Question 1

The more elastic the supply of a product, the more likely it is that the

Accepted Answer

B

Question 2

Which of the following is a major disadvantage of setting the price of a good below equilibrium and using waiting in line rather than price to ration the good?

Accepted Answer

C

Question 3

A new law requiring plumbers to pass strict certification tests that reduce the number of plumbers would

Accepted Answer

By reducing the number of plumbers, there will be an increase in demand for plumbers who are certified. This will lead to an increase in their wage rate since their skills will be in high demand. The decrease in the number of plumbers also means less competition, which can result in higher wages.

Question 4

An increase in the number of students graduating with a major in engineering would result in

Accepted Answer

An increase in the number of students graduating with a major in engineering would result in an increase in the supply of engineers. As the supply of engineers increases, the competition for jobs in the market also increases. This would lead to a decrease in the wage of engineers and an increase in the number of engineers that are employed. Therefore, choice B is the correct answer.

Question 5

If the demand for a good is highly inelastic, a tax on the good

Accepted Answer

If the demand for a good is highly inelastic, it means that consumers are not very responsive to changes in price. Therefore, if a tax is imposed on the good, sellers will be able to pass on most of the cost increase to consumers without a significant decrease in demand. This means that the burden of the tax will mostly fall on the consumers of the product, not the sellers.

Question 6

Which of the following would tend to increase the wage of coal miners?

Accepted Answer

The answer of Which of the following would tend to...

Question 7

When a price floor is above the equilibrium price,

Accepted Answer

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

Question 8

If there was an increase in the excise tax imposed on beer suppliers, what would be the effect on the equilibrium price and quantity of beer?

Accepted Answer

An increase in the excise tax imposed on beer suppliers means that the cost of production for beer suppliers will increase. As a result, the supply of beer will decrease and the supply curve will shift to the left. This will cause a decrease in the equilibrium quantity of beer. The increase in cost will also cause an increase in the price of beer, resulting in a higher equilibrium price for the product. Therefore, the correct answer is A, price increases, and quantity decreases.

Question 9

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?

Accepted Answer

The answer of A substantial revision of the income tax...

Question 10

Which of the following would tend to increase the price of lumber?

Accepted Answer

An increase in the demand for newly constructed homes would require more lumber as it is a key component in home construction. This increased demand with a constant supply would lead to a higher price for lumber.

Question 11

An increase in the number of students attending college would tend to

Accepted Answer

An increase in the number of students attending college would lead to an increase in the demand for college professors. As the number of students increases, more professors are needed to teach them, resulting in a higher demand for professors in the job market.

Question 12

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that the below-equilibrium prices established by rent controls would

Accepted Answer

Rent control creates a disincentive for landlords to maintain and improve properties since they cannot charge a higher rent to cover the costs. This leads to poor maintenance, reduced supply, and lower-quality rental units. It does not create a surplus of rental housing, promote a rapid increase in the future supply of housing, or lead to a reduction in housing discrimination against minorities.

Question 13

The Laffer curve illustrates the concept that

Accepted Answer

The Laffer curve shows that when marginal tax rates are quite high, a decrease in the tax rate may cause tax revenues to increase. However, this relationship only holds up to a certain point. Once the tax rate reaches a certain level, further reductions actually lead to a decrease in tax revenue. Therefore, there is an optimal tax rate which maximizes revenue.

Question 14

When a supply and demand model is used to analyze the market for labor,

Accepted Answer

In the labor market, the wage rate (market price) is used on the vertical axis and employment (market quantity) is used on the horizontal axis. This is different from most other supply and demand models, where quantity is generally on the vertical axis. In the labor market, the demand curve for labor is typically downward sloping, indicating that as wages increase, employers will demand less labor.

Question 15

How would an increase in the price of paper influence the market for college textbooks?

Accepted Answer

A price increase in paper would affect the cost of producing textbooks. This, in turn, would decrease the supply of textbooks, leading to a shift in the supply curve to the left. With a decrease in supply and given constant or increasing demand for textbooks, the price of textbooks would rise.

Question 16

When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because

Accepted Answer

When a government subsidy is granted to the sellers of a product, the cost of production decreases for them, which leads to an increase in supply. However, since the demand for the product remains constant, the market price of the product will fall to maintain equilibrium. Due to the lower price, buyers can capture some of the benefit of the subsidy as they can purchase the product at a lower price.

Question 17

Other things constant, a decrease in the demand for computers will

Accepted Answer

The answer of Other things constant, a decrease in the...

Question 18

Which of the following is the most likely result of an increase in the minimum wage?

Accepted Answer

An increase in the minimum wage would increase labor costs for employers, which may lead them to hire fewer workers or reduce the hours of current employees. Therefore, the most likely result of an increase in the minimum wage is a decrease in the employment of unskilled workers.

Question 19

Other things constant, as the price of a resource increases,

Accepted Answer

As the price of a resource increases, the cost of producing goods or providing services that use the resource also increases, making consumers less willing to purchase as much of the resource. This leads to a decrease in the quantity of the resource demanded.

Question 20

Other things constant, an increase in the demand for motorcycles will

Accepted Answer

An increase in the demand for motorcycles will lead to an increase in the quantity of motorcycles bought and sold, which will, in turn, increase the demand for motorcycle workers. This increase in demand for workers will increase their wages to incentivize employment in the industry. Therefore, the correct answer is D.

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