Question 1

Economic analysis indicates minimum wage legislation has
A) made it possible for any teenager who wants to work to earn almost 80 percent as much as an adult.
B) made it easier for teenagers to find jobs that offer the opportunity for training.
C) been an important source of increases in income since most workers earn at or near the minimum wage.
D) reduced the on-the-job training opportunities available to teenagers.

Accepted Answer

Economic analysis suggests that minimum wage legislation has reduced the availability of on-the-job training opportunities, particularly for teenagers. This is because employers are less likely to invest in training if they must pay higher wages, which may lead to a reduction in the number of entry-level jobs available for young people. While the minimum wage may provide some benefits, such as increasing wages for low-skilled workers and reducing poverty, it also has potential negative effects on the labor market, such as increasing unemployment and reducing the availability of training opportunities. Choices A, B, and C are incorrect because they do not reflect the economic analysis of minimum wage legislation.

Question 2

Which of the following is true?
A) Most minimum wage workers are employed more than 40 hours per week.
B) Economic analysis indicates an increase in the minimum wage would increase the training opportunities available to inexperienced workers.
C) Most minimum wage workers are heads of families with incomes below the poverty level.
D) Most minimum wage workers are employed part-time, and they are often members of a household with an income well above the poverty level.

Accepted Answer

According to studies and data, the majority of minimum wage workers are employed part-time and often belong to households with income levels above the poverty line. This is supported by data from the Bureau of Labor Statistics which shows that around 60% of minimum wage workers are employed part-time. Additionally, a study from the University of California, Berkeley found that only a quarter of minimum wage workers were the sole earners in their household, and that the majority were in households with average incomes of around $56,000 per year. Therefore, option D is the only true statement among the given choices.

Question 3

A politician was recently quoted as saying, "Our country can only reach full employment by raising the minimum wage, which would cause the demand for products to increase . . . and eventually cause production to expand." His analysis overlooks the fact that
A) minimum wage legislation increases costs of production (and thus product prices) and creates an excess supply (unemployment) of unskilled labor.
B) automation is the prime cause of unemployment.
C) full employment can only be reached by increasing the minimum wage substantially.
D) minimum wage legislation may increase the employment of low-skilled workers, but this will be offset by an equal reduction in the employment of skilled workers.

Accepted Answer

The politician's statement overlooks the fact that minimum wage legislation actually increases the costs of production for businesses, leading to an increase in product prices. This can cause a decrease in demand for goods and services, potentially resulting in excess supply and unemployment, particularly among unskilled workers. While raising the minimum wage may increase the demand for products and ultimately lead to production expansion, it is not a guaranteed solution for achieving full employment.

Question 4

If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market?
A) an increase in quantity of unskilled labor demanded
B) a decrease in the quantity of unskilled labor supplied
C) a shortage of unskilled labor
D) a surplus of unskilled labor (unemployment)

Accepted Answer

If the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, firms will demand less unskilled labor, while more workers will be willing to supply their labor at the higher wage rate. This will result in a surplus of unskilled labor, or unemployment.

Question 5

Both price floors and price ceilings lead to
A) shortages.
B) surpluses.
C) reductions in quality.
D) a reduction in the quantity traded.

Accepted Answer

The answer of Both price floors and price ceilings lead...

Question 6

Which of the following is true?
A) An increase in the minimum wage will reduce the training opportunities available to inexperienced workers.
B) The minimum wage is an example of a price floor.
C) Most minimum wage workers are employed part-time, and they are generally either a spouse or a teenage member of a household with an income well above the poverty level.
D) All of the above are true.

Accepted Answer

An increase in the minimum wage can lead to reduced training opportunities as employers may cut costs. The minimum wage is a price floor, and many minimum wage workers are part-time and not the primary earners in their households.

Question 7

Which of the following statements is true?
A) The quality of products sold in black markets tends to be less reliable than the quality of products in legal markets.
B) For otherwise identical products, the price of products in black markets tends to be higher than in legal markets.
C) The rate of violence is higher in black markets than in legal markets.
D) All of the above are true.

Accepted Answer

The answer of Which of the following statements is true?
A)...

Question 8

When a price floor is imposed above the equilibrium price of a commodity,
A) quantity demanded will be greater than quantity supplied for the good.
B) the quantity demanded by consumers will be greater than at the equilibrium price.
C) a shortage of the good will develop.
D) a surplus of the good will develop.

Accepted Answer

The answer of When a price floor is imposed above...

Question 9

The large amount of violence associated with the current drug trade is mostly caused by
A) the fact that drug markets must operate outside the normal legal system.
B) buyers and sellers often being under the influence of drugs at the time of the transaction.
C) buyers and sellers who are often unfamiliar with conducting normal transactions within the legal system.
D) the lack of quantity supplied and quantity demand being in balance in black markets because there is no equilibrium price in these markets.

Accepted Answer

The fact that drug markets must operate outside the normal legal system means that disputes cannot be resolved through legal means, leading to violent conflict between rival drug cartels and gangs. The lack of legal protection for drug dealers also means that they must resort to violence to protect their territories and profits. Additionally, the high profits associated with the drug trade make it an attractive target for criminal organizations, who are willing to use violence to control the market.

Question 10

A market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices is referred to in economics as a
A) gray market.
B) resource market.
C) black market.
D) criminal market.

Accepted Answer

A black market operates outside the legal system and involves the sale of illegal goods or the sale of legal goods at illegal prices. The term "gray market" refers to the sale of legal goods through channels that are unauthorized by the manufacturer or trademark owner. The term "resource market" refers to the market for factors of production such as labor or capital. The term "criminal market" is not commonly used in economics.

Question 11

Suppose the market equilibrium price of wheat is $5 per bushel, and the government sets a price floor of $7 per bushel to aid growers. What is the most likely result of this action?
A) There will be a shortage of wheat.
B) There will be a surplus of wheat.
C) There will be an increase in the quantity of wheat demanded as the result of the price floor.
D) There will be a decrease in the quantity of wheat supplied as the result of the price floor.

Accepted Answer

The government's price floor of $7 per bushel is above the market equilibrium price of $5 per bushel. As a result, the price floor will prevent the price of wheat from falling to its market equilibrium level, leading to a surplus of unsold wheat. This surplus could lead to storage costs, waste, or the need for the government to purchase the excess supply. Therefore, choice B is the correct answer.

Question 12

If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?
A) The quantity of milk demanded will increase.
B) The quantity of milk supplied will decrease.
C) There will be a surplus of milk.
D) There will be a shortage of milk.

Accepted Answer

A price floor above market equilibrium creates a situation where the quantity of milk supplied will exceed the quantity demanded, resulting in a surplus of milk. This is because producers will be willing to supply more milk at the higher price, but consumers will be less willing to buy the same quantity of milk at the higher price.

Question 13

Which of the following statements is true?
A) In both black markets and legal markets, supply and demand determine price.
B) The quality of products sold in black markets and legal markets are similar.
C) The price of products in black markets tends to be the same as those in legal markets for otherwise identical products.
D) The rate of violence is similar in black markets and legal markets.

Accepted Answer

In both black markets and legal markets, supply and demand determine price. This is a basic principle of economics that applies to all markets, regardless of their legality. The other three statements are false. Products sold in black markets are often of lower quality, the price of products in black markets is typically higher than in legal markets, and violence is more common in black markets due to the lack of regulation and legal protections.

Question 14

A price floor set above an equilibrium price tends to cause persistent imbalances in the market because
A) Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage.
B) Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus.
C) Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage.
D) Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Accepted Answer

The answer of A price floor set above an equilibrium...

Question 15

In a market economy, which of the following would most likely cause a prolonged grain surplus?
A) a decrease in the demand for grain
B) an increase in the supply of grain
C) imposition of a price floor above the equilibrium price of grain
D) imposition of a price ceiling below the equilibrium price of grain

Accepted Answer

The answer of In a market economy, which of the...

Question 16

Exempting teenagers from the minimum wage would probably cause
A) the unemployment rate of teenagers to increase.
B) an increase in the demand for unionized labor, which is a good substitute for labor services provided by teenagers.
C) an increase in the number of jobs offering on-the-job training to teenagers.
D) all of the above.

Accepted Answer

Exempting teenagers from the minimum wage would likely lead to an increase in the number of jobs offering on-the-job training to teenagers, as employers could hire them at lower wages and invest in their training.

Question 17

Which of the following will most likely occur when government price controls fix the price of a good above market equilibrium?
A) Waiting lines to buy the good will develop.
B) The quality of the good will deteriorate.
C) Consumers will buy more than they would at the market equilibrium price.
D) A surplus of the good will develop.

Accepted Answer

When the government sets the price of a good above the market equilibrium, a surplus of the good will develop because suppliers are willing to supply more of the good than consumers are willing to buy at the higher price. This surplus may lead to waste as suppliers may have to dispose of excess inventory or cut costs, but it will not result in waiting lines or a deterioration in quality as consumers will not be willing to buy as much of the good at the higher price.

Question 18

If drugs such as marijuana and cocaine were legalized, it would be likely that
A) their prices would decrease.
B) there would be a reduction in tainted or poor quality drugs.
C) there would be less violence occurring in drug transactions.
D) all of the above.

Accepted Answer

Legalization would likely lead to a decrease in price, as production and distribution costs would be lower. It would also allow for regulation and quality control, reducing the risk of tainted or poor quality drugs. Additionally, much of the violence associated with drugs comes from the illegal market, so legalization could lead to a reduction in violent drug transactions.

Question 19

A legally mandated minimum wage is an example of
A) the invisible hand principle.
B) a price floor.
C) a price ceiling.
D) a fringe benefit.

Accepted Answer

A legally mandated minimum wage sets a minimum price that employers are required to pay their employees. This creates a price floor in the labor market, as the wage cannot legally be set below the mandated minimum.

Question 20

Which one of the following will most likely be harmed by legislation exempting teenagers from the minimum wage?
A) a high school student seeking a part-time job
B) a high-skilled, 30-year-old worker who is unlikely to compete with low-skilled teenagers in the employment market
C) a large family that often employs the services of low-skilled, part-time workers
D) an illiterate 40-year-old worker with few labor skills

Accepted Answer

The answer of Which one of the following will most...

Quiz 4: Supply and Demand: Applications and Extensions

Economic analysis indicates minimum wage legislation has

Which of the following is true?

A politician was recently quoted as saying, "Our country can only reach full employment by raising the minimum wage, which would cause the demand for products to increase . . . and eventually cause production to expand." His analysis overlooks the fact that

If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market?

Both price floors and price ceilings lead to

Which of the following is true?

Which of the following statements is true?

When a price floor is imposed above the equilibrium price of a commodity,

The large amount of violence associated with the current drug trade is mostly caused by

A market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices is referred to in economics as a

Suppose the market equilibrium price of wheat is $5 per bushel, and the government sets a price floor of $7 per bushel to aid growers. What is the most likely result of this action?

If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?

Which of the following statements is true?

A price floor set above an equilibrium price tends to cause persistent imbalances in the market because

In a market economy, which of the following would most likely cause a prolonged grain surplus?

Exempting teenagers from the minimum wage would probably cause

Which of the following will most likely occur when government price controls fix the price of a good above market equilibrium?

If drugs such as marijuana and cocaine were legalized, it would be likely that

A legally mandated minimum wage is an example of

Which one of the following will most likely be harmed by legislation exempting teenagers from the minimum wage?