5%
E) 50%; 2%

Question 24

If each of the following jobs paid the same wage, which one would we expect most people to pick if given the choice?

A) A job that requires large amounts of human capital but is dangerous
B) A job that requires few skills and has a large amount of nonmonetary benefits
C) A job that requires excellent skills and has a small amount of nonmonetary benefits
D) A job with very poor working conditions
E) A job that requires little human capital but is dangerous

Question 25

To be profitable in a free market, one must

A) be able to creatively destruct its competition
B) develop a brand name
C) earn an A in economics
D) obtain government approval
E) limit competition

Question 26

An increase in the minimum wage, which is above the equilibrium wage, will result in

A) firms hiring less workers
B) more people going to look for a job
C) adverse affects on low-skilled workers
D) more teenagers looking for jobs
E) All of these.

Question 27

In 2005, the U.S. Department of Labor estimated, based on trends noted in 2003 and 2004 that ____ jobs would be moved out of the U.S. by 2015.

A) 1 million
B) 2 million
C) 3 million
D) 5 million
E) more than 7 million

Question 28

Which is not an example of creative destruction?

A) A large manufacturing plant closes, and unemployed workers leave town.
B) Americans retire in Mexico because the cost of living is cheaper.
C) Call centers are moved from the United States to India and the Philippines.
D) Medical records go online, eliminating the need for paper files and people to track and organize them.
E) All of these are examples of creative destruction.

Question 29

To earn more than what the free competitive market would allow, a business has to acquire

A) a permit from government
B) some way to limit the competition they face
C) and update daily, its Facebook and Twitter accounts
D) backing of politicians
E) a factory in a developing country.

Question 30

States with a higher minimum wage than the federal minimum wage tend to be located in the ____ U.S.

A) east coast
B) south eastern
C) Midwest
D) Southern
E) West coast

Question 31

Figure 3.4

In Figure 3.4, the reason for the wage differential could be the fact that

A) market A is the market for a risky occupation.
B) market B consists of unskilled labor.
C) market A consists of workers with more human capital.
D) market B consists of workers with less human capital.
E) all of these are true.

Question 32

Figure 3.3

In Figure 3.3, the initial labor supply is S₁ and the labor demand is D₁. If the wage is $6, which of the following is correct?

A) There is a shortage of 20 workers.
B) The actual wage is above the equilibrium wage.
C) There is a shortage of 30 workers.
D) There is a shortage of 10 workers.
E) The market is in equilibrium.

Question 33

Figure 3.4

In Figure 3.4, if the wage rate in market A and market B were set at $15, then

A) there would be a shortage of workers in both markets.
B) there would be a surplus of workers in both markets.
C) there would be a shortage of workers in market A and a surplus of workers in market B.
D) there would be a shortage of workers in market B and a surplus of workers in market A.
E) the market as a whole would be in equilibrium.

Question 34

Which of the following is not correct?

A) A person may be paid a wage higher than he or she is worth, if he or she works in a risky profession.
B) A person in a risky profession will likely be paid more than a person of equal skills in another profession.
C) It is possible that a person will turn down a higher-paying job because his or her current job provides many nonmonetary benefits.
D) By increasing his or her human capital, a worker can expect to receive a higher wage.
E) If there were no compensating wage differential, there would be a shortage of workers in risky professions.

Question 35

Figure 3.4

In Figure 3.4, the amount of the wage differential is

A) $6.
B) $18.
C) $12.
D) $30.
E) impossible to determine from the information given.

Question 36

The U.S. economy has shifted from ____ to ____ over the past several decades.

A) services; manufacturing
B) manufacturing; services
C) agrarian; industrialized
D) manufacturing; industrialized
E) developing; industrialized

Question 37

Individual states may set their own minimum wage

A) at any time, regardless of the federal minimum wage
B) if their wage exceeds the federal level
C) only if it is below the federal level
D) by filing an application with the federal department of labor
E) only in times of emergency

Question 38

Some Italian factories bring Chinese workers and raw materials to Italy, where these resources are used to make products sold under the label, "Made in Italy". This is an example of

A) Unfettered market
B) Human trafficking
C) Labor differential
D) Specialization
E) Tax avoidance

Question 39

Figure 3.2

In Figure 3.2, if the market is in equilibrium with 30 workers at a wage rate of $15 per day, which of the following must be the corresponding labor supply and demand curves?

A) S₁ and D₁
B) S₁ and D₂
C) S₂ and D₁
D) S₂ and D₂
E) Cannot be determined from the information given

Question 40

Figure 3.4

Assume that Figure 3.4 represents the markets for comparably skilled and educated economists and coal miners. If there are more coal miners, identify which market represents each profession. What is the economists' wage? What is the coal miners' wage?

A) $12; $12
B) $18; $12
C) $12; $18
D) $18; $18
E) $15; $15

Question 41

Figure 3.6

Assume that the market described by the demand and supply curves in Figure 3.6 is originally in equilibrium. What is the most likely consequence of a government-imposed price ceiling at $10 per unit?

A) Supply will decrease.
B) Demand will increase.
C) Quantity supplied will decrease.
D) There will be a surplus of the good.
E) There will be no consequence at all.

Question 42

Current unemployment for teenagers (between 16 and 19 years of age)

A) is about 15%
B) is about 25%
C) is about 40%
D) is about 55%
E) exceeds 60%

Question 43

In Table 3.2, if the price is $2, a ____ of ____ units will occur.

A) shortage; 12
B) shortage; 14
C) surplus; 12
D) surplus; 14
E) surplus; 19

Question 44

Figure 3.5

In Figure 3.5, if the change in demand occurred before the change in supply, then starting from the initial equilibrium,

A) firms would experience a fall in profits and then a gradual increase in profits after the change in supply occurred.
B) there would be an immediate shortage until the price reached P₂.
C) price would change from P₁ to P₂ after the change in demand and would change again from P₃ to P₄ after the change in supply.
D) there would be a surplus until the price reached P₄.
E) none of these would occur.

Question 45

In Table 3.3, if the price is $1, a ____ of ____ units will occur.

A) shortage; 15
B) shortage; 12
C) surplus; 15
D) surplus; 12
E) shortage; 45

Question 46

Looking at last year's sweaters piled up on sale racks, or waiting over an hour for a table at a restaurant is best described as a situation

A) where equilibrium can never occur.
B) that always exists.
C) where the market is on its way to equilibrium.
D) where there is no market.
E) where there is no demand.

Question 47

An effective price ceiling on gasoline means that

A) long lines occur at gas stations.
B) the lines at gas stations will disappear.
C) people will quit driving.
D) people will be able to drive more.
E) a shortage of cars will result.

Question 48

Refer to Table 3.4. If a price ceiling of $55 is imposed,

A) a shortage equal to 250 units will result.
B) a shortage equal to 200 units will result.
C) a surplus equal to 200 units will result.
D) the price will be forced to the equilibrium price before the ceiling.
E) the price will be above the equilibrium price.

Question 49

In Table 3.2, the equilibrium quantity is

A) 2.
B) 4.
C) 6.
D) 8.
E) 10.

Question 50

Innovations, which result in people continually looking for ways to excel, earn more money, and live better, occur due to

A) the rapid development in the IT sector
B) competition
C) government regulation
D) greedy people
E) China's entry into the World Trade Organization

Question 51

In Table 3.3, the equilibrium quantity is

A) 10.
B) 15.
C) 20.
D) 25.
E) 30.

Question 52

An effective rent ceiling results in a

A) shortage and therefore another allocation mechanism than price.
B) surplus and therefore another allocation mechanism than price.
C) shortage, and thus the price will increase.
D) surplus, and thus the price will decline.
E) price that exceeds equilibrium.

Question 53

In Table 3.2, if the price is $5, a ____ of ____ units will occur.

A) shortage; 8
B) shortage; 6
C) surplus; 8
D) surplus; 6
E) shortage; 19

Question 54

Refer to Table 3.1. If the government imposes a price of $2,

A) the price will be above equilibrium.
B) the price will fall to $1 because producers will be forced to incur losses.
C) demand will increase.
D) a surplus equal to 20 units will result.
E) a shortage equal to 20 units will result.

Question 55

Rent control is

A) a situation where a price floor exists.
B) the same as a minimum wage.
C) the same as a subsidy to landlords.
D) a situation where a price ceiling exists.
E) a situation where equilibrium persists.

Question 56

Refer to Table 3.4. At a price of $45,

A) we would expect the price to rise because of a shortage equal to 350 units.
B) we would expect the amount purchased to fall because of a surplus equal to 350 units.
C) none of the commodity is demanded.
D) we would expect the price to fall because of a shortage equal to 350 units.
E) 350 units of the commodity are supplied.

Question 57

If a price ceiling results in the price not being used to allocate a scarce resource or good, then

A) something other than price must allocate the scarce good.
B) the price will have to decline.
C) the market will take over.
D) the government will be more efficient than any other mechanism.
E) a random allocation will be more efficient than any other mechanism.

Question 58

In Table 3.3, if the price is $3, a ____ of ____ units will occur.

A) shortage; 15
B) shortage; 12
C) surplus; 12
D) surplus; 15
E) surplus; 45

Question 59

Rent control results in a(n)

A) shortage of apartments.
B) surplus of apartments.
C) increase in the number of apartments.
D) increase in the quality of apartments.
E) reduction in the number of people willing and able to rent apartments.

Question 60

In Table 3.2, the equilibrium price is

A) $1.
B) $2.
C) $3.
D) $4.
E) $5.

Question 61

Prices above the equilibrium price cause a(n)

A) shortage to develop and an increase in prices.
B) shortage to develop and a decrease in prices.
C) surplus to develop and an increase in prices.
D) surplus to develop and a decrease in prices.
E) increase in supply.

Question 62

We have the things we desire when we want them due to the market system.

Question 63

"Efficiency" means you get the same amount at a higher cost.

Question 64

If the government wanted to aid a particular industry, it might impose a(n) ____ for their products.

A) price floor.
B) price ceiling.
C) quantity floor.
D) quantity ceiling.
E) equilibrium pricing.

Question 65

Quotas have the effect of

A) Increasing demand, raising price, and raising quantity
B) Increasing supply, decreasing price, and increasing quantity
C) Decreasing supply, raising price, and lowering quantity
D) Decreasing demand, decreasing price, and decreasing quantity
E) Decreasing supply, raising price, and increasing quantity

Question 66

Figure 3.7

Refer to Figure 3.7. The highest price consumers would be willing and able to pay for 50 units of this product is

A) $10.
B) nothing; they wouldn't pay any positive price for 50 units.
C) $2.
D) $6.
E) $8.

Question 67

The price system induces people to employ their talents and resources in the most effective manner.

Question 68

In the 1980s, Japanese automobile manufacturers, fearing a U.S.-government-imposed restriction, agreed to a voluntary quota on the number of their cars exported to the United States. This quota affected the U.S. automobile market by

A) increasing the prices of Japanese cars to U.S. consumers.
B) increasing the black market for Japanese cars in the United States.
C) decreasing the demand for domestically produced cars in the United States.
D) increasing the market share of Japanese producers in the U.S. market.
E) doing all of these.

Question 69

By imposing a ban on the use of trans fat in New York City restaurants, the government

A) created a positive image of New York as a healthy environment.
B) reduced Wall Street arbitrage in trans fats and other oils.
C) lowered the price of restaurant meals in general.
D) raised the cost of food that relied on trans fat.
E) stimulated demand for a black market in trans fat.

Question 70

Elimination of sugar quotas have ____ the price of sugar in the U.S., causing U.S. sugar farmers to ____.

A) decreased; enjoy large profits
B) decreased; go out of business
C) increased; enjoy large profits
D) increased; go out of business
E) not changed; change crops

Question 71

If an effective price floor is imposed,

A) a shortage occurs.
B) equilibrium occurs.
C) a surplus occurs.
D) both a shortage and a surplus occur.
E) scarcity occurs.

Question 72

A minimum wage that is above the market wage will likely

A) create some unemployment.
B) increase employment opportunities.
C) cause a shortage of labor.
D) eliminate poverty.
E) increase the demand for labor.

Question 73

One result of specialization is that economies become less dependent on each other.

Question 74

People take jobs in unpleasant, low-wage facilities voluntarily.

Question 75

A ban has the effect of ____ the ____ for/of the product. Equilibrium price will ____.

A) increasing; demand; increase
B) increasing; supply; decrease
C) decreasing; supply; increase
D) decreasing; demand; decrease
E) eliminating; demand; not exist

Question 76

Figure 3.7

Refer to Figure 3.7. Assume this is a market with no restrictions. Price and quantity will move toward

A) $10 and 50 units.
B) $10 and 150 units.
C) $6 and 100 units.
D) $2 and 150 units.
E) none of these.

Question 77

Figure 3.7

A price of $10 in Figure 3.7 will result in

A) a surplus of 150 units.
B) a surplus of 100 units.
C) a shortage of 50 units.
D) a shortage of 100 units.
E) equilibrium.

Question 78

A price floor is a situation where the

A) price is not allowed to rise above a certain level.
B) price is not allowed to fall below a certain level.
C) price is not allowed to change.
D) quantity is not allowed to fall below a certain level.
E) quantity is not allowed to rise above a certain level.

Question 79

Assume that a minimum wage law is enacted and imposed on an otherwise perfectly competitive labor market. We can expect all of the following except

A) the number of people seeking employment to increase.
B) some people to be laid off.
C) the number of laborers demanded to decrease.
D) a greater unemployment rate.
E) more people to gain employment.

Question 80

One of the guiding principles of economics is that people try to make themselves as well off as possible.