Question 1

A price ceiling imposed by the government ________.

Accepted Answer

A price ceiling is a legal maximum price set by the government that a seller can charge for a good or service. If the price ceiling is below the market equilibrium price, it can create a situation of excess demand, where the quantity demanded exceeds the quantity supplied. This can lead to shortages, rationing, and black markets. Therefore, choice A is the best answer. 
B is incorrect because a price ceiling is not a tax but a restriction on prices.
C is incorrect because pricing a commodity above the market price is called price gouging, which is illegal in many jurisdictions.
D is incorrect because a price ceiling can exacerbate shortages or surpluses, rather than establish equilibrium.

Question 2

Refer to the scenario above.If you are told that the increase in emerald sales was due to an increase in the supply of 1-carat commercial grade emeralds,you can conclude that commercial grade emerald prices ________.

Accepted Answer

An increase in supply typically reduces prices, as more goods are available than the demand requires. Therefore, the increase in emerald sales due to an increase in the supply of commercial grade emeralds suggests that prices decreased.

Question 3

If the demand and supply curves for a commodity both shift to the left by the same amount,then in comparison to the initial equilibrium,the new equilibrium will be characterized by ________.

Accepted Answer

If both the demand and supply curves shift to the left by the same amount, then there will be a decrease in both quantity demanded and quantity supplied. However, the effect on price cannot be determined without knowing the relative magnitudes of the shifts. Thus, we can only determine that the equilibrium quantity will decrease, but we cannot determine the effect on price. Therefore, the correct choice is C, which states that the new equilibrium will have the same price but a lower quantity.

Question 4

The table below provides data on opium sales and farmgate prices of opium in Afghanistan from 1994 to 2008.
 
-Refer to the table above.From 2007 to 2008,opium sales fell by roughly 6.1 percent and opium prices fell by 18.6 percent.If you are told that the supply curve of opium remained constant from 2007 to 2008,what was the likely change in opium demand?

Accepted Answer

If opium sales and prices both decrease while the supply curve remains constant, it implies a shift in the demand curve to the left, indicating a decrease in demand for opium.

Question 5

Scenario: Suppose that the government imposes a price control on gasoline where the legal price is set at $1.50 per gallon while the equilibrium price would be $2.25. A shortage ensues. Worried that you may not have enough gas to commute to school and do errands, you get up before dawn to go to a gas station to fill up the tank. But you find yourself waiting in a long line. Fortunately, the station did not run out of gas before your turn came up, and you were happy to drive away with a full tank.
-Refer to the scenario above.For the last gallon of gas that the seller is willing to produce at $1.50,the consumers are willing to pay ________.

Accepted Answer

The answer of Scenario: Suppose that the government imposes a...

Question 6

What will happen to the equilibrium price and quantity of cars if there is an increase in the price of gasoline?

Accepted Answer

The answer of What will happen to the equilibrium price...

Question 7

Refer to the scenario above.You can conclude that commercial grade emerald prices ________.

Accepted Answer

The scenario does not provide specific information about the trend in commercial grade emerald prices, making it uncertain.

Question 8

If the current market price of wheat in the United States is $6 per bushel and the federal government sets the maximum price of wheat at $4 per bushel,what happens to the market price and quantity of wheat in the U.S.wheat market?

Accepted Answer

If the federal government sets a maximum price below the current market price, it creates a price ceiling that prevents suppliers from charging the market price. At the $4 per bushel maximum price, suppliers have less incentive to produce wheat, leading to a decrease in supply. At the same time, consumers have an increased incentive to purchase wheat at the lower price, creating excess demand. The result is a decrease in quantity traded and a lower market price for wheat.

Question 9

Scenario: Suppose the market for wheat in the United States is given by the demand and supply schedules in the table below (as well as the accompanying graph).

Suppose the U.S. government imposes a minimum price for wheat (price floor) of $6 per bushel.
-Refer to the scenario above.The quantity demanded of wheat at the minimum price is ________.

Accepted Answer

The quantity demanded of wheat at the minimum price is 6 million bushels because the supply and demand curves intersect at that point.

Question 10

Scenario: Suppose that the government imposes a price control on gasoline where the legal price is set at $1.50 per gallon while the equilibrium price would be $2.25. A shortage ensues. Worried that you may not have enough gas to commute to school and do errands, you get up before dawn to go to a gas station to fill up the tank. But you find yourself waiting in a long line. Fortunately, the station did not run out of gas before your turn came up, and you were happy to drive away with a full tank.
-Refer to the scenario above.The shortage results because ________.

Accepted Answer

A shortage occurs when the quantity demanded of a good exceeds the quantity supplied at the set price. In this case, the legal price of $1.50 is below the equilibrium price of $2.25, which means that the quantity demanded by consumers will be higher than the quantity supplied by sellers. As a result, a shortage occurs, and consumers have to wait in long lines to obtain the limited gasoline available. Thus, choice B is the best answer.

Question 11

The figure below shows the market demand and the market supply curve for gasoline. It would be useful to find the equations of the curves to answer the questions below.
 
-Refer to the figure above.Suppose that a government regulation mandates a higher quality of gasoline,which raises the marginal cost of each liter by 2.00 euros.Meanwhile,the popularity of hybrid and other energy-efficient vehicles lowers consumers' willingness to pay by 2.00 euros.Then the new equilibrium quantity is ________ and the new equilibrium price ________.

Accepted Answer

The increase in marginal cost due to higher quality gasoline and the decrease in consumers' willingness to pay by the same amount (2.00 euros) would shift both the supply curve upwards and the demand curve downwards, respectively. This would lead to a new equilibrium where the quantity might change, but the price would remain the same as the effects on supply and demand offset each other.

Question 12

Using graphs,explain how the equilibrium price and quantity of laptops will change when:
a)the demand curve for laptops shifts right and the supply curve for laptops shifts left.The shift in the demand curve is greater than the shift in the supply curve.
b)both the demand and supply curves for laptops shift right by the same amount.
c)the demand curve for laptops shifts right without any change in the supply curve.

Accepted Answer

The answer of Using graphs,explain how the equilibrium price and...

Question 13

The table below provides data on opium sales and farmgate prices of opium in Afghanistan from 1994 to 2008.
 
-Refer to the table above.From 2000 to 2001,opium sales fell by 95 percent and opium prices increased by 975 percent.If you are told that demand curve for opium in Afghanistan remained constant from 2000 to 2001,what was the likely change in opium supply?

Accepted Answer

If the demand curve for opium remained constant, the decrease in opium sales by 95% from 2000 to 2001 indicates a decrease in opium supply. Similarly, the increase in opium prices by 975% during this period also indicates a decrease in opium supply. Therefore, the likely change in opium supply is a decrease, which corresponds to choice D.

Question 14

Scenario: Suppose that the government imposes a price control on gasoline where the legal price is set at $1.50 per gallon while the equilibrium price would be $2.25. A shortage ensues. Worried that you may not have enough gas to commute to school and do errands, you get up before dawn to go to a gas station to fill up the tank. But you find yourself waiting in a long line. Fortunately, the station did not run out of gas before your turn came up, and you were happy to drive away with a full tank.
-Refer to the scenario above.Your total cost of getting gas ________.

Accepted Answer

Although the price ceiling set by the government may be lower than the equilibrium price, in this situation, the total cost of getting gas may be higher than the equilibrium price due to the opportunity cost of waiting in line and uncertainty about availability. Additionally, while illegal sellers may charge prices higher than the legal price ceiling, this is not mentioned in the scenario.

Question 15

Assume that the supply curve for a commodity shifts to the left and the demand curve shifts to the right,both by the same degree.Then,in comparison to the initial equilibrium,the new equilibrium will be characterized by ________.

Accepted Answer

When the supply curve shifts to the left, it means that suppliers are producing less of the commodity at every given price. At the same time, when the demand curve shifts to the right, it means that consumers are willing to buy more of the commodity at every given price. Therefore, when both these curves shift by the same degree, the equilibrium quantity will increase, but the change in price will depend on the relative magnitude of the shifts. If the demand curve shifts to a greater degree than the supply curve, the price will increase, and if the supply curve shifts to a greater degree than the demand curve, the price will decrease. In this case, since the degree of the shifts is the same, the price will remain the same if they shift by equal amounts. However, since the equilibrium quantity will increase, the new equilibrium will be characterized by a higher quantity and the same price, which is option D.

Question 16

Which of the following was an effect of the price ceiling placed on gasoline in the United States in the 1970s?

Accepted Answer

The price ceiling created a shortage of gasoline as the quantity demanded exceeded the quantity supplied at the lower price, leading to gas stations running out of gas. Options A, B, and D are incorrect as they don't reflect the actual outcomes of the price ceiling on gasoline.

Question 17

Assume that the supply curve for a commodity shifts to the right and the demand curve shifts to the left,and the shift in demand is greater than the shift in supply.Then in comparison to the initial equilibrium,the new equilibrium will be characterized by ________.

Accepted Answer

When the supply curve shifts to the right, it indicates an increase in supply, which would typically lead to a lower price. When the demand curve shifts to the left, it indicates a decrease in demand, which also leads to a lower price and lower quantity demanded. Since the shift in demand is greater than the shift in supply, the dominant effect will be a decrease in both price and quantity.

Question 18

Assume that the supply curve for a commodity shifts to the left and the demand curve shifts to the right,and the shift in demand is greater than the shift in supply.Then in comparison to the initial equilibrium,the new equilibrium will be characterized by a ________.

Accepted Answer

When both the supply curve shifts to the left (indicating a decrease in supply) and the demand curve shifts to the right (indicating an increase in demand), and the shift in demand is greater than the shift in supply, the result is typically a higher equilibrium price due to increased demand and decreased supply, and a higher quantity because the increase in demand more than offsets the decrease in supply.

Question 19

Scenario: Suppose the market for wheat in the United States is given by the demand and supply schedules in the table below (as well as the accompanying graph).

Suppose the U.S. government imposes a minimum price for wheat (price floor) of $6 per bushel.
-Refer to the scenario above.At the minimum price of $6 per bushel,there is a ________ of ________ million bushels.

Accepted Answer

At a minimum price of $6 per bushel, the quantity supplied exceeds the quantity demanded, resulting in a surplus of 6 million bushels.

Question 20

The figure below shows the market demand and the market supply curve for gasoline. It would be useful to find the equations of the curves to answer the questions below.
 
-Refer to the figure above.Which of the following events would,all else being equal,unambiguously increase the equilibrium quantity?

Accepted Answer

A decrease in prices of cars and increase in competition among oil-producing countries would shift the supply curve to the right, resulting in an increase in equilibrium quantity. Wider availability of public transportation would decrease demand for gasoline, shifting the demand curve to the left and decreasing equilibrium quantity. Political instability in oil-producing nations and an increase in prices of cars and decrease in wages of oil industry workers may affect both supply and demand, making the direction of the effect on equilibrium quantity unclear.

Quiz 4: Demand, Supply, and Equilibrium

A price ceiling imposed by the government ________.

Refer to the scenario above.If you are told that the increase in emerald sales was due to an increase in the supply of 1-carat commercial grade emeralds,you can conclude that commercial grade emerald prices ________.

If the demand and supply curves for a commodity both shift to the left by the same amount,then in comparison to the initial equilibrium,the new equilibrium will be characterized by ________.

What will happen to the equilibrium price and quantity of cars if there is an increase in the price of gasoline?

Refer to the scenario above.You can conclude that commercial grade emerald prices ________.

If the current market price of wheat in the United States is $6 per bushel and the federal government sets the maximum price of wheat at $4 per bushel,what happens to the market price and quantity of wheat in the U.S.wheat market?

Assume that the supply curve for a commodity shifts to the left and the demand curve shifts to the right,both by the same degree.Then,in comparison to the initial equilibrium,the new equilibrium will be characterized by ________.

Which of the following was an effect of the price ceiling placed on gasoline in the United States in the 1970s?

Assume that the supply curve for a commodity shifts to the right and the demand curve shifts to the left,and the shift in demand is greater than the shift in supply.Then in comparison to the initial equilibrium,the new equilibrium will be characterized by ________.

Assume that the supply curve for a commodity shifts to the left and the demand curve shifts to the right,and the shift in demand is greater than the shift in supply.Then in comparison to the initial equilibrium,the new equilibrium will be characterized by a ________.