Deck 11: Government Policies

Question 1

A price ceiling:

A) is a legislated price higher than the equilibrium price
B) is a legislated price lower than the equilibrium price
C) is a legislated price equal to the equilibrium price
D) is not binding when it is lower than the equilibrium price

Answer 1

B

Question 2

A price support:

A) is a legislated price higher than the equilibrium price
B) is a legislated price lower than the equilibrium price
C) is a legislated price equal to the equilibrium price
D) is not binding when it is higher than the equilibrium price

Answer 2

A

Question 3

A price ceiling:

A) helps all consumers
B) hurts all producers
C) is higher than the market price
D) helps all producers

Answer 3

B

Question 4

A price support:

A) helps all consumers
B) helps all producers
C) hurts all producers
D) is lower than the market price

Question 5

A price ceiling results in:

A) consumers better off
B) producers better off
C) both producers and consumers better off
D) none of the other answers

Question 6

A price support will:

A) increase the supply of the good
B) increase the quantity demanded of the good
C) result in a shortage of the good
D) attempt to make consumers of the good better off

Question 7

A price support that is lower than the equilibrium price

A) is not binding and has no effect
B) causes a surplus
C) causes a shortage
D) requires producers and consumers to get together and make an agreement

Question 8

Market failures include all except:

A) Market power
B) Public goods
C) High oil prices
D) Externalities

Question 9

In the case of market failure:

A) Socialism is called for
B) Free markets provide superior outcomes
C) Government intervention provides superior outcomes
D) Firm owners will lose money

Question 10

Price supports are most commonly used in:

A) Low income nations
B) High income nations
C) Oil-exporting nations
D) Rapidly growing economies

Question 11

Price ceilings are most commonly used in:

A) Low income nations
B) High income nations
C) Oil-exporting nations
D) Rapidly growing economies

Question 12

All of the following are things that the government can do to eliminate a surplus except:

A) Give the surplus away to domestic consumers
B) Increase the price
C) Give the surplus away to foreign consumers
D) Destroy the surplus

Question 13

Price ceilings help:

A) All consumers
B) All producers
C) Some consumers, but not all.
D) Some producers, but not all.

Question 14

Welfare economics is:

A) Giving money to poor people
B) Measuring the well-being of individuals and groups
C) Market economics
D) Supply and demand

Question 15

consumer surplus measures all except:

A) The surplus produced from a price support
B) The well-being of consumers
C) Willingness to pay minus price actually paid
D) A measure of the welfare of consumers

Question 16

Producer surplus measures all except:

A) The surplus produced from a price support
B) The well-being of producers
C) Price received minus cost of production
D) A measure of the welfare of producers

Question 17

If consumer willingness to pay equals 5 USD/unit and the price paid is equal to 2 USD/unit, then the CS equals:

A) 2 USD
B) 5 USD
C) 3 USD
D) 7 USD

Question 18

If price received equals 5 USD/unit and the cost of production equals 2 USD/unit, then PS equals:

A) 2 USD
B) 5 USD
C) 3 USD
D) 7 USD

Question 19

The units for CS and PS are:

A) Units
B) USD/unit
C) USd
D) It depends on the situation

Question 20

All government policies and programs result in:

A) Benefits to producers
B) Benefits to consumers
C) Benefits to society
D) Deadweight loss to society

Question 21

Who benefits from a price ceiling:

A) Producers
B) All consumers
C) All consumers who can purchase the good
D) Consumers priced out of the market

Question 22

Two measures of the overall size of the economy include:

A) MVP and OMG
B) MVP and NI
C) GDP and MVP
D) GDP and NI

Question 23

GDP measures:

A) The value of all expenditures on goods and services
B) The value of all factor payments
C) The rate of change of the money supply
D) The value of all money in the economy

Question 24

NI measures:

A) The value of all expenditures on goods and services
B) The value of all factor payments
C) The rate of change of the money supply
D) The value of all money in the economy

Question 25

A recession is:

A) A period when the rate of change in GDP is negative
B) A period when the rate of growth in GDP is negative
C) A period when the rate of growth in GDP is positive
D) A period when the rate of change in GDP is positive

Question 26

A boom is:

A) A period when the rate of change in GDP is negative
B) A period when the rate of growth in GDP is negative
C) A period when the rate of growth in GDP is positive
D) A period when the rate of change in GDP is positive

Question 27

A depression is:

A) A period when the rate of change in GDP is negative
B) A period when the rate of growth in GDP is negative
C) A period when the rate of growth in GDP is positive
D) A period when the rate of change in GDP is positive

Question 28

Goals of macroeconomic policy include all except:

A) Inflation
B) Stable prices and currency values
C) Full employment
D) Economic growth

Question 29

Money is:

A) Paper, if backed by precious metals
B) Coins made of precious metals
C) Anything generally acceptable and commonly used as a measure of output
D) Electronic transactions

Question 30

the three major functions of money in society include all except:

A) Store of value
B) Investment opportunity
C) Unit of account
D) Medium of exchange

Question 31

Purchasing power remains stable udner:

A) Constant value of money
B) Deflation
C) Inflation
D) Increases in prices

Question 32

Prices of goods and services adjusted for inflation are:

A) Relative prices
B) Absolute prices
C) Nominal prices
D) Real prices

Question 33

Prices observed at any point in time, measured in dollars of that time are:

A) Relative prices
B) Absolute prices
C) Nominal prices
D) Real prices

Question 34

Monetary policy:

A) Changes the rate of growth of the quantity of credit
B) Changes the rate of growth of the quantity of money
C) Changes the rate of growth of the quantity of employment
D) Changes the rate of growth of the quantity of government spending and taxes

Question 35

Fiscal policy:

A) Changes the rate of growth of the quantity of credit
B) Changes the rate of growth of the quantity of money
C) Changes the rate of growth of the quantity of employment
D) Changes the rate of growth of the quantity of government spending and taxes

Question 36

Food security includes all except:

A) Safe food
B) Nutritious food
C) Access to food
D) Free food

Question 37

Problems associated with food aid include all except:

A) Food aid is due to a surplus of food in donor nation
B) Food aid is used as a foreign policy tool
C) Food aid increases the price of food in the recipient nation
D) Economic development may not be the objective

Question 38

Economic development is:

A) An increase in GDP
B) An increase in NI
C) Improvement sin economic, political, and social well-being of people
D) Improvement sin economic and political well-being of people

Question 39

Economic development policies can include all except:

A) Property rights and rule of law
B) Market-based economics
C) Infrastructure
D) Lower income levels to decrease inequality

Question 40

A public good is:

A) Nonrival
B) Nonexcludable
C) Both A and B
D) Neither A nor B

Question 41

An example of a nonrival good is:

A) Apple
B) National security
C) Massage
D) Telephone calls

Question 42

An example of a nonexcludable good includes all except:

A) Publid parks
B) Food security
C) Rural landscapes
D) College textbooks

Question 43

Public goods are:

A) Underproduced
B) Overproduced
C) Produced at efficient levels
D) Not enough information to know

Question 44

Relative to other industries, agriculture is:

A) Land-intensive
B) Capital-intensive
C) Both A and B
D) Neither A nor B

Question 45

Relative to other goods, agricultural goods are:

A) More traded internationally
B) Less traded internationally
C) The same level of international trade
D) Not enough information to know

Question 46

expansionary fiscal policy includes:

A) Tax increases, and increases in government spending
B) Tax decreases, and increases in government spending
C) Tax increases, and decreases in government spending
D) Tax decreases, and decreases in government spending

Question 47

Expansive fiscal policy results in:

A) Recovery from recession
B) Low inflation rates
C) Recovery from high inflation
D) Recovery from an overheated economy

Question 48

Restrictive fiscal policy is used to:

A) Reduce economic activity
B) Increase economic activity
C) Increase inflation
D) Increase deficit spending

Question 49

Restrictive monetary policy is used for all except:

A) Increase economic activity
B) Reduce inflation rates
C) Reduce the supply of money
D) Reduce the supply of credit

Question 50

Monetary policy is:

A) An exact science
B) Exact policy instrument for inflation rates
C) Inexact policy
D) Not used anymore

Question 51

List three types of market failure that justify government intervention.

Question 52

A Price Ceiling on Beef. The inverse demand and supply curves for beef are given by: P = 12 - 0.2Q^d and P = 0.2Q^s, where P is the price of beef in dollars per pound (USD/lb) and Q is the quantity of beef in million pounds (mil lb). The price ceiling is equal to $5/lb.
A. Explain the purpose of this policy: what is it intended to do?
B. Calculate the equilibrium price and quantity of beef in free markets.
C. Calculate Q^s and Q^d under the price ceiling.
D. Who is helped and who is hurt by this policy?

Question 53

A Price Support on Wheat. The inverse demand and supply curves for wheat are given by: P = 11 - Q^d and P = 1 + Q^s, where P is the price of wheat in dollars per bushel (USD/bu) and Q is the quantity of wheat in million bushels (mil bu). The price support set by the government is equal to $8/bu.
A. Explain the purpose of this policy: what is it intended to do?
B. Calculate the equilibrium price and quantity of wheat in free markets.
C. Calculate Q^s and Q^d under the price ceiling.
D. Who is helped and who is hurt by this policy?

Question 54

Calculate the changes in producer and consumer surplus for the price ceiling policy in (2) above. Who is made better off, who worse off, and by how much?

Question 55

Calculate the changes in producer and consumer surplus for the price support policy in (3) above. Who is made better off, who worse off, and by how much?

Question 56

Describe the changes in producer and consumer surplus for the immigration in the short run. Who is made better off, who worse off, and by how much?

Question 57

Describe the changes in producer and consumer surplus for the immigration in the long run. Who is made better off, who worse off, and by how much?

Question 58

Define and explain the terms, "Gross Domestic Product" and "National Income." How are the two terms similar, and how are they different?

Question 59

List and explain three functions of money in a market-based economy.

Question 60

If you are a borrower, are you better off with inflation or deflation? Why?

Question 61

How is monetary policy used during a recession? During a boom?

Question 62

How is fiscal policy used during a recession? During a boom?