Deck 5: Using Supply and Demand

Question 1

Tariffs increase equilibrium price and quantity.

Answer 1

False

Question 2

The minimum wage is an example of a price floor.

Answer 2

True

Question 3

When the person who chooses how much to purchase doesn't have to bear the full cost, the quantity demanded tends to be higher.

Answer 3

True

Question 4

A price floor causes excess demand, resulting in the need to ration by some means other than price.

Question 5

When a hurricane destroys a significant portion of an apple crop:

A) apple prices rise, and quantity sold rises.
B) apple prices decline, and quantity sold falls.
C) apple prices rise, and quantity sold falls.
D) apple prices decline, and quantity sold rises.

Question 6

When gasoline prices rose in the early 2000s, the demand for SUVs fell. An economist would predict that SUV prices would decline or at least not rise as quickly.

Question 7

Suppose the price of tomatoes dramatically increases. Which of the following could cause this change?

A) Hurricanes during the late summer damage the Florida crop, shifting supply left
B) A reduction in tariffs of tomatoes from Central American, shifting supply right
C) A news report stating that a pesticide used on tomatoes might cause cancer, shifting the demand to the right
D) Advertising for ketchup increases demand for ketchup, shifting the demand curve to the left

Question 8

Suppose a recent and widely circulated medical article reports new benefits of exercise. Simultaneously, the price of the parts needed to make bikes falls. What is the likely effect on the equilibrium price and quantity of exercise bikes sold?

A) Price of exercise bikes decreases and quantity sold remains the same.
B) Price of exercise bikes increases and quantity sold also increases.
C) Price of exercise bikes remains the same and quantity sold increases.
D) The change in price is ambiguous, but the quantity sold increases.

Question 9

Given a downward sloping demand curve, a tax on the supply of a good will result in an increase in equilibrium price that is less than the amount of the tax.

Question 10

The U.S. imposes substantial taxes on cigarettes but not on loose tobacco. When the tax on cigarettes went into effect, the demand for home cigarette rolling machines most likely:

A) decreased, causing the price of cigarette rolling machines to fall and the quantity of machines purchased to fall.
B) decreased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to fall.
C) increased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to rise.
D) increased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to fall.

Question 11

The U.S. Postal Service printed 150,000 sheets of a stamp depicting Bill Pickett, but recalled them when the USPS realized the image on the stamp was Bill's brother, Ben, instead. They were unable to recall 183 sheets that had already been sold. The effect of this recall was to:

A) drastically reduce the demand for the stamps, causing their equilibrium price to fall.
B) have no effect on either supply of or demand for the Bill Pickett stamps because there is no market for them.
C) drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to rise.
D) drastically reduce the supply of the Bill Pickett stamps, causing their equilibrium price to fall.

Question 12

Refer to the following graphs. Floods in the U.S. Midwest reduce the U.S. corn crop. Which graph depicts the effect of the floods on the U.S. corn market?

A) I
B) II
C) III
D) IV

Question 13

Trade sanctions imposed on Iraq that limited Iraq's production of oil after the 1990 Gulf War on the oil market are best shown graphically with a price ceiling below equilibrium price.

Question 14

The Katrina disaster in New Orleans decreased the ability of oil companies to purify crude oil into gasoline. This caused the:

A) supply curve for gasoline to shift inward.
B) supply curve for gasoline to shift outward.
C) quantity of gasoline demanded to move out along the demand curve.
D) quantity of gasoline supplied to move in along the supply curve.

Question 15

Online music stores such as Apple's iTunes provide an alternative to buying CDs. The introduction of online music stores has shifted:

A) the supply curve of CDs to the right.
B) the supply curve of CDs to the left.
C) the demand curve of CDs to the right.
D) the demand curve of CDs to the left.

Question 16

Real-world experience shows that when weather conditions reduce crop yields, the price of agricultural products will fall.

Question 17

The effect of successful compliance with recycling regulation by homeowners on the market for recycled paper along with a concurrent rise in demand for products made with recycled paper is best shown by a shift to the right in the supply of and demand for recyclable paper and a certain drop in its price.

Question 18

The standard supply/demand framework:

A) can be modified to explain real-world events.
B) cannot be modified to explain real-world events.
C) should not be modified to explain real-world events.
D) explains real-world events with no need for modification.

Question 19

European Union subsidizes its farmers. How do these subsidies make it difficult for farmers in developing economies to compete in the world farm market?

A) The subsidies set a price ceiling for EU farm goods, keeping prices below the market equilibrium, and lowering the price developing country farmers can receive for their produce.
B) The subsidies shift the supply of EU farm goods to the right, lowering world prices of farm goods and the price developing country farmers can receive for their produce.
C) The subsidies function as a tariff, causing imports from developing countries to become artificially expensive, thus denying European consumers the benefits of cheap imported food
D) The subsidies create ethical problems for Europeans who want to buy farm products from developing countries since the subsidies are raising the price of developing country produce.

Question 20

Which of the following would be the most likely effect of a 75 percent tax on punitive awards by juries?

A) An increase in the number of lawsuits asking for punitive damages
B) A decrease in the number of cases settled out of court
C) An increase in the incentive for plaintiffs to pursue legal action against individuals or businesses who have caused injury due to gross negligence
D) An increase in pretrial settlements since plaintiffs are willing to accept lower settlement amounts that are not taxed

Question 21

A decrease in price and an indeterminate change in quantity are consistent with a:

A) leftward shift in demand and no shift in supply.
B) leftward shift in supply and no shift in demand.
C) rightward shift in supply and a leftward shift in demand.
D) leftward shift in supply and a rightward shift in demand.

Question 22

Refer to the following graphs. A recent report indicates that the device known as the right heart catheter used to diagnose heart conditions poses more risks than previously thought. The effect of the report on the market for right heart catheters is best shown by which of the graphs?

A) I
B) II
C) III
D) IV

Question 23

When computer manufacturers overcame the enormous 13,000 Chinese character barrier by creating a workable keyboard through voice and handwriting recognition, PCs became more accessible to the Chinese. What was the predicted effect of the events on equilibrium price and quantity of PCs sold in China?

A) The price and quantity fell.
B) The price fell and quantity rose.
C) The price rose and quantity fell.
D) The price and quantity rose.

Question 24

Refer to the following graphs. A recent report indicated that 50 intensive-care unit patients die for every 1,000 who are managed with a heart device known as the right heart catheter. Suppose as a result, the FDA limited supply of the heart catheters. The effect of the report and subsequent action by the FDA on the market for right heart catheters is best shown by which of the graphs?

A) I
B) II
C) III
D) IV

Question 25

Helped by desktop publishing, the number of vintage baseball card forgeries has flooded the market for vintage baseball cards. Dealers left the market for fear of purchasing a phony. What was the effect on the market for vintage baseball cards assuming phonies could not be detected?

A) Demand shifted to the left, supply did not change, price declined, and quantity traded declined.
B) Supply shifted to the right, demand did not change, price declined, and quantity traded rose.
C) Supply shifted to the right, demand shifted to the left, and price rose.
D) Supply shifted to the right, demand shifted to the left, and price declined.

Question 26

Suppose that there is a renewed interest in eating caviar at the same time that the supply of Russian caviar shrinks. What would be the most likely effect of these events on the price and quantity of caviar sold?

A) Price rose and quantity sold fell.
B) Price rose and the effect on the quantity of caviar sold is ambiguous.
C) Price fell and the effect on the quantity of caviar sold is ambiguous.
D) Price fell and quantity sold rise.

Question 27

At a Chicago Bulls game 20,000 tickets were sold at $30 apiece. The game was sold out and some people did not get tickets. This suggests that the selling price:

A) was at equilibrium.
B) was below equilibrium.
C) was above equilibrium.
D) could not have been any higher.

Question 28

A decrease in quantity and price is consistent with a:

A) leftward shift in demand keeping supply constant.
B) leftward shift in supply keeping demand constant.
C) rightward shift in supply and demand.
D) rightward shift in demand and a leftward shift in supply.

Question 29

Honus Wagner, a major league baseball player from 1897 to 1917 and one of the first five men inducted into the Baseball Hall of Fame, had his baseball card pulled from cigarette packs because he wasn't being paid for their distribution. What best describes the effect of his action on the market for his baseball card?

A) Supply shifted to the left, price rose, and quantity demanded fell.
B) Supply shifted to the left, price rose, and demand shifted to the left.
C) Demand shifted to the left, price fell, and quantity supplied fell.
D) Demand shifted to the left, price fell, and supply fell.

Question 30

An increase in quantity and an indeterminate change in price are consistent with a:

A) leftward shift in demand and supply.
B) rightward shift in supply and demand.
C) rightward shift in supply, keeping demand constant.
D) rightward shift in demand, keeping supply constant.

Question 31

Refer to the following graphs. Americans nationwide have been complying with recycling regulations with unexpected zeal. The effect on the market for recycled paper is best shown by which graph?

A) I
B) II
C) III
D) IV

Question 32

Season tickets to the Miami Heat games are sold out at $30 a game and some people who wanted to get tickets couldn't buy them. As the season progresses, it is clear that the Heat will make it to the playoffs. What is the effect on resale price of tickets to Miami Heat games, assuming resale is legal?

A) Resale price will remain at $30 a game.
B) Resale price will rise and quantity supplied will rise.
C) Resale price will rise and supply will rise.
D) Resale price will decline as supply rises.

Question 33

A Wall Street Journal headline reads: "Cigar Shortage Draws New Brands into Market." The shortage resulted from a renewed interest in smoking cigars. What best describes facts behind the headline?

A) Supply has shifted to the right. Price has fallen somewhat, but not enough to equilibrate supply and demand.
B) Demand has shifted to the right. Price has risen somewhat, increasing quantity supplied, but not enough to equal quantity demanded.
C) Demand has shifted to the right and price has risen to equilibrate supply and demand.
D) Supply has shifted to the left. Price has risen somewhat, but not enough to equilibrate supply and demand.

Question 34

An increase in price and decrease in quantity are consistent with a:

A) leftward shift in demand and no shift in supply.
B) leftward shift in supply and no shift in demand.
C) rightward shift in supply and a rightward shift in demand.
D) rightward shift in supply and a leftward shift in demand.

Question 35

U.S. baby boomers are beginning to retire and withdraw their savings for retirement. What effect should we expect this to have on equilibrium price and quantity of financial assets?

A) Price rises and quantity also rises.
B) Price rises and quantity falls.
C) Price falls and quantity rises.
D) Price falls and quantity also falls.

Question 36

Suppose caviar sales soars at the same time price increases. What would lead to both a higher quantity sold and higher price of caviar?

A) A shift in demand to the right and a larger shift in supply to the right.
B) A shift in demand to the left and a smaller shift in supply to the left.
C) A shift in demand to the right and a shift in supply to the left.
D) A shift in demand to the left and a smaller shift in supply to the right.

Question 37

In 1990 the UN placed trade sanctions on Iraqi oil. In 1996, Iraq was allowed limited export of oil to make war reparations. What was the predicted effect of the two events on equilibrium price and quantity of oil?

A) The price fell initially, then rose (failing to return to its former low level); quantity fell and then rose
B) The price fell initially, then rose (failing to return to its former low level); quantity rose and then fell
C) The price rose initially, then fell (failing to regain its former losses); quantity fell and then rose
D) The price rose initially, then fell (failing to regain its former losses); quantity rose, then fell

Question 38

An increase in price and an indeterminate change in quantity are consistent with a:

A) leftward shift in demand and no shift in supply.
B) leftward shift in supply and no shift in demand.
C) rightward shift in supply and a leftward shift in demand.
D) leftward shift in supply and a rightward shift in demand.

Question 39

More and more devices are being introduced into the market that perform tasks similar to that of PCs, such as tablets and smartphones. At the same time, the price of computer chips to make high-end PCs continues to fall. What is the effect of the events on equilibrium price and quantity of high-end PCs?

A) Price falls continuously as does quantity sold.
B) Price rises then falls while quantity sold falls continuously.
C) Price falls continuously while quantity falls initially but then rises, recouping earlier losses.
D) Price falls continuously and quantity rises continuously.

Question 40

In the late 1990s "mad cow" disease caused people to buy less beef. It also caused the EU to ban imported British beef and the British government to ban the sale of older cattle. What is the effect of the following on price and quantity of British beef sold worldwide?

A) The price of British beef falls and quantity sold also falls
B) The price of British beef rises and quantity sold falls
C) The price of British beef falls initially, but regains some of its losses; quantity sold initially rises, then falls
D) The price of British beef falls initially, but regains some of its losses; quantity sold falls

Question 41

To keep the price of gas from rising quickly after a hurricane, the government sometimes institutes price ceilings on the price of gasoline. These price ceilings cause ________ in the gasoline market.

A) surpluses
B) movement of the demand curve
C) movement along the demand curve
D) shortages

Question 42

Suppose a scientific report states that fish contain dangerously high levels of mercury (toxic to humans). At the same time, the price of diesel fuel, used by fishermen to fuel their boats, falls. What is the effect on the market for fish?

A) A decrease in demand and a fall in price and quantity sold
B) A decrease in demand and supply; price and quantity sold falls
C) A decrease in demand and an increase in supply; price falls but the change in quantity is ambiguous
D) A decrease in demand and supply; price and quantity sold rises

Question 43

After several years of slow economic growth, world demand for petroleum began to rise rapidly in the 1990s. Much of the increase in demand was met by additional supplies from sources outside OPEC. OPEC during this time was unable to restrain output among members in its effort to lift oil prices. What best describes these events?

A) The rise in demand shifted the demand for oil to the right. OPEC actions shifted the demand for oil back to the left.
B) The rise in demand shifted the demand for oil to the right. As price rose, supply of oil also rose.
C) The rise in demand shifted the demand for oil to the right. As price rose, quantity of oil supplied rose.
D) The rise in demand reflects a movement down along the demand curve as supply shifted to the right when suppliers produced more oil.

Question 44

Fishing for king crabs for a living is risky business. Their migration habits along the Bering Strait are just not understood. The king crabs seem to disappear one year but return mysteriously a few years later, wreaking havoc on the income of crabbers. When crabs disappear, consumers buy lobster instead. What best describes this situation in the king crab market?

A) The supply curve shifts to the left when crabs disappear (their price rises) and shift to the right when they reappear (their price declines).
B) The supply curve shifts to the left when crabs disappear, (their price rises) and the demand curve shifts to the left when consumers substitute lobster for crab (lowering their price). The supply curve then shifts to the right when crabs reappear (their price declines).
C) The price of crab rises when crabs are scarce creating excess demand. The price of crab falls when crabs are abundant creating excess supply.
D) The quantity of crab falls and then rises as crabs disappear and reappear in response to shifts in demand. Demand shifts to the left as consumers substitute toward lobster when crab is scarce and shift to the right when crab is abundant.

Question 45

Suppose the equilibrium price of oranges is $0.79 an orange, but government takes steps to prevent the price from exceeding $0.60 an orange. The likely result will be a:

A) lower equilibrium price for oranges as the supply curve for oranges shifts to the right.
B) higher equilibrium price for oranges as the demand curve for oranges shifts to the right.
C) shortage of oranges as the price ceiling keeps the market from reaching equilibrium.
D) surplus of oranges as the price ceiling keeps the market from reaching equilibrium.

Question 46

What events most likely explain the following Wall Street Journal headline, "Cities Couldn't Give Away Their Trash; Now They Get Top Dollar"?

A) Quantity supplied initially exceeded quantity demanded, but a subsequent increase in the demand for trash not only eliminated the surplus, but led to a rise in the price of trash.
B) Supply initially exceeded demand, but a subsequent increase in the quantity of trash demanded not only eliminated the surplus, but led to a rise in the price of trash.
C) Quantity supplied initially exceeded quantity demanded, but a subsequent increase in the supply of trash not only eliminated the surplus, but led to a rise in the price of trash.
D) Supply initially exceeded demand, but a subsequent increase in the quantity of trash supplied not only eliminated the surplus, but led to a rise in the price of trash.

Question 47

Refer to the following graph. A price ceiling would be binding, resulting in a market shortage if it is set at:

A) $3.00.
B) $2.25.
C) $1.50.
D) either $3.00 or $1.50.

Question 48

A Wall Street Journal headline reads: "Cigar Shortage Draws New Brands into Market." The shortage resulted from a renewed interest in smoking cigars. What best describes the facts behind the headline?

A) Price is too low, demand exceeds supply.
B) Price is too low, quantity demanded exceeds quantity supplied.
C) The cigar market is in equilibrium.
D) A shift in supply has equilibrated supply and demand.

Question 49

An effective price ceiling is best defined as a price:

A) imposed by government below equilibrium price.
B) imposed by government above equilibrium price.
C) higher than any consumer is willing to pay.
D) lower than any supplier is willing to sell.

Question 50

Refer to the following graph. If the price is set at Pc:

A) a nonprice rationing mechanism must determine which producers will be able to sell the product.
B) a nonprice rationing mechanism must determine which buyers will be able to purchase the product.
C) anyone willing and able to pay the asking price will be able to purchase the product.
D) the demand curve will shift to the left to achieve a new equilibrium.

Question 51

An increase in the Federal minimum wage, assuming the minimum is higher than equilibrium wage and that all other things remain constant, will:

A) reduce the number of unemployed.
B) increase the number of unemployed.
C) shift the supply of labor to the right.
D) shift the demand of labor to the right.

Question 52

Some years ago, Stuyvesant Town and Peter Cooper Village in Manhattan were sold for redevelopment. These villages had been rent controlled, but now that these neighborhoods are no longer rent controlled, one would expect the:

A) houses to be not as well maintained since rent will be so high.
B) housing shortage in the neighborhood to worsen.
C) rent to rise in those neighborhoods.
D) quantity of rentals demanded to rise.

Question 53

When the polio vaccine first became available in the United States, the government controlled the price with an effective price ceiling. Production of the vaccine was not sufficient to fill all orders and the government had to regulate its distribution. Had the vaccine been sold without government intervention, the shortage would have been eliminated by price:

A) falling, quantity demanded decreasing, and supply increasing.
B) falling, demand decreasing, and supply increasing.
C) rising, demand decreasing, and quantity supplied increasing.
D) rising, quantity demanded decreasing, and quantity supplied increasing.

Question 54

Price ceilings and price floors:

A) cause surpluses and shortages in markets respectively.
B) interfere with the allocation function of prices.
C) make the rationing function of markets more efficient.
D) cause demand and supply curves to shift thus having no effect on the rationing function of prices.

Question 55

Refer to the following graphs. In the early 1990s, mounds of newspapers and worthless plastic piled up at recycling centers. As the nation's economy continued to grow, increased demand eliminated the mounds and turned them into shortages. In the mid-1990s, as recycling became more popular, the mounds of recycled materials returned. What graph best depicts these events on the market for recycled materials?

A) Price remained constant at P0. Quantity demanded first rose, while supply remained constant; quantity supplied then rose, while demand remained constant.
B) Price remained constant at P0. Supply first shifted from S1 to S0 and then back to S1.
C) Price remained constant at P0. Demand shifted from D0 to D1 then supply shifted from S0 to S1.
D) Price remained constant at P0. Demand shifted from D0 to D1 and then back to D0.

Question 56

When an effective price ceiling is removed, we would expect the price of the good to:

A) increase and the quantity demanded to decrease.
B) increase and the quantity demanded to increase.
C) decrease and the quantity demanded to decrease.
D) decrease and the quantity demanded to increase.

Question 57

Refer to the following graph. Which price will create the greatest shortage?

A) P0
B) P1
C) P2
D) P3

Question 58

Stricter environmental regulations and increased demand for energy have caused an increase in the demand for relatively clean natural gas. In the last several years, improved extraction technologies and new discoveries have increased the availability of natural gas. What has been the net effect on price and quantity for natural gas?

A) Quantity sold and price both fell with certainty.
B) Quantity sold fell and the effect on price is ambiguous.
C) Quantity sold and price both rose with certainty.
D) Quantity sold rose while the effect on price is ambiguous.

Question 59

A number of states have a minimum wage that is higher than the federal minimum. In those states that impose such a minimum wage, it is more likely that the minimum wage acts as a binding:

A) price floor, causing excess supply in the market.
B) price floor, causing excess demand in the market.
C) price ceiling, causing excess supply in the market.
D) price ceiling, causing excess demand in the market.

Question 60

When people heard that there was a shortage of specialty dolls, they wanted even more of them. Because of this effect the pressure on the price of these dolls increased. The price of the dolls remained the same however. Thus, the shortage of these dolls:

A) increased.
B) decreased.
C) did not change.
D) may have increased or decreased.

Question 61

Which price ceiling will cause the greatest excess demand?

A) $1
B) $2
C) $3
D) $4

Question 62

The most likely impact of an effective price floor is:

A) the supply curve will shift to the right.
B) the demand curve will shift to the left.
C) a surplus will develop.
D) a shortage will develop.

Question 63

A surplus of a good could possibly be eliminated by:

A) the removal of a price floor.
B) the removal of a price ceiling.
C) a sufficient decrease in demand keeping price constant.
D) a sufficient increase in supply keeping price constant.

Question 64

Suppose a price floor is imposed on eggs above their equilibrium price. The likely result will be:

A) a lower equilibrium price for eggs as the demand curve for eggs shifts left.
B) a higher equilibrium price for eggs as the supply curve for eggs shifts left.
C) a decrease in the quantity of eggs demanded.
D) an increase in the quantity of eggs demanded.

Question 65

Refer to the graph shown. If government establishes a price floor of $7.25 per hour, there will be a:

A) shortage of 400 labor hours.
B) surplus of 400 labor hours.
C) shortage of 300 labor hours.
D) surplus of 300 labor hours.

Question 66

If the government imposes an excise tax on gasoline equal to $0.25 per gallon and the demand curve for gasoline is downward-sloping, the supply of gasoline will:

A) shift upward and the price will increase by $0.25 per gallon.
B) shift upward and the price will increase by less than $0.25 per gallon.
C) shift downward and the price will decrease by $0.25 per gallon.
D) shift downward and the price will decrease by less than $0.25 per gallon.

Question 67

Which of the following is the best example of an excise tax?

A) A tax on all capital gains (the amount by which the value of an asset has risen between the time it was purchased and the time it was sold)
B) A tax paid by employers on income paid to workers
C) A tax collected on each gallon of gasoline sold
D) A tax that is levied on the value of land and buildings

Question 68

New York City has been experiencing a housing emergency for quite some time. Apartments are difficult to come by. In fact, the vacancy rate has been below 5 percent since World War II. The most likely cause of the housing emergency is:

A) a price floor on rent higher than equilibrium price.
B) a price ceiling on rent lower than equilibrium price.
C) too high incomes in New York City.
D) a lack of a rationing mechanism to distribute existing apartments.

Question 69

Refer to the graph shown. Without government intervention, market forces would result in:

A) 800 labor hours demanded, 800 labor hours supplied, and a wage rate of $6.50 per hour.
B) 500 labor hours demanded, 900 labor hours supplied, and a wage rate of $7.25 per hour.
C) 1,200 labor hours demanded, 500 labor hours supplied, and a wage rate of $4.50 per hour.
D) 500 labor hours demanded, 500 labor hours supplied, and a wage rate of $7.25 per hour.

Question 70

The invention of a machine that increases milk production is discovered. If farmers were to decry the effect of this new technology on the price of milk and lobby government to set the price of milk at the price before the invention, what would be the result?

A) Excess demand for milk
B) Excess supply of milk
C) Neither a shortage nor a surplus of milk
D) A decline in the price of milk

Question 71

If the government imposes an excise tax on a good equal to $5 per unit and the demand curve for this good is vertical, the supply of this good will shift:

A) upward and the price will increase by $5.
B) upward and the price will increase by less than $5.
C) downward and the price will decrease by $5.
D) downward and the price will decrease by less than $5.

Question 72

When a country imposes a tariff:

A) the domestic price of the imported good falls.
B) domestic consumption of the imported good falls.
C) domestic production of the good falls.
D) domestic production of the good is unchanged.

Question 73

If the government imposes an excise tax on cars equal to $5,000 per automobile, the supply of automobiles will shift to the:

A) left and the price of automobiles will increase by $5,000.
B) left and the price of automobiles will increase by an unknown amount.
C) right and the price of automobiles will decrease by $5,000.
D) right and the price of automobiles will decrease by an unknown amount.

Question 74

A tariff is:

A) a tax that government places on imported goods.
B) a quantity limitation placed on imports
C) an all-out restriction on imports.
D) a government-imposed procedural rule limiting imports.

Question 75

Refer to the following graph. Suppose this graph represents the market for cheese. In order to keep the price of cheese at Pf, government must:

A) devise a mechanism to ration cheese to consumers.
B) cause the supply of cheese to increase.
C) cause the demand for cheese to decrease.
D) prevent the excess supply from reaching the market.

Question 76

Refer to the graph shown. Which of the following wage rates would be an effective price floor?

A) $3.50
B) $4.50
C) $6.50
D) $7.25

Question 77

Refer to the following graph. In New York City, the rent on many apartments is set below market rates. As a result, many people find that the only way to obtain an apartment is to make illegal payments to landlords. If Pc is the controlled rent, a best estimate of such "key" money is shown as:

A) Pf.
B) Pe.
C) Pe minus Pc.
D) Pf minus Pc.

Question 78

Rent control makes apartments:

A) hard to find.
B) easy to find.
C) less desirable.
D) be in excess demand.

Question 79

Refer to the following graph. A government-imposed price floor of $2 will result in:

A) neither excess supply nor excess demand since it is binding.
B) neither excess supply nor excess demand since it is not binding.
C) an excess demand of 2.
D) an excess supply of 2.

Question 80

Refer to the graph shown. If government establishes a minimum wage at $7.25 per hour:

A) employers will be unable to find enough qualified applicants to fill the available positions.
B) the number of job seekers will exceed the number of job vacancies, resulting in some unemployment.
C) employers will be forced to hire 900 workers, resulting in reduced profits.
D) there will be a shortage in this labor market.