In this market, economists would call a government-set minimum price of $50 a

111.138. In the above market, economists would call a government-setminimum price of $50 a:A. price ceiling.B. price floor.C. equilibrium price.D. fair price.ANSWER:bbB. price floor.112.An effective price floor on wheat will:ANSWER:euresult in a surplus of wheat.3-104

Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix)113.Suppose that tacos and pizza are substitutes, and that soda and pizza arecomplements. We would expect an increase in the price of pizza to:ANSWER:dyreduce the demand for soda and increase the demand for tacos.114.If Z is an inferior good, an increase in money income will shift the:ANSWER:bxdemand curve for Z to the left.115.What is a market?ANSWER:eyan institution that brings together buyers and sellers.116.An increase in the quantity demanded means that:ANSWER:ezprice has declined and consumers therefore want to purchase more ofthe product.117.Allocative efficiency is concerned with:ANSWER:eiproducing the combination of goods most desired by society.118.Camille's Creations and Julia's Jewels both sell beads in a competitivemarket. If at the market price of $5, both are running out of beads to sell (theycan't keep up with the quantity demanded at that price), then we would expectboth Camille's and Julia's to:ANSWER:braise their price and increase their quantity supplied.119.140. If government set a minimum price of $50 in the above market, a:A. shortage of 21 units would occur.B. shortage of 125 units would occur.C. surplus of 21 units would occur.D. surplus of 125 units would occur.ANSWER:sC. surplus of 21 units would occur.120.The rationing function of prices refers to the:ANSWER:facapacity of a competitive market to equate the quantity demanded andthe quantity supplied.121.A demand curve indicates what?ANSWER:cdindicates the quantity demanded at each price in a series of prices.3-105

Chapter 03 - Demand, Supply, and Market Equilibrium (+ Appendix)122.Tennis rackets and ballpoint pens are:ANSWER:findependent goods.123.If an economy produces its most wanted goods but uses outdatedproduction methods, it is:ANSWER:danot achieving productive efficiency.124.(Consider This) Ticket scalping refers to:ANSWER:ekreselling a ticket at a price above its original purchase price.125.Suppose that corn prices rise significantly. If farmers expect the price ofcorn to continue rising relative to other crops, then we would expect:A. the supply of ethanol, a corn-based product, to increase.B. consumer demand for wheat to fall.C. the supply to increase as farmers plant more corn.D. the supply to fall as farmers plant more of other crops.ANSWER:abC. the supply to increase as farmers plant more corn.

In the above market, economists would call a government-set minimum price of $50 a:price floor.In the above market, economists would call a government-set minimum price of $40 a:price ceiling.If government set a minimum price of $50 in the above market, a: surplus of 21 units would occur.If government set a maximum price of $45 in the above market:neither a shortage nor a surplus would arise.Refer to the above diagram. A government-set price floor is best illustrated by: price C.Refer to the above diagram. A government-set price ceiling is best illustrated by:price ARefer to the above diagram. Rent controls are best illustrated by:price ARefer to the above diagram. A government price support program to aid farmers is best illustrated by:price C

Refer to the above diagram. A government-set maximum permissible interest rate is best illustrated by:price APrice floors and ceiling prices:interfere with the rationing function of prices.A price floor means that:inflation is severe in this particular market.An effective ceiling price will:result in a product shortage.An effective price floor will:result in a product surplus.Other things equal, the shortage associated with a price ceiling will be greater the:greater the elasticity of bothdemand and supply.Black markets are associated with:ceiling prices and the resulting product shortages.Price ceilings and price floors:interfere with the rationing function of prices. A price ceiling means that: government is imposing a legal price that is below the equilibrium price.If an effective ceiling price is placed on hamburgers then:the quantity demanded will exceed the quantitysupplied.Or a black market for hamburger may evolve.Or that consumers may want government to rationhamburger.If a legal ceiling price is set above the equilibrium price:neither the equilibrium price nor equilibrium quantity willbe affectedAn effective price floor on wheat will:result in a surplus of wheat.Consider This Questions(Consider This) Alfred Marshall's scissors analogy emphasizes that:supply and demand are equally important indetermining equilibrium price and quantity.Consider This) The idea that equilibrium price and quantity are jointly determined by supply and demandis best illustrated through an analogy of:a scissors.Last Word Questions(Last Word) Ticket scalping refers to:reselling a ticket at a price above its original purchase price.(Last Word) Ticket scalping: creates economic gains for both buyers and sellers.(Last Word) Ticket scalping implies that:event sponsors have established ticket prices at below-equilibrium levels.(Last Word) Ticket scalping is likely to:produce a more interested audience.

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