Question 1

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 2

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 floor, or minimum, on the wage that employers can pay their workers. This is an example of a price floor, which is a government intervention that sets a minimum price for a good or service. The purpose of a minimum wage is to ensure that workers earn a fair wage and that they are not exploited by employers who may try to take advantage of their position. However, setting a minimum wage can also have unintended consequences, such as higher unemployment or reduced hours for workers, especially in industries with low profit margins.

Question 3

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

Legalizing marijuana and cocaine would likely lead to a decrease in prices as they could be produced and distributed more openly, without the risks associated with illegal activities. Additionally, legalization would provide more regulation and testing of the drugs, reducing the likelihood of tainted or poor quality drugs being sold. Finally, the elimination of illegal drug transactions would likely lead to less violence associated with drug deals.

Question 4

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

When a price floor is imposed above the equilibrium price, it means suppliers are forced to sell their goods at a higher price than what the consumers are willing to pay. As a result, suppliers will produce more of the good than consumers are willing to buy, creating a surplus. This results in excess supply and leftover goods.

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

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

A price floor above the equilibrium price creates a surplus because it forces the price to remain above the market equilibrium price. In this case, because the government has set a price floor of $7 per bushel, growers will be unwilling to sell at the lower price of $5 per bushel, even if buyers are willing to pay that much. As a result, there will be a surplus of wheat.

Question 7

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...

Question 8

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 research, most minimum wage workers are employed part-time, and they often live in households with incomes above the poverty level. Some minimum wage workers may be teenagers or college students who are not the primary earners in their households. Increasing the minimum wage may not necessarily lift these workers out of poverty, as their households may already have sufficient income, but it could increase costs for small businesses and potentially lead to job loss for low-skilled workers.

Question 9

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 government price controls fix the price of a good above market equilibrium, a surplus of the good will develop. At this higher price, producers will want to sell more of the good than consumers are willing to buy, creating excess supply or a surplus. This surplus may lead to waste or other unintended consequences, such as the need for government subsidies or intervention to deal with the excess supply.

Question 10

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

When a price floor is set above an equilibrium price, it sets a minimum price that suppliers can charge for their goods or services. This creates a surplus of goods or services because the quantity supplied exceeds the quantity demanded at the higher price. The surplus cannot be eliminated because the price cannot fall below the price floor. As a result, there is persistent imbalance in the market.

Question 11

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, it means that the wage rate is higher than the equilibrium wage rate. At the higher wage rate, employers demand less unskilled labor, while a greater number of workers are willing to supply their labor. This results in an excess supply or surplus of unskilled labor, which manifests as unemployment or underemployment among unskilled or low-skilled workers. Therefore, option D - a surplus of unskilled labor (unemployment) - is the most likely outcome in the unskilled labor market.

Question 12

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)The...

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 fundamental economic concept that applies to all markets. The absence of legal oversight in black markets can lead to price fluctuations and volatility, but ultimately the same basic economic principles apply. The other options are incorrect. B is incorrect because quality standards can be lower in black markets due to lack of regulation. C is incorrect because black market prices can be higher or lower than legal market prices depending on various factors such as supply and demand, risk, and scarcity. D is incorrect because violence is typically more prevalent in black markets due to the absence of legal protections and recourse.

Question 14

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 is a market where goods or services are traded illegally, typically without paying taxes or complying with regulations. This can include the sale of illegal goods, such as drugs or stolen items, or the sale of legal goods at illegally high prices. A gray market refers to the sale of legal goods through unauthorized channels, but it is not necessarily illegal. The resource market refers to the market for factors of production, such as labor and capital. The term "criminal market" is not commonly used in economics.

Question 15

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

The answer of Exempting teenagers from the minimum wage would...

Question 16

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

Minimum wage legislation increases the cost of production and thus product prices, which can, in turn, decrease demand and production, leading to excess supply (unemployment) of unskilled labor. The statement that "our country can only reach full employment by raising the minimum wage" oversimplifies the complex relationship between wages, employment, and production, and ignores the potential negative consequences of minimum wage legislation on businesses and the labor market. While raising the minimum wage may benefit some low-skilled workers, it may also harm other workers by reducing their employment opportunities. Additionally, other factors such as automation, technological change, and trade can have a significant impact on employment levels, and cannot be ignored in any discussion of employment policy.

Question 17

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

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

Question 18

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

The answer of If a government-imposed price floor legally sets...

Question 19

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 is the main reason that violence is associated with the current drug trade. Competition and disputes between rival drug dealers cannot be resolved through the legal system, and as a result, violence becomes the default mechanism for resolving conflicts.

Question 20

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 has shown that minimum wage legislation reduces the incentive for employers to invest in the training of entry-level workers, such as teenagers. Therefore, minimum wage legislation has decreased the on-the-job training opportunities available to teenagers. Choices A, B, and C are not accurate based on economic analysis.

Quiz 4: A: Supply and Demand: Applications and Extensions

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

A legally mandated minimum wage is an example of

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

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

Both price floors and price ceilings lead to

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?

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

Which of the following is true?

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

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

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?

Which of the following statements is true?

Which of the following statements is true?

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

Exempting teenagers from the minimum wage would probably cause

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

Which of the following is true?

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

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

Economic analysis indicates minimum wage legislation has