Question 1

Consumers and firms are known as price takers only if

Accepted Answer

Price takers are those who cannot unilaterally affect the market price. In other words, they must accept the prevailing market price as given and adjust their behavior accordingly. Both consumers and firms are considered price takers in most markets, as they do not have enough market power to set or influence prices on their own. Therefore, options A, B, and D are incorrect.

Question 2

Quotas are most often supported by

Accepted Answer

Quotas are most often supported by domestic producers, as they restrict foreign competition and protect domestic industries from foreign imports.

Question 3

Repealing a tariff will likely

Accepted Answer

Repealing a tariff typically leads to a reduction in the quantity produced domestically because domestic producers become less competitive against cheaper foreign imports. It increases the quantity purchased domestically as consumers have access to more affordable goods. Additionally, it reduces the price charged domestically as the market adjusts to the increased competition from abroad, making goods cheaper for consumers.

Question 4

Use a supply-and-demand graph to predict what happens to sheet steel prices in the United States after quotas on Japanese and European sheet steel expire.

Accepted Answer

The answer of Use a supply-and-demand graph to predict what...

Question 5

It is appropriate to use the supply-and demand-model if,in a market,

Accepted Answer

All of the above factors indicate a competitive market, which is the typical setting in which the supply-and-demand model is used. If everyone is a price taker with full information, there are no market distortions that would prevent the forces of supply and demand from determining the market price. If firms sell identical products, they will all have the same cost of production, so the market price will also reflect the equilibrium between supply and demand. Lastly, if costs of trading are low, then it is easy for buyers and sellers to enter and exit the market, further ensuring that the market price reflects the true supply and demand conditions.

Question 6

Considering that the U.S.places a quota on imports of steel from South Korea,which of the following would NOT likely occur?

Accepted Answer

Quotas limit the quantity of a good that can be imported into a country, which can lead to higher prices due to reduced supply. This does not directly increase demand for steel in the United States; rather, it affects supply and prices. Demand is influenced by other factors such as the needs of consumers and businesses, not by the imposition of quotas.

Question 7

Consumer groups tend to lobby for

Accepted Answer

Consumer groups tend to lobby for price ceilings that limit the maximum price that sellers can charge for goods or services. This is done to ensure affordability for consumers and prevent exploitation or price gouging by sellers.

Question 8

Agricultural price supports are

Accepted Answer

Agricultural price supports are floors set by the government to ensure that the price of certain agricultural products does not fall below a certain level. This is done to support farmers and stabilize the market for these products.

Question 9

A price restriction that tells suppliers the minimum price they can sell their goods for is also known as

Accepted Answer

The answer of A price restriction that tells suppliers the...

Question 10

Suppose the market for a good is expressed as follows:
Inverse demand: P = 200 - 2Q
Inverse supply: P = 2Q
What is the equilibrium if the government imposes a supply quota of 75 units?
What is the equilibrium if the government imposes a supply quota of 25 units?

Accepted Answer

The answer of Suppose the market for a good is...

Question 11

-The above figure shows a graph of the market for pizzas in a large town.Suppose that concern over dietary habits has led the government to impose a restriction that limits suppliers to produce only 40 pizzas.As a result,for prices greater than $7,the

Accepted Answer

When the government imposes a restriction limiting suppliers to produce only 40 pizzas, the supply becomes perfectly inelastic at that quantity, meaning suppliers will only produce 40 pizzas regardless of the price. This is represented graphically by a vertical supply curve at the quantity of 40 pizzas.

Question 12

Suppose the market for potatoes can be expressed as follows: Supply: Q^S = -20 + 10p Demand: Q^D = 400 - 20p If the government sets a maximum price of $10 per unit,what will be the quantity demanded and quantity supplied?

Accepted Answer

The answer of Suppose the market for potatoes can be...

Question 13

Producer groups tend to lobby for

Accepted Answer

Producer groups tend to lobby for price floors to ensure that the price of their product remains above a certain level, thereby increasing their revenue and profits. Price ceilings, quantity quotas, and taxes, on the other hand, would limit their ability to sell or increase their costs, making them less likely to seek these policies.

Question 14

The fact that many people drive faster than the posted speed limit suggests that

Accepted Answer

This behavior suggests that not all regulations, including speed limits, are fully enforceable. It implies that there may be a gap between what is legally mandated and what people actually do in practice.

Question 15

Assume that the market for annual physical checkups is in equilibrium,and not everyone gets an annual physical checkup.What is the effect on price and quantity if a government regulation fixes price at the current level and requires everyone to get an annual physical checkup?

Accepted Answer

The answer of Assume that the market for annual physical...

Question 16

Suppose that government decides to create a license for widget makers.Only licensed widget makers are allowed to produce widgets.Moreover,only half of the current widget producers are eligible to obtain the license.What will happen with the supply curve of widgets?

Accepted Answer

By limiting the number of eligible suppliers, the supply of widgets will decrease as half of the current widget producers are no longer allowed to produce widgets. Therefore, the supply curve of widgets will shift to the left.

Question 17

Import quotas on steel tend to result in higher quantities of steel being sold at lower prices than would be observed in the absence of a quota.

Accepted Answer

The opposite is true.Quotas restrict the supply curve.This reduces quantity and raises price.

Question 18

Usury laws place a ceiling on interest rates that lenders such as banks can charge borrowers.The interest rate is the price of a loan.Graph a binding usury law on the market for loans,and describe the effects of the law on the quantity of loans supplied and the quantity of loans demanded.

Accepted Answer

The answer of Usury laws place a ceiling on interest...

Question 19

-The above figure shows a graph of the market for pizzas in a large town.As a result of concern over the affordability of pizza,the government restricts sellers from charging a price over $7.As a result,the quantity of pizzas consumed will

Accepted Answer

When the government sets a maximum price (price ceiling) below the equilibrium price, it typically leads to a decrease in the quantity supplied as sellers are not willing to supply as much at the lower price, leading to a shortage and thus a decrease in the quantity consumed.

Question 20

Suppose the market for potatoes can be expressed as follows: Supply: Q^S = -20 + 10p Demand: Q^D = 400 - 20p Suppose the government restricts the quantity to 100 units.What will be the price of potatoes?

Accepted Answer