Deck 4: Demand and Supply Applications

Question 1

In the short run, it is necessary to nonprice ration a good whenever ________ exists.

A) excess demand
B) excess supply
C) a surplus
D) market equilibrium

Answer 1

A

Question 2

Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1
Refer to Figure 4.1. If the United States levies no taxes on apples, the price of apples in the United States would fall to ________, and the United States would import ________.

A) 20 cents per apple; 10 million apples per day
B) 30 cents per apple; 6 million apples per day
C) 40 cents per apple; 2 million apples per day
D) The price of apples in the United States after the U.S. government eliminated all taxes on imported apples cannot be determined from this information.

Answer 2

B

Question 3

Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1
Refer to Figure 4.1. The United States will import 6 million apples per day if a per-apple tax of ________ is levied on imported apples.

A) 0 cents
B) 10 cents
C) 20 cents
D) 30 cents

Answer 3

A

Question 4

People scalping tickets for the Super Bowl will be successful at selling the tickets for a profit

A) any time the Super Bowl is popular.
B) when prices are too high.
C) when the price set by the National Football League is less than the market equilibrium price.
D) only when there is excess supply.

Question 5

Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1
Refer to Figure 4.1. Assume that initially there is free trade. If the United States then imposes a 10-cent tax per apple,

A) the quantity of apples demanded will be reduced by 2 million apples per day.
B) the quantity of apples supplied by U.S. firms will increase by 2 million apples per day.
C) the price of apples in the United States will increase to 40 cents per apple.
D) all of the above

Question 6

People scalping tickets for a jazz festival will be successful at selling the tickets for a profit

A) any time the jazz festival is popular.
B) when the price set by the festival organizers is less than the market equilibrium price.
C) when prices are too high.
D) only when there is excess supply.

Question 7

In a "black market,"

A) suppliers take advantage of buyers.
B) price is illegally below market price.
C) illegal trading at market prices takes place.
D) only illegal goods and services are traded.

Question 8

When supply is fixed or the product is unique, then price is

A) supply determined.
B) demand determined.
C) government determined.
D) indeterminate.

Question 9

If the government imposes a maximum price that is above the equilibrium price,

A) this maximum price will have no economic impact.
B) quantity demanded will be less than quantity supplied.
C) demand will be greater than supply.
D) the available supply will have to be rationed with a nonprice rationing mechanism.

Question 10

Attempts to bypass price rationing in the market

A) are efficient.
B) are easily administered.
C) are costly.
D) always fail.

Question 11

Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1
Refer to Figure 4.1. At the price of ________ cents per apple the United States imports 6 million apples per day.

A) 20
B) 30
C) 40
D) 60

Question 12

Among the methods of nonprice rationing are

A) coupons.
B) favored customers.
C) waiting in line.
D) all of the above

Question 13

Favored customers are customers who receive special treatment from dealers during periods of

A) excess demand.
B) excess supply.
C) price above equilibrium.
D) equilibrium.

Question 14

Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1
Refer to Figure 4.1. The United States will import 2 million apples per day if a per-apple tax of ________ is levied on imported apples.

A) 10 cents
B) 20 cents
C) 30 cents
D) 40 cents

Question 15

Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1
Refer to Figure 4.1. Assume that initially there is free trade. The quantity demanded of apples will be reduced by 2 million per day if the United States imposes a tax of ________ per apple.

A) 10 cents
B) 20 cents
C) 30 cents
D) 40 cents

Question 16

The price system

A) automatically distributes scarce goods.
B) is inefficient.
C) requires government help to allocate goods.
D) is the only way to allocate goods.

Question 17

Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1
Refer to Figure 4.1. Assume that initially there is free trade. If the United States then imposes a 10-cent tax per apple,

A) the quantity of apples demanded will be reduced by 4 million apples per day.
B) the quantity of apples supplied by U.S. firms will increase by 6 million apples per day.
C) the price of apples in the United States will increase to 40 cents per apple.
D) U.S. imports of apples will increase by 6 million per day.

Question 18

Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1
Refer to Figure 4.1. If a 10-cent-per-apple tax is levied on imported apples, the United States will

A) import 2 million apples per day.
B) import 4 million apples per day.
C) import 6 million apples per day.
D) import 8 million apples per day.

Question 19

Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1
Refer to Figure 4.1. Assume that initially there is free trade. The price of apples in the United States will increase to 40 cents per apple if a ________ per apple tax tax is imposed.

A) 10 cents
B) 20 cents
C) 30 cents
D) 40 cents

Question 20

Refer to the information provided in Figure 4.1 below to answer the questions that follow. Figure 4.1
Refer to Figure 4.1. At the world price of 30 cents per apple the United States imports ________ million apples per day.

A) 2
B) 4
C) 6
D) 10

Question 21

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
Refer to Figure 4.3. At an effective price ceiling for pencils,

A) quantity demanded is greater than quantity supplied.
B) quantity demanded is less than quantity supplied.
C) quantity demanded is equal to quantity supplied.
D) price is above equilibrium.

Question 22

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
Refer to Figure 4.3. The government setting the price of pencils at $0.40 would be an example of an effective

A) price floor.
B) price ceiling.
C) market equilibrium.
D) price surplus.

Question 23

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
Refer to Figure 4.3. If the government will not allow retailers to charge less than $0.50 for a pencil, which of the following will happen?

A) Demand must eventually increase so that the market will come into equilibrium at a price of $0.50.
B) Supply must eventually decrease so that the market will come into equilibrium at a price of $0.50.
C) Retailers will have an excess supply of pencils.
D) The market will be in equilibrium at a price of $0.50.

Question 24

A price ceiling is

A) a minimum price set by government that sellers may charge for a good.
B) a maximum price set by government that sellers may charge for a good.
C) the difference between the initial equilibrium price and the equilibrium price after a decrease in supply.
D) the minimum price that consumers are willing to pay for a good.

Question 25

An example of an ineffective price ceiling would be the government setting the maximum price of wheat at ________ per bushel when the market price is at $5.00 per bushel.

A) $2.25
B) $3.00
C) $4.75
D) $6.00

Question 26

The adjustment of ________ is the rationing mechanism in market economies.

A) quantity
B) price
C) supply
D) demand

Question 27

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
Refer to Figure 4.3. The government setting the price of pencils at $0.50 would be an example of an effective

A) price floor.
B) price ceiling.
C) market equilibrium.
D) price shortage.

Question 28

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
Refer to Figure 4.3. An example of an effective price floor would be the government setting the price of pencils at

A) $0.00.
B) $0.40.
C) $0.45.
D) $0.50.

Question 29

A price floor is

A) a minimum price set by government that sellers may charge for a good.
B) a maximum price set by government that sellers may charge for a good.
C) the difference between the initial equilibrium price and the equilibrium price after a decrease in supply.
D) the minimum price that consumers are willing to pay for a good.

Question 30

If the market price of coffee is $3.00 per pound but the government will not allow coffee growers to charge more than $2.00 per pound of coffee, which of the following will happen?

A) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.50.
B) There will be a shortage of coffee.
C) Supply must eventually increase so that the market will come into equilibrium at a price of $2.50.
D) The market will be in equilibrium at a price of $2.00.

Question 31

If the equilibrium price of gasoline is $4.00 per gallon and the government will not allow oil companies to charge more than $3.00 per gallon of gasoline, which of the following will happen?

A) Demand must eventually decrease so that the market will come into equilibrium at a price of $3.00.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $3.00.
C) A nonprice rationing system such as ration coupons must be used to ration the available supply of gasoline.
D) The market will be in equilibrium at a price of $3.00.

Question 32

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
Refer to Figure 4.3. An example of an effective price ceiling would be government setting the price of pencils at

A) $0.40.
B) $0.45.
C) $0.50.
D) $0.55.

Question 33

It is necessary to ration a good whenever ________ exists.

A) excess demand
B) excess supply
C) a surplus
D) market equilibrium

Question 34

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
Refer to Figure 4.3. If the government will not allow retailers to charge more than $0.40 for a pencil, which of the following will happen?

A) Demand must eventually decrease so that the market will come into equilibrium at a price of $0.40.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $0.40.
C) A nonprice rationing system such as queuing must be used to ration the available supply of pencils.
D) The market will be in equilibrium at a price of $0.40.

Question 35

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
Refer to Figure 4.3. In the market for pencils, the quantity demanded will be greater than the quantity supplied if the government imposes an effective

A) price floor.
B) price ceiling.
C) market equilibrium price.
D) price surplus.

Question 36

An example of a price ceiling would be the government setting the price of sugar

A) above the equilibrium market price.
B) at the equilibrium market price.
C) below the equilibrium market price.
D) none of the above

Question 37

Refer to the information provided in Figure 4.2 below to answer the questions that follow. Figure 4.2

-Refer to Figure 4.2. The market is initially in equilibrium at the intersection of S₂and D,and supply shifts from S₂ to S₁Which of the following statements is true?

A) Price will still serve as a rationing device causing quantity demanded to rise from 8 to 11 soft pretzels.
B) There is no need for price to serve as a rationing device in this case because the new equilibrium quantity is lower than the original equilibrium quantity.
C) Price will still serve as a rationing device causing quantity supplied to fall from 8 to 4 soft pretzels.
D) The market cannot move to a new equilibrium until there is also a change in supply.

Question 38

A maximum price, set by the government, that sellers may charge for a good is known as

A) a price floor.
B) a price rationing mechanism.
C) a price ceiling.
D) a subsidy.

Question 39

A minimum price, set by the government, that sellers may charge for a good is known as

A) a price floor.
B) a price rationing mechanism.
C) a price ceiling.
D) a subsidy.

Question 40

Refer to the information provided in Figure 4.2 below to answer the questions that follow. Figure 4.2
Refer to Figure 4.2. The market is initially in equilibrium at Point A and supply shifts from S₁ to S₂. Which of the following statements is true?

A) Price will still serve as a rationing device causing quantity supplied to rise from 8 to 11 soft pretzels.
B) There is no need for price to serve as a rationing device in this case because the new equilibrium quantity is higher than the original equilibrium quantity.
C) Price will still serve as a rationing device causing quantity demanded to fall from 11 to 8 soft pretzels.
D) The market cannot move to a new equilibrium until there is also a change in supply.

Question 41

If a price floor is set above the equilibrium price,

A) quantity demanded will equal quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) the floor will be ineffective.

Question 42

In the short run, it is necessary to ________ a good whenever excess demand exists.

A) nonprice ration
B) price allocate
C) discontinue distribution of
D) increase production of

Question 43

The government imposes a price ceiling on gasoline that is below the market price. You are asked to suggest a rationing scheme that will minimize the misallocation of resources. You suggest

A) using rationing coupons that can be resold.
B) using rationing coupons that cannot be resold.
C) using rationing on a first-come, first-served basis.
D) using rationing only on weekdays.

Question 44

The type of nonprice rationing that most closely approaches the market outcome is

A) coupon rationing with coupons that can be resold.
B) coupon rationing with coupons that cannot be resold.
C) first-come, first-served basis or queuing.
D) favored customer rationing.

Question 45

Issuing coupons, waiting in line, and catering to favored customers are all methods of

A) unbiased favoritism.
B) exploiting wealth.
C) income distribution.
D) nonprice rationing.

Question 46

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
Refer to Figure 4.3. Retailers will have an excess supply of pencils if the government will not allow retailers to charge less than ________ for a pencil.

A) $0.50
B) $0.45
C) $0.40
D) the equilibrium price

Question 47

Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
Refer to Figure 4.3. A nonprice rationing system such as queuing must be used to ration the available supply of pencils if the government will not allow retailers to charge more than ________ for a pencil.

A) $0.40
B) $0.45
C) $0.50
D) $0.55

Question 48

Queuing means

A) waiting in line.
B) price rationing.
C) favoring customers.
D) issuing ration coupons.

Question 49

The most common of all nonprice rationing systems is

A) ration coupons.
B) queuing.
C) favored customers.
D) price ceilings.

Question 50

Related to the Economics in Practice on page 81: Which of the following best explains why the people who wait for hours to acquire tickets to free performances earn less on average than the people who actually see those performances?

A) The value of time spent waiting in line is less for people who earn less money.
B) People who earn more money are less likely to be aware of the opportunity to acquire free tickets.
C) High-wage individuals are more likely to have schedule conflicts that prevent them from using their tickets.
D) People interested in live performances are likely to have access to other forms of entertainment, such as television and radio.

Question 51

Related to the Economics in Practice on page 77: If a hurricane results in the supply of hotel rooms decreasing and the demand for hotel rooms increases, the equilibrium price for hotel rooms ________ and the equilibrium quantity of hotel rooms ________.

A) will increase; will decrease
B) will increase; may increase, decrease, or stay the same
C) may increase, decrease, or stay the same; will decrease
D) may increase, decrease, or stay the same; may increase, decrease, or stay the same

Question 52

The government imposes a price ceiling on sugar that is above the market price. You are asked to suggest a rationing scheme that will minimize the misallocation of resources. You suggest

A) using rationing coupons that cannot be resold.
B) using rationing on a first-come, first-served basis.
C) using rationing coupons that can be resold.
D) that no rationing system will be necessary.

Question 53

If a price ceiling is set above the equilibrium price,

A) quantity demanded will equal quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) demand will be less than supply.

Question 54

People scalping tickets for a rock concert can sell their tickets for at least a normal profit

A) any time the rock group is popular.
B) when the price set by the concert hall is less than the market equilibrium price.
C) when prices are too high.
D) only when there is excess supply.

Question 55

The ________ automatically distributes scarce goods.

A) price system
B) barter system
C) laissez-faire economy
D) command economy

Question 56

If a price floor is set below the equilibrium price,

A) quantity demanded will be less than quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) the floor will be ineffective.

Question 57

The government imposes a maximum price on apartments that is above the equilibrium price. You accurately predict that

A) the law will have no economic impact.
B) the law will create a surplus of apartments.
C) renters will find that landlords start offering to furnish the apartments.
D) landlords are less likely to do routine maintenance work in the apartments.

Question 58

If a price ceiling is set below the equilibrium price,

A) quantity demanded will equal quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) demand will be less than supply.

Question 59

Related to the Economics in Practice on page 81: When acquiring a ticket for a play takes a significant amount of time, the true economic cost of that ticket would include all of the following factors except

A) the amount of time spent acquiring the ticket.
B) the utility provided by seeing the play.
C) the earning power of the person acquiring the ticket.
D) the purchase price of the ticket.

Question 60

Related to the Economics in Practice on page 77: If a hurricane results in the supply of hotel rooms decreasing and the equilibrium price for hotel rooms increases, the demand for hotel rooms ________ and total revenue from the sale of hotel rooms ________.

A) has decreased; will decrease
B) has decreased; may increase, decrease, or stay the same
C) may have increased, decreased, or stayed the same; will decrease
D) may have increased, decreased, or stayed the same; may increase, decrease, or stay the same

Question 61

A surplus will occur if a ________ is set ________ the equilibrium price.

A) price floor; below
B) price floor; above
C) price ceiling; above
D) price ceiling; below

Question 62

A shortage will occur if a ________ is set ________ the equilibrium price.

A) price floor; below
B) price floor; above
C) price ceiling; above
D) price ceiling; below

Question 63

A situation where illegal trading at market prices takes place is known in economics as a

A) smuggler's market.
B) pirate market.
C) black market.
D) command market.

Question 64

For a particular product, an effective price ceiling results in

A) quantity demanded greater than quantity supplied.
B) quantity supplied greater than quantity demanded.
C) quantity demanded equal to quantity supplied.
D) demand equal to supply.

Question 65

The government imposes a maximum price on apartments that is below the equilibrium price. You accurately predict that

A) the law will have no economic impact.
B) the law will create a surplus of apartments.
C) renters will find that landlords start offering to furnish the apartments.
D) landlords are less likely to do routine maintenance work in the apartments.

Question 66

An example of a ________ would be the government setting the price of coffee below the equilibrium price.

A) non-income tax
B) rational expenditure
C) black market
D) price ceiling

Question 67

In the short run, whenever excess demand exists, it is necessary to

A) ration the good.
B) put the good on sale.
C) increase the supply of the good.
D) impose a price ceiling on the good.

Question 68

If the market price of green tea is $20.00 per pound and the government will not allow green tea growers to charge more than $25.00 per pound of green tea, which of the following will happen?

A) Demand must eventually decrease so that the market will come into equilibrium at a price of $17.50.
B) There will be a shortage of green tea.
C) Supply must eventually increase so that the market will come into equilibrium at a price of $17.50.
D) The price ceiling will be ineffective and the market will remain in equilibrium.

Question 69

Quantity demanded will equal quantity supplied if a ________ is set ________ the equilibrium price.

A) price ceiling; above
B) price ceiling; below
C) price floor; above
D) price ceiling; at or below

Question 70

If the equilibrium price of gasoline is $3.00 per gallon and the government will not allow oil companies to charge more than $2.00 per gallon of gasoline, which of the following will happen?

A) The market will be in equilibrium at a price of $2.00.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $2.00.
C) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.00.
D) A nonprice rationing system such as ration coupons must be used to ration the available supply of gasoline.

Question 71

An effective price floor must be set

A) above the equilibrium price.
B) below the equilibrium price.
C) at the equilibrium price.
D) either at or below the equilibrium price.

Question 72

For a particular product, an effective price floor results in

A) quantity demanded greater than quantity supplied.
B) quantity supplied greater than quantity demanded.
C) quantity demanded equal to quantity supplied.
D) demand equal to supply.

Question 73

When supply is ________ or the product is ________, then price is demand determined.

A) fixed; unique
B) variable; standardized
C) fixed; standardized
D) variable; unique

Question 74

The rationing mechanism in market economies is the adjustment of

A) supply.
B) demand.
C) quantity.
D) price.

Question 75

An effective price ceiling must be set

A) above the equilibrium price.
B) below the equilibrium price.
C) at the equilibrium price.
D) either at or above the equilibrium price.

Question 76

A government-imposed maximum price will have no economic impact if

A) it is below the equilibrium price.
B) it is at or below the equilibrium price.
C) it is above the equilibrium price.
D) there is a fixed supply of the good.

Question 77

An example of an effective price ceiling would be the government setting the price of wheat at ________ per bushel when the market price is at $4.25 per bushel.

A) $3.75
B) $4.25
C) $7.75
D) $12.00

Question 78

The market will be in equilibrium if ________ is set ________ the equilibrium price.

A) a price floor; below
B) a price ceiling; below
C) actual price; above
D) actual price; below

Question 79

The benefit of a price ceiling to ________ is ________.

A) producers; the selling price of the product is above the equilibrium price
B) producers; the ceiling creates excess demand
C) consumers; the selling price of the product is below the equilibrium price
D) consumers; the ceiling creates excess supply

Question 80

If a price is demand determined, then

A) the supply curve must be horizontal.
B) the supply curve must be vertical.
C) the demand curve must be vertical.
D) the demand curve must be upward sloping.