ECO 405 Week 3 Quiz - Strayer
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ECO 405 Week 3 Quiz – Strayer
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Chapter 02
Economic Systems, Resource Allocation, And Social Well-Being: Lessons From
China's Transition
Multiple Choice Questions
1. Which Of The Following Descriptions Fits The American Economy Best?
A. A Pure Market Economy
B. A Mixed Economy
C. Purely Competitive Economy
D. A Command Economy
E. A Monopoly Economy
2. In A Market Economy,
A. Resources Are Allocated By The Private Parties Who Own The Resources
B. Resources Are Allocated By The Various Local, State, And Federal Planning
Committees And Zoning Commissions
C. Shortages Never Exist
D. Surpluses Never Exist
E. Both C) And D)
3. In 1978, The Chinese Economy
A. Opened Ties To The Noncommunist World
B. Became A Strictly Centralized Economy Under Joseph Stalin
C. Became Communist Under Mao Zedong
D. Moved To The Island Of Taiwan
E. Became A Purely Market-Oriented Economy
4. In Both The U.S. And Canada, Most, But Not All, Of Economic Resources Are
Owned And Controlled By Private Parties Who Make Decisions As To How To Use
Those Resources With Somewhat Limited Interference From Government. As Such,
These Economies Are Examples Of
A. The Pure Command Economy
B. Mixed Economies, Though Closer To The Market End Of The Spectrum
C. Mixed Economies, Though Closer To The Command End Of The Spectrum
D. The Pure Market Economy
E. The Communist Economy
5. In The Market Economy, Markets Serve The Function Of
A. Coordinating Resource Use Decisions Made By Individual Owners Of Resources
B. Bringing About Resource Allocation Changes Desired By Resource Owners
C. Determining Prices
D. All Of The Above
E. Both (A) And (B)
6. Which Of The Following Is Least Consistent With The Pure Market Economy?
A. An Established Legal System That Arbitrates Contract Disputes
B. An Individual Accepting A Job For $1 Per Hour
C. The Institution Of Private Property Rights
D. The Existence Of A Minimum Wage
E. Private Property Rights
7. Which Of The Following Is Not A Characteristic Of A Purely Competitive Market?
A. Enough Sellers And Buyers So That No One Of Them Acting Alone Can Influence
The Price Of This Product
B. The Ability Of A Single Seller To Block Potential Competitors Out Of The Market
C. Freedom Of The Price To Move Up Or Down, That Is, No Price Fixing
D. Mobility Of Buyers And Sellers
E. A Standardized Product
8. A Market With Only One Seller Of A Product That Has No Good Substitutes Is
Called
A. A Pure Monopoly
B. A Pure Command Economy
C. Purely Competitive
D. Imperfectly Competitive
E. An Oligopoly
9. Which Of The Following Is Of Monopoly Firms? They
A. Can Manipulate The Price Of Their Product
B. Beat Their Competitors' Prices
C. Must Constantly Deal With The Entry Of New Firms
D. Never Receive Government Help Blocking Entry Into The Market
E. Do All Of The Above
10. Markets That Fall Between Pure Competition And Monopoly Are Called:
A. Anti-Competitive
B. Imperfectly Competitive
C. Command Markets
D. Tweener Markets
E. Monopsonistic
11. If A Consumer Always Eats Cheese With Macaroni, Then For That Consumer
Macaroni And Cheese Are Examples Of:
A. Substitutes
B. Complements
C. Normal Goods
D. Inferior Goods
E. Standardized Products
12. If An Increase In The Price Of Cookies Leads To A Decrease In The Demand For
Ice Cream, Then Ice Cream And Cookies Must Be
A. Substitutes
B. Complements
C. Normal Goods
D. Inferior Goods
E. Standardized Products
13. If An Increase In The Price Of Bicycles Leads To An Increase In The Demand For
Bus Transportation, The Bicycles And Bus Rides Must Be
A. Substitutes
B. Complements
C. Normal Goods
D. Inferior Goods
E. Standardized Products
14. A Student Graduates From College And Gets A High-Paying Job. As A Result Of
The Increase In Income, The Student Buys More Frozen Pizzas. For The Student,
Frozen Pizzas Must Be A(N)
A. Substitute
B. Complement
C. Normal Good
D. Inferior Good
E. Standardized Product
15. You Receive A Big Raise At Work. As A Result Of Your Now Higher Income, You
Stop Bringing Your Lunch From Home And Start Eating Lunch At A Nearby
Restaurant. Your Homemade Lunches Must Be
A. A Substitute
B. A Complement
C. Normal Goods
D. Inferior Goods
E. Standardized Products
16. The Law Of Demand States That Price And
A. Demand Are Positively Related
B. Quantity Demanded Are Positively Related
C. Demand Are Negatively Related
D. Quantity Demanded Are Negatively Related
E. None Of The Above
17. The Law Of Supply States That Price And
A. Supply Are Positively Related
B. Quantity Supplied Are Positively Related
C. Supply Are Negatively Related
D. Quantity Supplied Are Negatively Related
E. Quantity Demanded Are Negatively Related
18. An Increase In The Price Of A Good Will Cause Which Of The Following?
A. Quantity Demanded To Demand To Rise
B. Demand To Fall
C. Quantity Supplied To Fall
D. Supply To Rise
E. None Of The Above
19. Which Of The Following Will Cause Demand To Rise?
A. A Decrease In Price
B. A Decrease In The Price Of A Substitute Good
C. A Decrease In The Price Of A Complementary Good
D. An Increase In Supply
E. An Increase In The Cost Of Production
20. Given A Downward-Sloping Demand Curve And An Upward-Sloping Supply
Curve, An Increase In Supply Together With An Increase In Demand Will Cause The
A. Equilibrium Quantity Purchased To Increase, But The Effect On Price Will Be
Indeterminate
B. Equilibrium Quantity Purchased To Decrease, But The Effect On Price Will Be
Indeterminate
C. Price To Rise, But The Effect On The Equilibrium Quantity Purchased Will Be
Indeterminate
D. Price To Fall, But The Effect On The Quantity Bought And Sold Will Be
Indeterminate
E. Equilibrium Price To Rise And The Equilibrium Quantity Purchased Will Rise
21. A Situation In Which The Demand For A Product Is Decreasing While The Price
Is Simultaneously Increasing Can Be Explained By
A. A Decrease In Supply
B. An Increase In Supply
C. Unchanged Supply
D. All Of The Above
E. None Of The Above
Questions 22 - 24 Refer To The Graph Below.
22. At Price P1 There Is A
A. Surplus Of X1x2
B. Shortage Of X1x2
C. Surplus Of Xx2
D. Surplus Of Ab
E. Shortage Of X1x
23. At A Price Of P1, What Quantity Will Be Sold In The Market?
A. 0
B. X
C. X1
D. X2
E. X1x2
24. If The Market Is In Equilibrium, The Price And Quantity Will Be
A. P1 And X1
B. P And X1
C. P1 And X
D. P And X
E. P And X2
Questions 25 - 30 Refer To The Graph Below.
25. The Demand Curve And Supply Curve For Beef Are Dd And Ss. The Demand
Curve Shifts To D1d1 And A Price Ceiling Is Placed On Beef At Price P. The Result
Will Be
A. A Surplus Equal To X1x
B. A Shift In The Supply Curve To S1s1
C. An Increase In The Quantity Placed On The Market To X1
D. Both (B) And (C) Above
E. A Shortage Equal To X1x
26. The Demand Curve And Supply Curve For Beef Are Dd And Ss. Which Of The
Following Could Not Cause Demand To Shift To D1d1?
A. An Increase In The Price Of A Substitute Good
B. An Increase In The Price Of A Complementary Good
C. An Increase In Consumer Income
D. A Change In Consumer Tastes
E. A Change In Consumer Expectations
27. The Demand Curve And Supply Curve For Beef Are Dd And Ss. Which Of The
Following Could Cause Supply To Shift To S1s1?
A. An Increase In The Cost Of Production
B. A Decrease In The Cost Of Production
C. An Increase In The Price Of A Substitute In Production
D. An Increase In Income
E. All Of The Above
28. Which Of The Following Statements Is Incorrect?
A. If Supply Decreases And Demand Remains Constant, Equilibrium Price Will Rise
B. If Demand Decreases And Supply Increases, Equilibrium Price Will Rise
C. If Supply Increases And Demand Decreases, Equilibrium Price Will Fall
D. If Demand Increases And Supply Decreases, Equilibrium Price Will Rise
E. If Supply Is Constant And Demand Increases, Price Will Rise
29. If Demand And Supply Shift To D1d1 And S1s1, Market Price Will Be
A. P
B. Above P
C. Below P
D. Indeterminate
E. The Price That Goes With The Quantity X
30. Which Of The Following Will Cause A Change In The Demand For Beer?
A. A Change In The Average Income In The Economy
B. A Change In The Price Of Hops (Used To Make Beer)
C. A Change In The Price Of Beer
D. All Of The Above
E. None Of The Above
31. The Law Of Demand Suggests That
A. Higher Prices Automatically Result In Higher Profits
B. Demand Determines Supply
C. The Lower The Price Of A Product, The More Consumers Will Wish To Purchase,
Other Things Equal
D. Without Laws, Markets Would Not Reach Equilibrium
E. Both (A) And (C)
32. A Change In The Quantity Supplied Of A Good May Be Caused By
A. A Change In Technology
B. A Change In The Number Of Firms Selling The Good
C. A Change In The Price Of The Good
D. A Change In The Demand For The Good
E. Either (C) Or (D)
Questions 33 - 37 Refer To The Graph Below.
33. Equilibrium Price And Quantity Are
A. 20 And 100
B. 20 And 200
C. 15 And 300
D. 15 And 200
E. 10 And 200
34. A Price Of $10 Will Lead To A
A. Shortage Of 200
B. Surplus Of 200
C. Shortage Of 100
D. Surplus Of 100
E. Surplus Of 300
35. A Price Of $20 Will Lead To A
A. Shortage Of 200
B. Surplus Of 200
C. Shortage Of 100
D. Surplus Of 100
E. Surplus Of 300
36. When Price Is $10, How Much Will Be Sold In The Market?
A. 0
B. 100
C. 200
D. 300
E. It Can Not Be Determined
37. Which Of The Following Could Lead To A Price Of $20 In The Market?
A. An Increase In Demand
B. A Decrease In Supply
C. A Decrease In Demand
D. An Increase In Supply
E. An Increase In Both Supply And Demand
Questions 38 - 43 Refer To The Graph Below.
38. If The Market Starts In Equilibrium With D1 And S1, Price And Quantity Are
A. 13 And 55
B. 10 And 40
C. 10 And 65
D. 7 And 55
E. 10 And 55
39. If The Market Starts In Equilibrium With D1 And S1, And The Price Of Pepsi
Increases, The New Equilibrium Price And Quantity Are
A. 13 And 55
B. 10 And 40
C. 10 And 65
D. 7 And 55
E. 10 And 55
40. If The Market Starts In Equilibrium With D1 And S1, And The Price Of
Carbonated Water (The Main Ingredient In Dr. Pepper) Increases, The New
Equilibrium Price And Quantity Are
A. 13 And 55
B. 10 And 40
C. 10 And 65
D. 7 And 55
E. 10 And 55
41. If The Market Starts In Equilibrium With D1 And S1, And More Consumers
Develop A Preference For Dr. Pepper, The New Equilibrium Price And Quantity Are
A. 13 And 55
B. 10 And 40
C. 10 And 65
D. 7 And 55
E. 10 And 55
42. If The Market Starts In Equilibrium With D1 And S1, And Equilibrium Price And
Quantity Increase To $10 And 65, Which Of The Following Could Have Caused The
Change?
A. An Increase In Consumer Income
B. An Increase In Production Costs
C. The Discovery That Dr. Pepper Causes Health Problems
D. A Technological Advance In Dr. Pepper Production
E. All Of The Above
43. Which Of The Following Is Not One Of The "Other Things Equal" Underlying
The Demand Curve?
A. Prices Of Resources
B. Purchasing Power Of Buyers
C. Buyers' Tastes And Preferences
D. Numbers Of Buyers
E. Buyers' Expectations
44. A Change In The Quantity Demanded
A. Results Whenever One Of The "Other Things Equal" Underlying The Demand
Curve Changes
B. Results When The Price Of The Product Increases Or Decreases
C. Means A Shift In The Position Of The Demand Curve
D. Means Movement Along A Given Demand Curve
E. Is Both (B) And (D)
45. Suppose That All Workers Receive A Wage Reduction. What Would The Impact
On The Market For Autos Be?
A. The Supply Of Autos Would Decrease
B. The Demand For Autos Would Increase
C. The Supply Of Autos Would Increase And The Demand For Autos Would Fall
D. Both A) And B)
E. It Can Not Be Determined
46. There Is An Increase In The Quantity Of Pizza Purchased But No Change In The
Price Of Pizza. Which Of The Following Is Most Likely To Have Occurred?
A. Supply Increased While Demand Remained Unchanged
B. Both Supply And Demand Increased
C. Supply Increased While The Quantity Demanded Increased
D. Demand Increased While Supply Remained Unchanged
E. Both Supply And Demand Decreased
47. Two Goods Are Said To Be Substitutes In Consumption If
A. An Increase In The Price Of One Leads To A Fall In The Demand For The Other
B. An Increase In The Price Of One Leads To An Increase In The Demand For The
Other
C. An Increase In The Price Of One Leads To An Increase In The Supply Of The
Other
D. A Fall In The Price Of One Leads To An Increase In The Demand For The Other
E. A Decrease In The Price Of One Leads To A Decrease In The Supply Of The Other
48. Assume Lettuce And Salad Dressing Are Complements In Consumption. An
Increase In The Price Of Lettuce Will
A. Lead To A Fall In The Demand For Salad Dressing
B. Lead To A Fall In The Quantity Demanded Of Salad Dressing
C. Have No Impact On The Demand For Salad Dressing
D. Lead To A Fall In The Supply Of Salad Dressing
E. Lead To A Rise In The Supply Of Salad Dressing
49. Which Of The Following Is For Inferior Goods?
A. The Law Of Demand Does Not Hold
B. They Are Of Low Quality
C. The Demand For Them Falls As Consumer Income Rises
D. All Of The Above
E. None Of The Above
50. An Increase In The Wages Of Orange Pickers Will Have What Effect In The
Market For Oranges?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
51. An Increase In Consumer Income Will Have What Effect On The Equilibrium
Price And Quantity Of Hot Dogs?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
52. An Increase In The Price Of Cars Will Have What Effect On The Equilibrium
Price And Quantity Of Gasoline?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
53. A Technological Advance In The Production Of Computers Will Have What
Effect On The Equilibrium Price And Quantity In The Computer Market?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
54. A Publicized Report That Finds Orange Juice Prevents Certain Diseases Will Have
What Effect On The Equilibrium Price And Quantity Of Orange Juice?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
55. As The Baby Boom Generation Continues To Age, What Will Happen To The
Equilibrium Price And Quantity Of Homes In Retirement Communities?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
56. If Consumers Expect An Increase In The Price Of Coffee Next Month, What Will
Happen To The Equilibrium Price And Quantity Of Coffee This Month?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
57. The Entry Of New Firms Into A Market, All Other Things Equal, Will Have What
Effect On Equilibrium Price And Quantity?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
58. An Increase In The Price Of Flashlights Will Have What Effect On The
Equilibrium Price And Quantity Of Batteries?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
59. If The Price Of Film Increases At The Same Time The Cost Of Camera Production
Increases, What Will Happen To The Equilibrium Price And Quantity In The Camera
Market?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
60. If There Is A Technological Advance In The Production Of Paper At The Same
Time Consumer Income Increases (Assume Paper Is A Normal Good), What Will
Happen In The Market For Paper?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
61. Suppose The United Auto Workers Union Successfully Lobbies Congress To
Enact An Import Quota On All Foreign Cars Imported Into The U.S. Which Of The
Following Is Most Likely To Occur In The U.S.?
A. A Fall In The Price Of Imported Cars And Increase In The Price Of Domestics
B. An Increase In The Demand For Domestic Cars
C. A Decrease In American Autoworker Wages
D. Higher Unemployment Among American Autoworkers
E. A Fall In The Demand For Imports
62. As Consumer Incomes Rise, The Demand Curve For Good X Shifts To The Right.
Given This, Good X Must Be
A. Produced By A Competitive Firm
B. A High Quality Product
C. A Substitute Good
D. A Normal Good
E. An Inferior Good
63. Since 1990, China's Growth Has Been
A. Roughly Equal To That Of The United States
B. Declining
C. In The Double Digits
D. About 3% Per Year
E. None Of The Above
64. China's Growth Has Been A Result Of
A. Increased Domestic Demand
B. Rapidly Increasing Inflation
C. Investment In Other Economies
D. Trade Deficits
E. Trade Surpluses
65. Since 1990, Foreign Investment In China Has
A. Increased Slightly
B. Increased Significantly
C. Been Unchanged
D. Decreased Slightly
E. Decreased Significantly
66. China Can Be Best Described As A
A. Market Economy
B. Mixed Economy
C. Transitional Economy
D. Competitive Economy
E. Monopoly Economy
67. From A Standpoint Of Resource Allocation, A Surplus Of Corn Implies
A. Consumers Would Prefer Some Of The Resources Used To Produce Corn Be Used
To Produce Something Else
B. The Market For Agricultural Products Is Failing
C. Government Should Purchase The Surplus To Protect The Farmers
D. The Price Of Corn Is Too Low And Should Be Increased
E. The Quantity Demanded Of Corn Exceeds The Quantity Supplied
68. After Establishing The Republic Of China In 1949, Mao's Communist Party
Patterned The Chinese Economy After
A. Japan
B. Taiwan
C. The Ussr
D. The United States
E. Europe
69. Following The Establishment Of A Soviet Style Society In 1949, The State
Planning Commission Was Created By
A. Chiang Kai-Shek
B. Deng Xiaoping
C. Mao Zedong
D. Joseph Stalin
E. Wen Jiabao
70. The State Planning Commission In China Has The Task Of
A. Determining What Goods And Services Should Be Produced
B. Determining What Quantities Of Goods And Services Are Produced
C. Determining The Allocation Of Resources Used In The Production Of Goods And
Services
D. How The Goods And Services Are To Be Distributed
E. Performing All Of The Tasks Listed Above
71. The Economy Of The People’s Republic Of China Operated As A Command
Economy
A. From 1917 Until 1949
B. From 1949 Until 1978
C. Since 1990
D. From 1949 Until 1962
E. Which Started China's Transition To A Market Economy
72. China’s Transition To A Market-Oriented Economy
A. Was Completed By Around 2004
B. Was Abandoned In 2010 And The Country Has Returned To Command Economy
C. Has Resulted In Relatively Low Rates Of Economic Growth
D. Did Not Lead To Any Problems With Inflation Or Unemployment
E. Did Not Lead To Any Problems With Corruption
73. In A Market Economy, A Shortage Of Wheat Will Cause The
A. Price Of Bread To Rise
B. Price Of Bread To Fall
C. Price Of Wheat To Fall
D. Supply Of Bread To Increase
E. Supply Of Wheat To Fall
74. Which Of The Following Was Not A Problem For China's Centralized Economy?
A. Informational Requirements
B. Incentives For Efficiency
C. The Emphasis On Heavy Machinery Production
D. Low Quality Products
E. None Of The Above (They Were All Problems)
75. If The Demand Curve For Bran Muffins Has Shifted Out Due To A Medical Study
That Indicates That Regular Consumption Of Bran Lowers Cholesterol, Then We Can
Conclude That There Has Been
A. A Response To The Increase Demand For A Complementary Good
B. A Change In Consumer Tastes
C. A Reduction In The Production Costs Of Bran
D. An Increase In Consumer Expectations
E. An Improvement In The Economy, Resulting In Higher Incomes
76. Consumer Purchases Of Hybrid Cars Have Risen Sharply In Recent Years. One
Important Factor In This Increased Demand For These Vehicles Is
A. It's Cool To Be "Green" And Drive A Hybrid
B. Decreasing Prices Of A Complementary Good
C. Change In Expectations Based Upon The Belief That Energy Prices Will Rise In
The Future
D. Reduced Availability Of A Substitute
E. Government Fuel Mandates
True / False Questions
77. Mao Zedong Started China's Transition To A Market Economy
78. Private Ownership Of An Economy's Resources Is A Defining Feature Of The
Pure Market Economy
79. The Institution Of Private Property Rights Is An Essential Feature Of The Market
Economy
80. The U.S. Is Best Described As A Pure Market Economy
81. In The Pure Command Economy, Most Resource Use Decisions Are Made By
Government
82. In A Market Economy, Price Fluctuations Indicate There Is A Lack Of Effective
Competition
83. For A Market To Be Considered Purely Competitive, New Rivals Must Be Free To
Enter If They Feel They Can Effectively Compete
84. Blocked Entry Is Essential For A Purely Competitive Market
85. Entry Is Blocked In Monopoly Markets
86. In Response To An Increase In The Price Of Beer, Bob Reduces His Consumption
From 3 To 2 Beers Per Day. This Reflects A Reduction In Bob's Demand For Beer
87. Surpluses Tend To Drive Competitive Prices Downward Toward Equilibrium, And
Shortages Tend To Drive Competitive Prices Upward Toward Equilibrium
88. When The Entire Demand Curve Shifts Out To The Right, We Say There Has
Been An Increase In Demand
89. A Change In Supply Occurs When One Of The Other Things Equal Changes And
Is Represented As Movement Along The Supply Curve
90. A Change In The Price Of Automobiles Will Cause A Change In The Demand For
Automobiles
91. Demand Is The Quantity Of A Product Per Time Period That Buyers Will Buy At
The Prevailing Price, Other Things Equal
92. The Law Of Demand States That Consumers Will Buy Less At Lower Prices, But
Only If A Number Of Other Things Are Held Constant
93. The Law Of Supply States That Sellers Will Sell More At High Prices Than At
Low Prices
94. When An Economist Says That The Demand For A Product Has Increased, This
Means That Consumers Are Now Willing To Purchase More Of The Product At Each
Alternative Price
95. An Increase In The Price Of A Good Will Decrease Demand For The Good
96. An Increase In The Supply Of A Good Will Increase Demand For The Good
97. An Increase In Consumer Income Can Either Increase Or Decrease Demand For A
Good
98. During December Each Year, The Number Of Christmas Trees Sold Increases, As
Does The Price Of The Trees. This Clearly Violates The Law Of Demand
99. An Increase In The Demand For Gasoline Accompanied By A Decrease In The
Supply Of Gasoline Will Cause The Price To Rise, But May Cause The Quantity
Purchased To Increase, Decrease, Or Remain The Same
100. Fluctuating Prices Tend To Confuse Consumers, So Prices Should Be
Government Controlled Whenever Possible
101. An Increase In The Price Of Gas Will Cause An Increase In The Supply Of Gas
Since It Will Be More Profitable To Sell
102. The Demand Curve For An Inferior Good Is Upward Sloping, Like A Typical
Supply Curve
103. When There Is An Increase In Both Supply And Demand, It Is Impossible To
Determine What Happens To The Equilibrium Price Unless The Magnitudes Of The
Supply And Demand Changes Are Known
104. During The 1992 Presidential Campaign, Ross Perot Recommended A 50-CentsPer-Gallon Increase In The Tax On Gasoline. Such An Increase Would Have Little Or
No Effect On The Quantity Of Gas Sold Since We Have Few Options To Driving
105. If You Buy More Of A Good As A Result Of An Increase In Income, The Good Is
Known As A Consumer Good
106. Appliances And Electricity Are An Example Of Complementary Goods
107. An Increase In The Supply Of A Good Will Increase The Price Of The Good,
Other Things Being Equal
108. When Both Supply And Demand Increase, Price And Quantity Will Increase
109. Shortages Of A Particular Good Can Be Expected To Lead To Rising Prices And
Increased Production For That Good In A Market Economy
110. Shortages Of A Particular Good Can Be Expected To Lead To Decreasing Prices
And Lower Production For That Good In A Market Economy
111. In The Short Run, An Increase In Demand For A Good Will Result In Higher
Prices In A Market Economy
112. In The Short Run, An Increase In Demand For A Good Will Result In Long Lines
In A Command Economy
113. In The Long Run, An Increase In The Demand For A Good Will Result In An
Increase In Supply Of The Good In A Market Economy
114. In The Long Run, An Increase In The Demand For A Good Will Result In An
Increase In Supply Of The Good In A Command Economy
115. If The Demand For A Good Increases In A Monopoly Market, Price Will Rise
And Firms Will Enter The Industry In The Long Run
116. China's Transition To A Market Economy Began In 1990.
117. Command Economies Introduce Incentives For Efficient Production
118. Under The Great Leap Forward, The Task Of Determining How Much To
Produce Fell On The State Planning Commission
119. The Chinese Communist Party Favored Production In The Heavy Industry
Sectors Of The Economy
120. In 1978, Deng Xiaoping Started The Process Of Transitioning China To A
"Socialist Market Economy."
121. While The Superiority Of The Market Orientation Seems Clear, It Is Equally
Clear That The Transition From A Command To A Market Economy Is Very Difficult
122. China's Transition To A Market Orientation Has Been Relatively Problem-Free
123. China's Transition To A Market Orientation Began With Agricultural Reform
124. China's Transitional Economy Is Free Of Unemployment And Inflation
125. 15 Of The 20 Cities With The Highest Levels Of Air Pollution Are In China.
Chapter 03
Government Control Of Prices In Mixed Systems: Who Are The Winners And
Losers?
Multiple Choice Questions
1. In A Market Economy, If The Market Supply Of A Product Decreases Relative To
Its Demand, The Product's Price Will
A. Fall
B. Rise
C. Be Unchanged
D. Fall And Then Rise
E. Rise And Then Fall
2. In A Mixed Economy, Governments May Intervene In Markets In Which Of The
Following Ways?
A. Price Ceilings
B. Minimum Wages
C. Agricultural Price Supports
D. Both A) And B)
E. All Of The Above
3. Which Of The Following Is Of How Markets React To Government Intervention?
They React
A. To Provide The Intended Results
B. In Ways That Offset Intended Impacts
C. Quickly To Reverse Intended Effects
D. In Completely Unpredictable Ways
E. So Slowly That Policies Never Work As They Are Intended
4. The Consequences Of Government Intervention
A. Are Generally As Planned By Policy Makers
B. Often Involve Unintended Consequences
C. Fall On Low Income Individuals
D. Are Not Felt Until The Next Fiscal Year
E. Serve To Increase Efficiency In Markets
5. A Maximum Allowable Price For A Good Or Service Is A
A. Price Ceiling
B. Price Floor
C. Minimum Wage
D. Market Equilibrium
E. Price Support
6. To Be Effective, A Price Ceiling Must Be Set
A. By The Market
B. Above Equilibrium
C. Below Equilibrium
D. At Equilibrium
E. By Producers
7. The Purpose Of A Price Ceiling May Be To Hold Down
A. Inflation
B. Unemployment
C. Interest Rates
D. Wages
E. All Of The Above
8. Price Ceilings May Be Used On A Selective Basis To
A. Control Inflation In The Economy
B. Make A Good Cheaper To Produce
C. Boost The Income Of Firms
D. Make A Good Accessible To All Income Levels
E. Increase Workers' Incomes
9. During The 1970's About How Many Cities In The U.S. Had Rent Controls?
A. 1,000
B. 200
C. 50
D. 15
E. 5
10. One Of The Earliest Known Rent Control Laws Was Instituted In Which City And
When?
A. New York At The Start Of Wwii
B. Washington D.C. During The Civil War
C. Paris In The 1700s
D. Rome In The 1400s
E. Chicago During The Great Depression
11. A Minimum Allowable Price For A Good Or Service Is Known As
A. A Price Floor
B. A Minimum Wage
C. A Price Support
D. All Of The Above
E. None Of The Above
12. Price Floors Are Often Instituted For Which Of The Following Purposes?
A. To Prevent Inflation
B. To Make Goods And Services Accessible To All Income Levels
C. To Increase The Income Of Sellers
D. To Increase The Wages Of Workers
E. To Do All Of The Above
13. Which Of The Following Is Of The First U.S. Minimum Wage?
A. It Was Set Under The Fair Labor Standards Act
B. It Was Instituted In 1938
C. It Set The Minimum Wage At 25 Cents Per Hour
D. It Applied Only To Certain Designated Industries
E. All Of The Above
14. In 1981, The U.S. Federal Minimum Wage Was Increased To
A. $2.00 Per Hour
B. $2.50 Per Hour
C. $3.35 Per Hour
D. $4.00 Per Hour
E. $5.15 Per Hour
15. Which Of The Following Is Of The U.S. Minimum Wage Over The 1980s And
1990s?
A. It Was Unchanged
B. It Increased Significantly Through The 1980s And Was Constant Through The
1990s
C. It Was Constant Through The 1980s And Then Increased Significantly Through
The 1990s
D. It Fell During The 1990s
E. It Was Eliminated In The 1990s
16. As Of Summer 2009, The U.S. Federal Minimum Wage Is Set At What Rate Per
Hour?
A. $5.15
B. $5.85
C. $6.55
D. $7.25
E. $8.00
17. Some States Also Have Their Own Minimum Wage Legislation. Generally These
Laws Set The State Minimum Wage
A. Above The Federal Minimum Wage
B. Below The Federal Minimum Wage
C. Equal To The Federal Minimum Wage
D. To Either A) Or C)
E. To Any Of The Above
18. As The Price Of Rental Housing Falls, Which Of The Following Occurs?
A. The Quantity Demanded Of Housing Increases
B. People Take In Roommates To Share Costs
C. Individuals Move Back In With Their Families
D. More Rental Housing Is Constructed
E. All Of The Above
19. As The Price Of Rental Housing Increases, Which Of The Following Will
Happen?
A. Property Will Be Switched From Commercial Property To Rental Housing
B. More Rental Housing Will Be Built
C. Renters Will Be Induced To Buy Housing
D. The Average Number Of Renters Per Rental Unit Will Increase
E. All Of The Above
Questions 20 - 24 Refer To The Graph Below.
20. If The Demand For Rental Housing Is Dd And The Supply Of Rental Housing Is
Ss, The Equilibrium Rent And Quantity (Number Of Units In Thousands) Are
A. $800 And 25
B. $625 And 30
C. $600 And 20
D. $400 And 25
E. $600 And 25
21. If Demand And Supply Are Dd And Ss And Demand Increases To D1d1, The New
Equilibrium Rent And Quantity (Number Of Units In Thousands) Are
A. $800 And 25
B. $625 And 30
C. $600 And 20
D. $400 And 25
E. $600 And 25
22. An Increase In Rent That Leads To Increased Profitability Of Producing Rental
Housing Will Lead To Which Of The Following Shifts In The Long Run?
A. Dd To D1d1
B. D1d1 To Dd
C. S1s1 To Ss
D. Ss To S1s1
E. None Of The Above
23. If The Supply And Demand For Rental Housing Are Dd And Ss, What Effect Will
A Rent Control Law That Sets The Maximum Allowable Rent At $400 Have On The
Market? It Will Lead To
A. A Surplus Of 5 Thousand Units
B. A Shortage Of 5 Thousand Units
C. A Surplus Of 10 Thousand Units
D. A Shortage Of 10 Thousand Units
E. No Change In Equilibrium Rent Or Quantity
24. If The Supply And Demand For Rental Housing Are Dd And Ss, What Effect Will
A Rent Control Law That Sets The Maximum Allowable Rent At $800 Have On The
Market? It Will Lead To
A. A Surplus Of 5 Thousand Units
B. A Shortage Of 5 Thousand Units
C. A Surplus Of 10 Thousand Units
D. A Shortage Of 10 Thousand Units
E. No Change In Equilibrium Rent Or Quantity
25. If People Are Forced To Commute As A Result Of A Rent Control Law In A City,
Which Of The Following Results? An Increase In
A. Rent Paid By Commuters
B. Direct Commuting Costs
C. Opportunity Costs For Commuters
D. Pollution And Traffic Congestion In Cities
E. All Of The Above
26. Rent Control Laws Will _____________ The Search Costs Of Potential Renters.
A. Increase
B. Decrease
C. Eliminate
D. Mitigate
E. Reimburse
Questions 27 - 32 Refer To The Graph Below.
27. The Equilibrium Rent And Quantity (1,000s Of Units) Are
A. $900 And 30
B. $750 And 40
C. $600 And 30
D. $900 And 50
E. $600 And 50
28. If Rent Is Controlled At $900, The Quantity Of Rental Housing Demanded Will
Be
A. 0
B. 30
C. 40
D. 50
E. More Than 50
29. If Rent Is Controlled At $600, The Quantity Of Rental Housing Demanded Will
Be
A. 0
B. 30
C. 40
D. 50
E. More Than 50
30. If Rent Is Controlled At $900, The Quantity Of Rental Housing Supplied Will Be
A. 0
B. 30
C. 40
D. 50
E. More Than 50
31. If Rent Is Controlled At $600, The Quantity Of Rental Housing Supplied Will Be
A. 0
B. 30
C. 40
D. 50
E. More Than 50
32. If Rent Is Controlled At $600, There Will Be A ______ Equal To ____ Thousand
Units In The Market.
A. Surplus; 10
B. Surplus; 20
C. Shortage; 10
D. Shortage; 20
E. Excess Supply; 10
33. Rent Control Laws May Lead To Which Of The Following Unintended Effects?
A. Under-The-Table Payments
B. Increased Forced Commuting
C. Higher Search Costs
D. Lost Profit Incentives To Change The Supply Of Rental Housing
E. All Of The Above
34. Owners Of Rent Controlled Property May Attempt To Increase Profits By
A. Raising Rents
B. Improving The Quality Of Their Rental Units
C. Taking Under-The-Table Payments
D. Converting Commercial Properties To Rental Properties
E. All Of The Above
35. In The Short-Run, Who "Wins" From Rent Control Laws?
A. All People Who Want To Rent Housing
B. Owners Of Rent Controlled Property
C. People Who Buy Housing
D. Governments That Pay To Enforce Rent Control Laws
E. None Of The Above
36. In The Short-Run, Who "Loses" From Rent Control Laws?
A. Those Who Cannot Find Rental Housing
B. People Who Are Forced To Commute
C. Individuals Who Experience Increased Search Costs For Rental Housing
D. Those Who Must Make Under-The-Table Payments To Secure Rental Housing
E. All Of The Above
37. The Demand For Labor Is A Derived Demand Because It Is Dependent On
A. The Demand For The Product Being Produced
B. The Marginal Revenue Of The Product Being Produced
C. The Marginal Productivity Of The Workers Producing The Product
D. All Of The Above
E. None Of The Above
38. The Additional Revenue That Accrues To A Firm When An Additional Worker Is
Hired Is
A. The Marginal Revenue Product Of Labor
B. The Marginal Product Of Labor
C. The Marginal Revenue Of Labor
D. The Marginal Utility Of Labor
E. None Of The Above
39. The Marginal Product Of Labor Is The Additional
A. Revenue Received When A Worker's Output Is Sold
B. Production Cost Of Hiring An Additional Labor
C. Output Produced As A Result Of Giving Workers Additional Capital
D. Output Produced As A Result Of Hiring An Additional Worker
E. Product Developed As A Result Of Ideas Generated By Workers
40. The Additional Revenue A Firm Receives As A Result Of Selling An Additional
Unit Of Output Is Called
A. Price
B. Profit
C. Total Revenue
D. Marginal Revenue
E. Marginal Revenue Product
41. A Firm Increases The Number Of Workers It Hires From 50 To 52 And, As A
Result, Output Increases From 100 To 110. Each Of The Additional Units Of Output
Can Be Sold For $2. What Is The Marginal Product Of The 52nd Worker?
A. 2
B. 5
C. 10
D. 20
E. 50
42. A Firm Increases The Number Of Workers It Hires From 50 To 52 And, As A
Result, Output Increases From 100 To 110. Each Of The Additional Units Of Output
Can Be Sold For $2. What Is Marginal Revenue For The Last 10 Units Produced?
A. 2
B. 5
C. 10
D. 20
E. 50
43. A Firm Increases The Number Of Workers It Hires From 50 To 52, And As A
Result, Output Increases From 100 To 110. Each Of The Additional Units Of Output
Can Be Sold For $2. What Is The Marginal Revenue Product Of The 52nd Worker?
A. 2
B. 5
C. 10
D. 20
E. 50
44. The Law Of Diminishing Returns States That, As Additional Units Of A Variable
Input Are Added To A Given Amount Of A Fixed Input, Increases In Output Will
A. Increase
B. Decline
C. Stay The Same
D. Accelerate
E. Become Erratic
45. A Firm Has A Given Amount Of Capital. When It Hires 10 Workers, Output Is 30.
When It Hires 11 Workers, Output Is 40. If The Law Of Diminishing Returns Applies,
Which Of The Following Is The Most Likely Amount Of Output When The Firm
Hires 12 Workers?
A. 70
B. 60
C. 50
D. 45
E. -10
46. Which Of The Following Represents The Demand Curve For Labor For A Firm?
A. The Mr Curve
B. The Mp Curve
C. The Mrp Curve
D. The Mc Curve
E. None Of The Above
Questions 47 - 51 Refer To The Table Below.
47. The Marginal Product Of The 4th Worker Is
A. 20
B. 40
C. 100
D. 140
E. 160
48. If Each Unit Of Output Is Sold For $5, The Marginal Revenue Of The Second
Unit Of Output Sold Is
A. $5
B. $10
C. $40
D. $50
E. $200
49. The Marginal Product Of The First Worker Is
A. 0
B. 10
C. 40
D. 50
E. Unable To Be Determined
50. If Each Unit Of Output Is Sold For $5, The Marginal Revenue Product Of The 3rd
Worker Is
A. 5
B. 50
C. 200
D. 250
E. 300
51. If Each Unit Of Output Is Sold For $2, The Marginal Revenue Product Of The 6th
Worker Is
A. 2
B. 4
C. 10
D. 20
E. 170
52. As The Wage Increases, A Worker Will Choose To Work
A. More
B. Less
C. The Same Amount
D. Overtime
E. An Amount That Cannot Be Determined
53. A Change In The Hours Of Work That Occurs In Response To A Wage Change,
Other Things Equal, Is Known As The
A. Supply Of Labor
B. Substitution Effect
C. Income Effect
D. Wage Effect
E. Opportunity Cost Of Labor
54. An Increase In The Wage From $6 Per Hour To $6.50 Per Hour Causes A Worker
To Increase Her Hours Worked From 40 To 45 Hours Per Week. For This Worker,
Which Effect Dominates?
A. Substitution
B. Income
C. Wage
D. Wealth
E. Leisure
55. Which Of The Following Measures The Change In The Hours Of Work That
Occurs When There Is A Change In Income, Other Things Equal?
A. The Supply Of Labor Curve
B. The Substitution Effect
C. The Income Effect
D. Marginal Productivity
E. The Wage Effect
56. If An Increase In The Wage Rate From $6.00 Per Hour To $6.50 Per Hour Causes
A Worker To Decrease His Hours Worked From 40 To 35 Hours Per Week, Which
Effect Dominates?
A. Substitution
B. Income
C. Wage
D. Wealth
E. Leisure
57. Which Effect Dominates If A Workers Supply Curve For Labor Is Negatively
Sloped?
A. Substitution
B. Income
C. Wage
D. Wealth
E. Leisure
Questions 58 - 63 Refer To The Graph Below.
58. Equilibrium Wage And Quantity In The Labor Market Are
A. $3 And 8
B. $5 And 22
C. $7 And 16
D. $10 And 8
E. $10 And 22
59. At A Wage Of $10, The Mrp Of Labor Is
A. $8
B. $10
C. $80
D. $216
E. Impossible To Determine Using This Graph
60. If The Wage Rate Is $10, What Is The Quantity Of Labor Demanded?
A. 0
B. 8
C. 16
D. 22
E. 25
61. If The Wage Rate Is $10, What Is The Quantity Of Labor Supplied?
A. 0
B. 8
C. 16
D. 22
E. 25
62. If The Wage Rate Is $3, Which Of The Following Will Occur?
A. A Shortage Of 8
B. A Surplus Of 8
C. A Shortage Of 17
D. A Surplus Of 17
E. A Surplus Of 16
63. To Be Effective, A Minimum Wage In This Market Would Have To Be Set
A. Above $7
B. Above $10
C. Below $5
D. Below $7
E. Below $10
Questions 64 - 68 Refer To The Graph Below.
64. A Minimum Wage Set At $12 Per Hour Would Result In A Surplus Of
A. 0
B. 10
C. 20
D. 35
E. None Of The Above
65. A Minimum Wage Of $12 Would Lead To A Quantity Of Labor Demanded Equal
To
A. 0
B. 15
C. 25
D. 35
E. More Than 35
66. A Minimum Wage Of $12 Would Lead To A Quantity Of Labor Supplied Equal
To
A. 0
B. 15
C. 25
D. 35
E. More Than 35
67. A Minimum Wage Set At $4 Would Result In A Shortage Of
A. 0
B. 10
C. 20
D. 35
E. None Of The Above
68. If A Minimum Wage Is Set At $4, The Quantity Of Labor Demanded In The
Market Will Be
A. 0
B. 15
C. 25
D. 35
E. More Than 35
69. Which Of The Following Groups Most Suffers The Costs Of Minimum Wage
Laws?
A. College Graduates
B. Senior Citizens
C. Teenagers
D. Manufacturing Workers
E. Agricultural Workers
70. Which Of The Following Is Of The Minimum Wage?
A. It Has Significantly Reduced Poverty In The United States
B. A Worker Earning The Minimum Wage Will Keep A Family Of Three Out Of
Poverty
C. It Results In A Much More Equal Distribution Of Income In The United States
D. Unemployment Rates Are Unaffected By The Minimum Wage
E. None Of The Above Is
71. Research Suggests That As The Minimum Wage Is Increased By 10%, The
Associated Increase In The Teenage Unemployment Rate Is Nearly
A. 1 Percent
B. 10 Percent
C. 20 Percent
D. 25 Percent
E. 30 Percent
72. The Alternative Analysis Of The Minimum Wage Indicates That Which Of The
Following May Be ?
A. The Demand Curve Is Vertical Over The Relevant Range
B. The Supply Curve Is Vertical Over The Relevant Range
C. There Is Only A Very Slight Unemployment Effect Of A Minimum Wage
D. All Of The Above
E. None Of The Above
73. According To The Alternative Analysis Of The Minimum Wage, Which Of The
Following Might Lead The Demand Curve For Labor To Be Vertical Over The
Relevant Range?
A. Firms Offset Higher Wages By Allowing Longer Lines During Peak Hours
B. Higher Wages Are Offset By Increased Efficiency
C. Prices Are Increased For Goods That Are Not Price-Sensitive
D. All Of The Above
E. None Of The Above
74. Which Of The Following Individuals Lose As A Result Of An Effective Minimum
Wage Law?
A. Those Who Remain Employed After The Minimum Wage Is Instituted
B. Teenagers Who Lose Their Jobs And Valuable On-The-Job Training
C. Skilled Workers Who Earn Wages Above The Minimum Wage
D. All Of The Above
E. None Of The Above
75. If There Is A Price Ceiling Set For Milk At $2.50 Per Gallon And The Current
Equilibrium Price Is $2.25 Per Gallon, Then We Can Conclude
A. That The Price Ceiling Is Doing Its Job, Keeping Prices Low
B. That The Price Ceiling Is Non-Binding And Has No Effect On The Market
Equilibrium
C. That Milk Imports Are Reducing The Price
D. That Grocery Stores Are Afraid To Raise The Price To The Ceiling Level, For Fear
Of Prosecution By The Government
E. That Price Ceilings Set A Minimum Price
76. Given That A Firm Is Selling Its Product In A Competitive Market, Meaning That
Its Marginal Revenue Is Constant, What Would The Law Of Diminishing Returns To
Labor Inputs Imply About The Demand For Labor?
A. That The Demand For Labor Would Be Constant If The Market Is Stable
B. That The Firm Would Pay Increasing Wages To Attract Qualified Employees
C. The Demand Would Diminish With The Output Of New Workers
D. The Demand Curve For Labor Has A Negative Slope Resulting From Declining
Marginal Product
E. The Law Of Diminishing Returns Has No Effect On Labor Demand
77. The Fact That We Observe Positively Sloped Market Labor Supply Curves
Implies That
A. The Substitution Effect Is Stronger That The Income Effect For Most Workers
B. The Income Effect Is Stronger Than The Substitution Effect For Most Workers
C. Most Workers Don't Have Income Or Substitution Effects
D. The Income Effect Plus Substitution Effect Results In The Positive Slope
E. Labor Laws Require Workers To Work At Least 40 Hours Per Week
True / False Questions
78. In A Mixed Economy, Markets Adjust Freely And All Markets Are Cleared.
79. In A Mixed Economy, Governments Intervene In Markets To Affect The Prices Of
Individual Goods.
80. In A Mixed Economy, Governments Intervene In Markets To Control Inflation.
81. Approximately 20 U.S. Cities Have Rent Control Laws.
82. There Are Examples Of Rent Controls From As Early As The 1700s.
83. Many Rent Controls Were Established As A Result Of World War Ii And Were
Kept Even After The War Ended.
84. Some Universities Have Rent Controlled Student Housing.
85. Price Floors Are Instituted To Increase The Income Of Sellers.
86. The 1938 Fair Labor Standards Act Created The First U.S. Rent Control Law.
87. The First U.S. Minimum Wage Was Set At 25 Cents An Hour.
88. The U.S. Minimum Wage Did Not Change Throughout The 1980s And 1990s.
89. All U.S. Workers Are Covered Under The U.S. Minimum Wage Law.
90. Some States Enact Their Own Minimum Wage Laws.
91. The Quantity Of Housing Demanded Does Not Change When Prices Increase
Because People Have To Live Somewhere.
92. In The Short-Run, The Supply Of Housing Can Increase Quickly.
93. A Price Ceiling Must Be Set Above Equilibrium To Have Any Effect On The
Market For Housing.
94. Rent Controls Result In Illegal Payments To Acquire Housing.
95. Rent Controls Decrease Renters' Housing Search Costs.
96. Rent Controls Lead To Increased Commuting.
97. 6 Of The 10 Cities With The Highest Homelessness Have Rent Control Laws.
98. Rent Controls Create Profit Incentives To Increase The Supply Of Rental
Housing.
99. Minimum Housing Standards Prevent Any Property Deterioration In Rent
Controlled Housing.
100. Rent Controls Result In A Misallocation Of Resources.
101. The Majority Of Individuals Support The Minimum Wage.
102. The Minimum Wage Allows An Individual To Earn Enough To Keep A Family
Of Three Above The Poverty Line.
103. Rent Controls Lead To Housing Shortages.
104. Rent Controls Lead To Conversion Of Rental Housing To Commercial Uses.
105. Rent Controls Make Housing More Accessible To Homeless Individuals.
106. The Demand For A Product Is A Derived Demand.
107. If 10 Workers Produce 100 Units Of Output And 11 Workers Produce 108 Units
Of Output, The Marginal Product Of The 11th Worker Is 8.
108. If All Units Of A Firm's Output Sell For $10 Each, Marginal Revenue Is
Constant.
109. The Additional Revenue A Firm Receives As A Result Of Hiring An Additional
Worker Is Mrp.
110. Limited Amounts Of Capital Eventually Lead To Diminishing Returns To Labor.
111. A Firm's Marginal Revenue Curve Is Also Its Demand Curve.
112. As The Wage Increases, The Quantity Of Labor An Individual Supplies Will
Increase.
113. As The Wage Increases, The Quantity Of Labor An Individual Supplies May
Decrease.
114. If A Worker Works More As The Wage Increases, The Substitution Effect Is
Dominating.
115. If A Worker Works More As The Wage Increases, The Income Effect Is
Dominating.
116. If The Supply Of Labor Curve Is Positively Sloped, The Substitution Effect Is
Dominating.
117. If The Supply Curve Of Labor Is Positively Sloped, The Income Effect Is
Dominating.
118. Evidence Indicates The Supply Curve Of Labor Is Positively Sloped.
119. A Surplus Of Labor Is Unemployment.
120. Teenagers Are The Group Most Likely To Work For Minimum Wage.
121. Working For The Minimum Wage Provides Valuable On-The-Job-Training.
122. The Minimum Wage In 2008 Was Approximately 37% Of Average Earnings.
123. The Minimum Wage Is 100% Of The Poverty Level.
124. A 10% Increase In The Minimum Wage Is Estimated To Increase Teenage
Unemployment By 15%.
125. Firms Can Offset Increased Wage Costs Due To An Increase In The Minimum
Wage By Increasing Efficiency.
126. Evidence Indicates The Minimum Wage Has Little Effect On The Income
Distribution.
127. The Supply Of Labor Is Very Responsive To Changes In The Wage.
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Chapter 02
Economic Systems, Resource Allocation, And Social Well-Being: Lessons From
China's Transition
Multiple Choice Questions
1. Which Of The Following Descriptions Fits The American Economy Best?
A. A Pure Market Economy
B. A Mixed Economy
C. Purely Competitive Economy
D. A Command Economy
E. A Monopoly Economy
2. In A Market Economy,
A. Resources Are Allocated By The Private Parties Who Own The Resources
B. Resources Are Allocated By The Various Local, State, And Federal Planning
Committees And Zoning Commissions
C. Shortages Never Exist
D. Surpluses Never Exist
E. Both C) And D)
3. In 1978, The Chinese Economy
A. Opened Ties To The Noncommunist World
B. Became A Strictly Centralized Economy Under Joseph Stalin
C. Became Communist Under Mao Zedong
D. Moved To The Island Of Taiwan
E. Became A Purely Market-Oriented Economy
4. In Both The U.S. And Canada, Most, But Not All, Of Economic Resources Are
Owned And Controlled By Private Parties Who Make Decisions As To How To Use
Those Resources With Somewhat Limited Interference From Government. As Such,
These Economies Are Examples Of
A. The Pure Command Economy
B. Mixed Economies, Though Closer To The Market End Of The Spectrum
C. Mixed Economies, Though Closer To The Command End Of The Spectrum
D. The Pure Market Economy
E. The Communist Economy
5. In The Market Economy, Markets Serve The Function Of
A. Coordinating Resource Use Decisions Made By Individual Owners Of Resources
B. Bringing About Resource Allocation Changes Desired By Resource Owners
C. Determining Prices
D. All Of The Above
E. Both (A) And (B)
6. Which Of The Following Is Least Consistent With The Pure Market Economy?
A. An Established Legal System That Arbitrates Contract Disputes
B. An Individual Accepting A Job For $1 Per Hour
C. The Institution Of Private Property Rights
D. The Existence Of A Minimum Wage
E. Private Property Rights
7. Which Of The Following Is Not A Characteristic Of A Purely Competitive Market?
A. Enough Sellers And Buyers So That No One Of Them Acting Alone Can Influence
The Price Of This Product
B. The Ability Of A Single Seller To Block Potential Competitors Out Of The Market
C. Freedom Of The Price To Move Up Or Down, That Is, No Price Fixing
D. Mobility Of Buyers And Sellers
E. A Standardized Product
8. A Market With Only One Seller Of A Product That Has No Good Substitutes Is
Called
A. A Pure Monopoly
B. A Pure Command Economy
C. Purely Competitive
D. Imperfectly Competitive
E. An Oligopoly
9. Which Of The Following Is Of Monopoly Firms? They
A. Can Manipulate The Price Of Their Product
B. Beat Their Competitors' Prices
C. Must Constantly Deal With The Entry Of New Firms
D. Never Receive Government Help Blocking Entry Into The Market
E. Do All Of The Above
10. Markets That Fall Between Pure Competition And Monopoly Are Called:
A. Anti-Competitive
B. Imperfectly Competitive
C. Command Markets
D. Tweener Markets
E. Monopsonistic
11. If A Consumer Always Eats Cheese With Macaroni, Then For That Consumer
Macaroni And Cheese Are Examples Of:
A. Substitutes
B. Complements
C. Normal Goods
D. Inferior Goods
E. Standardized Products
12. If An Increase In The Price Of Cookies Leads To A Decrease In The Demand For
Ice Cream, Then Ice Cream And Cookies Must Be
A. Substitutes
B. Complements
C. Normal Goods
D. Inferior Goods
E. Standardized Products
13. If An Increase In The Price Of Bicycles Leads To An Increase In The Demand For
Bus Transportation, The Bicycles And Bus Rides Must Be
A. Substitutes
B. Complements
C. Normal Goods
D. Inferior Goods
E. Standardized Products
14. A Student Graduates From College And Gets A High-Paying Job. As A Result Of
The Increase In Income, The Student Buys More Frozen Pizzas. For The Student,
Frozen Pizzas Must Be A(N)
A. Substitute
B. Complement
C. Normal Good
D. Inferior Good
E. Standardized Product
15. You Receive A Big Raise At Work. As A Result Of Your Now Higher Income, You
Stop Bringing Your Lunch From Home And Start Eating Lunch At A Nearby
Restaurant. Your Homemade Lunches Must Be
A. A Substitute
B. A Complement
C. Normal Goods
D. Inferior Goods
E. Standardized Products
16. The Law Of Demand States That Price And
A. Demand Are Positively Related
B. Quantity Demanded Are Positively Related
C. Demand Are Negatively Related
D. Quantity Demanded Are Negatively Related
E. None Of The Above
17. The Law Of Supply States That Price And
A. Supply Are Positively Related
B. Quantity Supplied Are Positively Related
C. Supply Are Negatively Related
D. Quantity Supplied Are Negatively Related
E. Quantity Demanded Are Negatively Related
18. An Increase In The Price Of A Good Will Cause Which Of The Following?
A. Quantity Demanded To Demand To Rise
B. Demand To Fall
C. Quantity Supplied To Fall
D. Supply To Rise
E. None Of The Above
19. Which Of The Following Will Cause Demand To Rise?
A. A Decrease In Price
B. A Decrease In The Price Of A Substitute Good
C. A Decrease In The Price Of A Complementary Good
D. An Increase In Supply
E. An Increase In The Cost Of Production
20. Given A Downward-Sloping Demand Curve And An Upward-Sloping Supply
Curve, An Increase In Supply Together With An Increase In Demand Will Cause The
A. Equilibrium Quantity Purchased To Increase, But The Effect On Price Will Be
Indeterminate
B. Equilibrium Quantity Purchased To Decrease, But The Effect On Price Will Be
Indeterminate
C. Price To Rise, But The Effect On The Equilibrium Quantity Purchased Will Be
Indeterminate
D. Price To Fall, But The Effect On The Quantity Bought And Sold Will Be
Indeterminate
E. Equilibrium Price To Rise And The Equilibrium Quantity Purchased Will Rise
21. A Situation In Which The Demand For A Product Is Decreasing While The Price
Is Simultaneously Increasing Can Be Explained By
A. A Decrease In Supply
B. An Increase In Supply
C. Unchanged Supply
D. All Of The Above
E. None Of The Above
Questions 22 - 24 Refer To The Graph Below.
22. At Price P1 There Is A
A. Surplus Of X1x2
B. Shortage Of X1x2
C. Surplus Of Xx2
D. Surplus Of Ab
E. Shortage Of X1x
23. At A Price Of P1, What Quantity Will Be Sold In The Market?
A. 0
B. X
C. X1
D. X2
E. X1x2
24. If The Market Is In Equilibrium, The Price And Quantity Will Be
A. P1 And X1
B. P And X1
C. P1 And X
D. P And X
E. P And X2
Questions 25 - 30 Refer To The Graph Below.
25. The Demand Curve And Supply Curve For Beef Are Dd And Ss. The Demand
Curve Shifts To D1d1 And A Price Ceiling Is Placed On Beef At Price P. The Result
Will Be
A. A Surplus Equal To X1x
B. A Shift In The Supply Curve To S1s1
C. An Increase In The Quantity Placed On The Market To X1
D. Both (B) And (C) Above
E. A Shortage Equal To X1x
26. The Demand Curve And Supply Curve For Beef Are Dd And Ss. Which Of The
Following Could Not Cause Demand To Shift To D1d1?
A. An Increase In The Price Of A Substitute Good
B. An Increase In The Price Of A Complementary Good
C. An Increase In Consumer Income
D. A Change In Consumer Tastes
E. A Change In Consumer Expectations
27. The Demand Curve And Supply Curve For Beef Are Dd And Ss. Which Of The
Following Could Cause Supply To Shift To S1s1?
A. An Increase In The Cost Of Production
B. A Decrease In The Cost Of Production
C. An Increase In The Price Of A Substitute In Production
D. An Increase In Income
E. All Of The Above
28. Which Of The Following Statements Is Incorrect?
A. If Supply Decreases And Demand Remains Constant, Equilibrium Price Will Rise
B. If Demand Decreases And Supply Increases, Equilibrium Price Will Rise
C. If Supply Increases And Demand Decreases, Equilibrium Price Will Fall
D. If Demand Increases And Supply Decreases, Equilibrium Price Will Rise
E. If Supply Is Constant And Demand Increases, Price Will Rise
29. If Demand And Supply Shift To D1d1 And S1s1, Market Price Will Be
A. P
B. Above P
C. Below P
D. Indeterminate
E. The Price That Goes With The Quantity X
30. Which Of The Following Will Cause A Change In The Demand For Beer?
A. A Change In The Average Income In The Economy
B. A Change In The Price Of Hops (Used To Make Beer)
C. A Change In The Price Of Beer
D. All Of The Above
E. None Of The Above
31. The Law Of Demand Suggests That
A. Higher Prices Automatically Result In Higher Profits
B. Demand Determines Supply
C. The Lower The Price Of A Product, The More Consumers Will Wish To Purchase,
Other Things Equal
D. Without Laws, Markets Would Not Reach Equilibrium
E. Both (A) And (C)
32. A Change In The Quantity Supplied Of A Good May Be Caused By
A. A Change In Technology
B. A Change In The Number Of Firms Selling The Good
C. A Change In The Price Of The Good
D. A Change In The Demand For The Good
E. Either (C) Or (D)
Questions 33 - 37 Refer To The Graph Below.
33. Equilibrium Price And Quantity Are
A. 20 And 100
B. 20 And 200
C. 15 And 300
D. 15 And 200
E. 10 And 200
34. A Price Of $10 Will Lead To A
A. Shortage Of 200
B. Surplus Of 200
C. Shortage Of 100
D. Surplus Of 100
E. Surplus Of 300
35. A Price Of $20 Will Lead To A
A. Shortage Of 200
B. Surplus Of 200
C. Shortage Of 100
D. Surplus Of 100
E. Surplus Of 300
36. When Price Is $10, How Much Will Be Sold In The Market?
A. 0
B. 100
C. 200
D. 300
E. It Can Not Be Determined
37. Which Of The Following Could Lead To A Price Of $20 In The Market?
A. An Increase In Demand
B. A Decrease In Supply
C. A Decrease In Demand
D. An Increase In Supply
E. An Increase In Both Supply And Demand
Questions 38 - 43 Refer To The Graph Below.
38. If The Market Starts In Equilibrium With D1 And S1, Price And Quantity Are
A. 13 And 55
B. 10 And 40
C. 10 And 65
D. 7 And 55
E. 10 And 55
39. If The Market Starts In Equilibrium With D1 And S1, And The Price Of Pepsi
Increases, The New Equilibrium Price And Quantity Are
A. 13 And 55
B. 10 And 40
C. 10 And 65
D. 7 And 55
E. 10 And 55
40. If The Market Starts In Equilibrium With D1 And S1, And The Price Of
Carbonated Water (The Main Ingredient In Dr. Pepper) Increases, The New
Equilibrium Price And Quantity Are
A. 13 And 55
B. 10 And 40
C. 10 And 65
D. 7 And 55
E. 10 And 55
41. If The Market Starts In Equilibrium With D1 And S1, And More Consumers
Develop A Preference For Dr. Pepper, The New Equilibrium Price And Quantity Are
A. 13 And 55
B. 10 And 40
C. 10 And 65
D. 7 And 55
E. 10 And 55
42. If The Market Starts In Equilibrium With D1 And S1, And Equilibrium Price And
Quantity Increase To $10 And 65, Which Of The Following Could Have Caused The
Change?
A. An Increase In Consumer Income
B. An Increase In Production Costs
C. The Discovery That Dr. Pepper Causes Health Problems
D. A Technological Advance In Dr. Pepper Production
E. All Of The Above
43. Which Of The Following Is Not One Of The "Other Things Equal" Underlying
The Demand Curve?
A. Prices Of Resources
B. Purchasing Power Of Buyers
C. Buyers' Tastes And Preferences
D. Numbers Of Buyers
E. Buyers' Expectations
44. A Change In The Quantity Demanded
A. Results Whenever One Of The "Other Things Equal" Underlying The Demand
Curve Changes
B. Results When The Price Of The Product Increases Or Decreases
C. Means A Shift In The Position Of The Demand Curve
D. Means Movement Along A Given Demand Curve
E. Is Both (B) And (D)
45. Suppose That All Workers Receive A Wage Reduction. What Would The Impact
On The Market For Autos Be?
A. The Supply Of Autos Would Decrease
B. The Demand For Autos Would Increase
C. The Supply Of Autos Would Increase And The Demand For Autos Would Fall
D. Both A) And B)
E. It Can Not Be Determined
46. There Is An Increase In The Quantity Of Pizza Purchased But No Change In The
Price Of Pizza. Which Of The Following Is Most Likely To Have Occurred?
A. Supply Increased While Demand Remained Unchanged
B. Both Supply And Demand Increased
C. Supply Increased While The Quantity Demanded Increased
D. Demand Increased While Supply Remained Unchanged
E. Both Supply And Demand Decreased
47. Two Goods Are Said To Be Substitutes In Consumption If
A. An Increase In The Price Of One Leads To A Fall In The Demand For The Other
B. An Increase In The Price Of One Leads To An Increase In The Demand For The
Other
C. An Increase In The Price Of One Leads To An Increase In The Supply Of The
Other
D. A Fall In The Price Of One Leads To An Increase In The Demand For The Other
E. A Decrease In The Price Of One Leads To A Decrease In The Supply Of The Other
48. Assume Lettuce And Salad Dressing Are Complements In Consumption. An
Increase In The Price Of Lettuce Will
A. Lead To A Fall In The Demand For Salad Dressing
B. Lead To A Fall In The Quantity Demanded Of Salad Dressing
C. Have No Impact On The Demand For Salad Dressing
D. Lead To A Fall In The Supply Of Salad Dressing
E. Lead To A Rise In The Supply Of Salad Dressing
49. Which Of The Following Is For Inferior Goods?
A. The Law Of Demand Does Not Hold
B. They Are Of Low Quality
C. The Demand For Them Falls As Consumer Income Rises
D. All Of The Above
E. None Of The Above
50. An Increase In The Wages Of Orange Pickers Will Have What Effect In The
Market For Oranges?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
51. An Increase In Consumer Income Will Have What Effect On The Equilibrium
Price And Quantity Of Hot Dogs?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
52. An Increase In The Price Of Cars Will Have What Effect On The Equilibrium
Price And Quantity Of Gasoline?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
53. A Technological Advance In The Production Of Computers Will Have What
Effect On The Equilibrium Price And Quantity In The Computer Market?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
54. A Publicized Report That Finds Orange Juice Prevents Certain Diseases Will Have
What Effect On The Equilibrium Price And Quantity Of Orange Juice?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
55. As The Baby Boom Generation Continues To Age, What Will Happen To The
Equilibrium Price And Quantity Of Homes In Retirement Communities?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
56. If Consumers Expect An Increase In The Price Of Coffee Next Month, What Will
Happen To The Equilibrium Price And Quantity Of Coffee This Month?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
57. The Entry Of New Firms Into A Market, All Other Things Equal, Will Have What
Effect On Equilibrium Price And Quantity?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
58. An Increase In The Price Of Flashlights Will Have What Effect On The
Equilibrium Price And Quantity Of Batteries?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
59. If The Price Of Film Increases At The Same Time The Cost Of Camera Production
Increases, What Will Happen To The Equilibrium Price And Quantity In The Camera
Market?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
60. If There Is A Technological Advance In The Production Of Paper At The Same
Time Consumer Income Increases (Assume Paper Is A Normal Good), What Will
Happen In The Market For Paper?
A. Price Will Increase, Quantity Will Decrease
B. Price Will Increase, Quantity Will Increase
C. Price Will Decrease, Quantity Will Decrease
D. Price Will Decrease, Quantity Will Increase
E. The New Equilibrium Price And Quantity Can Not Be Determined
61. Suppose The United Auto Workers Union Successfully Lobbies Congress To
Enact An Import Quota On All Foreign Cars Imported Into The U.S. Which Of The
Following Is Most Likely To Occur In The U.S.?
A. A Fall In The Price Of Imported Cars And Increase In The Price Of Domestics
B. An Increase In The Demand For Domestic Cars
C. A Decrease In American Autoworker Wages
D. Higher Unemployment Among American Autoworkers
E. A Fall In The Demand For Imports
62. As Consumer Incomes Rise, The Demand Curve For Good X Shifts To The Right.
Given This, Good X Must Be
A. Produced By A Competitive Firm
B. A High Quality Product
C. A Substitute Good
D. A Normal Good
E. An Inferior Good
63. Since 1990, China's Growth Has Been
A. Roughly Equal To That Of The United States
B. Declining
C. In The Double Digits
D. About 3% Per Year
E. None Of The Above
64. China's Growth Has Been A Result Of
A. Increased Domestic Demand
B. Rapidly Increasing Inflation
C. Investment In Other Economies
D. Trade Deficits
E. Trade Surpluses
65. Since 1990, Foreign Investment In China Has
A. Increased Slightly
B. Increased Significantly
C. Been Unchanged
D. Decreased Slightly
E. Decreased Significantly
66. China Can Be Best Described As A
A. Market Economy
B. Mixed Economy
C. Transitional Economy
D. Competitive Economy
E. Monopoly Economy
67. From A Standpoint Of Resource Allocation, A Surplus Of Corn Implies
A. Consumers Would Prefer Some Of The Resources Used To Produce Corn Be Used
To Produce Something Else
B. The Market For Agricultural Products Is Failing
C. Government Should Purchase The Surplus To Protect The Farmers
D. The Price Of Corn Is Too Low And Should Be Increased
E. The Quantity Demanded Of Corn Exceeds The Quantity Supplied
68. After Establishing The Republic Of China In 1949, Mao's Communist Party
Patterned The Chinese Economy After
A. Japan
B. Taiwan
C. The Ussr
D. The United States
E. Europe
69. Following The Establishment Of A Soviet Style Society In 1949, The State
Planning Commission Was Created By
A. Chiang Kai-Shek
B. Deng Xiaoping
C. Mao Zedong
D. Joseph Stalin
E. Wen Jiabao
70. The State Planning Commission In China Has The Task Of
A. Determining What Goods And Services Should Be Produced
B. Determining What Quantities Of Goods And Services Are Produced
C. Determining The Allocation Of Resources Used In The Production Of Goods And
Services
D. How The Goods And Services Are To Be Distributed
E. Performing All Of The Tasks Listed Above
71. The Economy Of The People’s Republic Of China Operated As A Command
Economy
A. From 1917 Until 1949
B. From 1949 Until 1978
C. Since 1990
D. From 1949 Until 1962
E. Which Started China's Transition To A Market Economy
72. China’s Transition To A Market-Oriented Economy
A. Was Completed By Around 2004
B. Was Abandoned In 2010 And The Country Has Returned To Command Economy
C. Has Resulted In Relatively Low Rates Of Economic Growth
D. Did Not Lead To Any Problems With Inflation Or Unemployment
E. Did Not Lead To Any Problems With Corruption
73. In A Market Economy, A Shortage Of Wheat Will Cause The
A. Price Of Bread To Rise
B. Price Of Bread To Fall
C. Price Of Wheat To Fall
D. Supply Of Bread To Increase
E. Supply Of Wheat To Fall
74. Which Of The Following Was Not A Problem For China's Centralized Economy?
A. Informational Requirements
B. Incentives For Efficiency
C. The Emphasis On Heavy Machinery Production
D. Low Quality Products
E. None Of The Above (They Were All Problems)
75. If The Demand Curve For Bran Muffins Has Shifted Out Due To A Medical Study
That Indicates That Regular Consumption Of Bran Lowers Cholesterol, Then We Can
Conclude That There Has Been
A. A Response To The Increase Demand For A Complementary Good
B. A Change In Consumer Tastes
C. A Reduction In The Production Costs Of Bran
D. An Increase In Consumer Expectations
E. An Improvement In The Economy, Resulting In Higher Incomes
76. Consumer Purchases Of Hybrid Cars Have Risen Sharply In Recent Years. One
Important Factor In This Increased Demand For These Vehicles Is
A. It's Cool To Be "Green" And Drive A Hybrid
B. Decreasing Prices Of A Complementary Good
C. Change In Expectations Based Upon The Belief That Energy Prices Will Rise In
The Future
D. Reduced Availability Of A Substitute
E. Government Fuel Mandates
True / False Questions
77. Mao Zedong Started China's Transition To A Market Economy
78. Private Ownership Of An Economy's Resources Is A Defining Feature Of The
Pure Market Economy
79. The Institution Of Private Property Rights Is An Essential Feature Of The Market
Economy
80. The U.S. Is Best Described As A Pure Market Economy
81. In The Pure Command Economy, Most Resource Use Decisions Are Made By
Government
82. In A Market Economy, Price Fluctuations Indicate There Is A Lack Of Effective
Competition
83. For A Market To Be Considered Purely Competitive, New Rivals Must Be Free To
Enter If They Feel They Can Effectively Compete
84. Blocked Entry Is Essential For A Purely Competitive Market
85. Entry Is Blocked In Monopoly Markets
86. In Response To An Increase In The Price Of Beer, Bob Reduces His Consumption
From 3 To 2 Beers Per Day. This Reflects A Reduction In Bob's Demand For Beer
87. Surpluses Tend To Drive Competitive Prices Downward Toward Equilibrium, And
Shortages Tend To Drive Competitive Prices Upward Toward Equilibrium
88. When The Entire Demand Curve Shifts Out To The Right, We Say There Has
Been An Increase In Demand
89. A Change In Supply Occurs When One Of The Other Things Equal Changes And
Is Represented As Movement Along The Supply Curve
90. A Change In The Price Of Automobiles Will Cause A Change In The Demand For
Automobiles
91. Demand Is The Quantity Of A Product Per Time Period That Buyers Will Buy At
The Prevailing Price, Other Things Equal
92. The Law Of Demand States That Consumers Will Buy Less At Lower Prices, But
Only If A Number Of Other Things Are Held Constant
93. The Law Of Supply States That Sellers Will Sell More At High Prices Than At
Low Prices
94. When An Economist Says That The Demand For A Product Has Increased, This
Means That Consumers Are Now Willing To Purchase More Of The Product At Each
Alternative Price
95. An Increase In The Price Of A Good Will Decrease Demand For The Good
96. An Increase In The Supply Of A Good Will Increase Demand For The Good
97. An Increase In Consumer Income Can Either Increase Or Decrease Demand For A
Good
98. During December Each Year, The Number Of Christmas Trees Sold Increases, As
Does The Price Of The Trees. This Clearly Violates The Law Of Demand
99. An Increase In The Demand For Gasoline Accompanied By A Decrease In The
Supply Of Gasoline Will Cause The Price To Rise, But May Cause The Quantity
Purchased To Increase, Decrease, Or Remain The Same
100. Fluctuating Prices Tend To Confuse Consumers, So Prices Should Be
Government Controlled Whenever Possible
101. An Increase In The Price Of Gas Will Cause An Increase In The Supply Of Gas
Since It Will Be More Profitable To Sell
102. The Demand Curve For An Inferior Good Is Upward Sloping, Like A Typical
Supply Curve
103. When There Is An Increase In Both Supply And Demand, It Is Impossible To
Determine What Happens To The Equilibrium Price Unless The Magnitudes Of The
Supply And Demand Changes Are Known
104. During The 1992 Presidential Campaign, Ross Perot Recommended A 50-CentsPer-Gallon Increase In The Tax On Gasoline. Such An Increase Would Have Little Or
No Effect On The Quantity Of Gas Sold Since We Have Few Options To Driving
105. If You Buy More Of A Good As A Result Of An Increase In Income, The Good Is
Known As A Consumer Good
106. Appliances And Electricity Are An Example Of Complementary Goods
107. An Increase In The Supply Of A Good Will Increase The Price Of The Good,
Other Things Being Equal
108. When Both Supply And Demand Increase, Price And Quantity Will Increase
109. Shortages Of A Particular Good Can Be Expected To Lead To Rising Prices And
Increased Production For That Good In A Market Economy
110. Shortages Of A Particular Good Can Be Expected To Lead To Decreasing Prices
And Lower Production For That Good In A Market Economy
111. In The Short Run, An Increase In Demand For A Good Will Result In Higher
Prices In A Market Economy
112. In The Short Run, An Increase In Demand For A Good Will Result In Long Lines
In A Command Economy
113. In The Long Run, An Increase In The Demand For A Good Will Result In An
Increase In Supply Of The Good In A Market Economy
114. In The Long Run, An Increase In The Demand For A Good Will Result In An
Increase In Supply Of The Good In A Command Economy
115. If The Demand For A Good Increases In A Monopoly Market, Price Will Rise
And Firms Will Enter The Industry In The Long Run
116. China's Transition To A Market Economy Began In 1990.
117. Command Economies Introduce Incentives For Efficient Production
118. Under The Great Leap Forward, The Task Of Determining How Much To
Produce Fell On The State Planning Commission
119. The Chinese Communist Party Favored Production In The Heavy Industry
Sectors Of The Economy
120. In 1978, Deng Xiaoping Started The Process Of Transitioning China To A
"Socialist Market Economy."
121. While The Superiority Of The Market Orientation Seems Clear, It Is Equally
Clear That The Transition From A Command To A Market Economy Is Very Difficult
122. China's Transition To A Market Orientation Has Been Relatively Problem-Free
123. China's Transition To A Market Orientation Began With Agricultural Reform
124. China's Transitional Economy Is Free Of Unemployment And Inflation
125. 15 Of The 20 Cities With The Highest Levels Of Air Pollution Are In China.
Chapter 03
Government Control Of Prices In Mixed Systems: Who Are The Winners And
Losers?
Multiple Choice Questions
1. In A Market Economy, If The Market Supply Of A Product Decreases Relative To
Its Demand, The Product's Price Will
A. Fall
B. Rise
C. Be Unchanged
D. Fall And Then Rise
E. Rise And Then Fall
2. In A Mixed Economy, Governments May Intervene In Markets In Which Of The
Following Ways?
A. Price Ceilings
B. Minimum Wages
C. Agricultural Price Supports
D. Both A) And B)
E. All Of The Above
3. Which Of The Following Is Of How Markets React To Government Intervention?
They React
A. To Provide The Intended Results
B. In Ways That Offset Intended Impacts
C. Quickly To Reverse Intended Effects
D. In Completely Unpredictable Ways
E. So Slowly That Policies Never Work As They Are Intended
4. The Consequences Of Government Intervention
A. Are Generally As Planned By Policy Makers
B. Often Involve Unintended Consequences
C. Fall On Low Income Individuals
D. Are Not Felt Until The Next Fiscal Year
E. Serve To Increase Efficiency In Markets
5. A Maximum Allowable Price For A Good Or Service Is A
A. Price Ceiling
B. Price Floor
C. Minimum Wage
D. Market Equilibrium
E. Price Support
6. To Be Effective, A Price Ceiling Must Be Set
A. By The Market
B. Above Equilibrium
C. Below Equilibrium
D. At Equilibrium
E. By Producers
7. The Purpose Of A Price Ceiling May Be To Hold Down
A. Inflation
B. Unemployment
C. Interest Rates
D. Wages
E. All Of The Above
8. Price Ceilings May Be Used On A Selective Basis To
A. Control Inflation In The Economy
B. Make A Good Cheaper To Produce
C. Boost The Income Of Firms
D. Make A Good Accessible To All Income Levels
E. Increase Workers' Incomes
9. During The 1970's About How Many Cities In The U.S. Had Rent Controls?
A. 1,000
B. 200
C. 50
D. 15
E. 5
10. One Of The Earliest Known Rent Control Laws Was Instituted In Which City And
When?
A. New York At The Start Of Wwii
B. Washington D.C. During The Civil War
C. Paris In The 1700s
D. Rome In The 1400s
E. Chicago During The Great Depression
11. A Minimum Allowable Price For A Good Or Service Is Known As
A. A Price Floor
B. A Minimum Wage
C. A Price Support
D. All Of The Above
E. None Of The Above
12. Price Floors Are Often Instituted For Which Of The Following Purposes?
A. To Prevent Inflation
B. To Make Goods And Services Accessible To All Income Levels
C. To Increase The Income Of Sellers
D. To Increase The Wages Of Workers
E. To Do All Of The Above
13. Which Of The Following Is Of The First U.S. Minimum Wage?
A. It Was Set Under The Fair Labor Standards Act
B. It Was Instituted In 1938
C. It Set The Minimum Wage At 25 Cents Per Hour
D. It Applied Only To Certain Designated Industries
E. All Of The Above
14. In 1981, The U.S. Federal Minimum Wage Was Increased To
A. $2.00 Per Hour
B. $2.50 Per Hour
C. $3.35 Per Hour
D. $4.00 Per Hour
E. $5.15 Per Hour
15. Which Of The Following Is Of The U.S. Minimum Wage Over The 1980s And
1990s?
A. It Was Unchanged
B. It Increased Significantly Through The 1980s And Was Constant Through The
1990s
C. It Was Constant Through The 1980s And Then Increased Significantly Through
The 1990s
D. It Fell During The 1990s
E. It Was Eliminated In The 1990s
16. As Of Summer 2009, The U.S. Federal Minimum Wage Is Set At What Rate Per
Hour?
A. $5.15
B. $5.85
C. $6.55
D. $7.25
E. $8.00
17. Some States Also Have Their Own Minimum Wage Legislation. Generally These
Laws Set The State Minimum Wage
A. Above The Federal Minimum Wage
B. Below The Federal Minimum Wage
C. Equal To The Federal Minimum Wage
D. To Either A) Or C)
E. To Any Of The Above
18. As The Price Of Rental Housing Falls, Which Of The Following Occurs?
A. The Quantity Demanded Of Housing Increases
B. People Take In Roommates To Share Costs
C. Individuals Move Back In With Their Families
D. More Rental Housing Is Constructed
E. All Of The Above
19. As The Price Of Rental Housing Increases, Which Of The Following Will
Happen?
A. Property Will Be Switched From Commercial Property To Rental Housing
B. More Rental Housing Will Be Built
C. Renters Will Be Induced To Buy Housing
D. The Average Number Of Renters Per Rental Unit Will Increase
E. All Of The Above
Questions 20 - 24 Refer To The Graph Below.
20. If The Demand For Rental Housing Is Dd And The Supply Of Rental Housing Is
Ss, The Equilibrium Rent And Quantity (Number Of Units In Thousands) Are
A. $800 And 25
B. $625 And 30
C. $600 And 20
D. $400 And 25
E. $600 And 25
21. If Demand And Supply Are Dd And Ss And Demand Increases To D1d1, The New
Equilibrium Rent And Quantity (Number Of Units In Thousands) Are
A. $800 And 25
B. $625 And 30
C. $600 And 20
D. $400 And 25
E. $600 And 25
22. An Increase In Rent That Leads To Increased Profitability Of Producing Rental
Housing Will Lead To Which Of The Following Shifts In The Long Run?
A. Dd To D1d1
B. D1d1 To Dd
C. S1s1 To Ss
D. Ss To S1s1
E. None Of The Above
23. If The Supply And Demand For Rental Housing Are Dd And Ss, What Effect Will
A Rent Control Law That Sets The Maximum Allowable Rent At $400 Have On The
Market? It Will Lead To
A. A Surplus Of 5 Thousand Units
B. A Shortage Of 5 Thousand Units
C. A Surplus Of 10 Thousand Units
D. A Shortage Of 10 Thousand Units
E. No Change In Equilibrium Rent Or Quantity
24. If The Supply And Demand For Rental Housing Are Dd And Ss, What Effect Will
A Rent Control Law That Sets The Maximum Allowable Rent At $800 Have On The
Market? It Will Lead To
A. A Surplus Of 5 Thousand Units
B. A Shortage Of 5 Thousand Units
C. A Surplus Of 10 Thousand Units
D. A Shortage Of 10 Thousand Units
E. No Change In Equilibrium Rent Or Quantity
25. If People Are Forced To Commute As A Result Of A Rent Control Law In A City,
Which Of The Following Results? An Increase In
A. Rent Paid By Commuters
B. Direct Commuting Costs
C. Opportunity Costs For Commuters
D. Pollution And Traffic Congestion In Cities
E. All Of The Above
26. Rent Control Laws Will _____________ The Search Costs Of Potential Renters.
A. Increase
B. Decrease
C. Eliminate
D. Mitigate
E. Reimburse
Questions 27 - 32 Refer To The Graph Below.
27. The Equilibrium Rent And Quantity (1,000s Of Units) Are
A. $900 And 30
B. $750 And 40
C. $600 And 30
D. $900 And 50
E. $600 And 50
28. If Rent Is Controlled At $900, The Quantity Of Rental Housing Demanded Will
Be
A. 0
B. 30
C. 40
D. 50
E. More Than 50
29. If Rent Is Controlled At $600, The Quantity Of Rental Housing Demanded Will
Be
A. 0
B. 30
C. 40
D. 50
E. More Than 50
30. If Rent Is Controlled At $900, The Quantity Of Rental Housing Supplied Will Be
A. 0
B. 30
C. 40
D. 50
E. More Than 50
31. If Rent Is Controlled At $600, The Quantity Of Rental Housing Supplied Will Be
A. 0
B. 30
C. 40
D. 50
E. More Than 50
32. If Rent Is Controlled At $600, There Will Be A ______ Equal To ____ Thousand
Units In The Market.
A. Surplus; 10
B. Surplus; 20
C. Shortage; 10
D. Shortage; 20
E. Excess Supply; 10
33. Rent Control Laws May Lead To Which Of The Following Unintended Effects?
A. Under-The-Table Payments
B. Increased Forced Commuting
C. Higher Search Costs
D. Lost Profit Incentives To Change The Supply Of Rental Housing
E. All Of The Above
34. Owners Of Rent Controlled Property May Attempt To Increase Profits By
A. Raising Rents
B. Improving The Quality Of Their Rental Units
C. Taking Under-The-Table Payments
D. Converting Commercial Properties To Rental Properties
E. All Of The Above
35. In The Short-Run, Who "Wins" From Rent Control Laws?
A. All People Who Want To Rent Housing
B. Owners Of Rent Controlled Property
C. People Who Buy Housing
D. Governments That Pay To Enforce Rent Control Laws
E. None Of The Above
36. In The Short-Run, Who "Loses" From Rent Control Laws?
A. Those Who Cannot Find Rental Housing
B. People Who Are Forced To Commute
C. Individuals Who Experience Increased Search Costs For Rental Housing
D. Those Who Must Make Under-The-Table Payments To Secure Rental Housing
E. All Of The Above
37. The Demand For Labor Is A Derived Demand Because It Is Dependent On
A. The Demand For The Product Being Produced
B. The Marginal Revenue Of The Product Being Produced
C. The Marginal Productivity Of The Workers Producing The Product
D. All Of The Above
E. None Of The Above
38. The Additional Revenue That Accrues To A Firm When An Additional Worker Is
Hired Is
A. The Marginal Revenue Product Of Labor
B. The Marginal Product Of Labor
C. The Marginal Revenue Of Labor
D. The Marginal Utility Of Labor
E. None Of The Above
39. The Marginal Product Of Labor Is The Additional
A. Revenue Received When A Worker's Output Is Sold
B. Production Cost Of Hiring An Additional Labor
C. Output Produced As A Result Of Giving Workers Additional Capital
D. Output Produced As A Result Of Hiring An Additional Worker
E. Product Developed As A Result Of Ideas Generated By Workers
40. The Additional Revenue A Firm Receives As A Result Of Selling An Additional
Unit Of Output Is Called
A. Price
B. Profit
C. Total Revenue
D. Marginal Revenue
E. Marginal Revenue Product
41. A Firm Increases The Number Of Workers It Hires From 50 To 52 And, As A
Result, Output Increases From 100 To 110. Each Of The Additional Units Of Output
Can Be Sold For $2. What Is The Marginal Product Of The 52nd Worker?
A. 2
B. 5
C. 10
D. 20
E. 50
42. A Firm Increases The Number Of Workers It Hires From 50 To 52 And, As A
Result, Output Increases From 100 To 110. Each Of The Additional Units Of Output
Can Be Sold For $2. What Is Marginal Revenue For The Last 10 Units Produced?
A. 2
B. 5
C. 10
D. 20
E. 50
43. A Firm Increases The Number Of Workers It Hires From 50 To 52, And As A
Result, Output Increases From 100 To 110. Each Of The Additional Units Of Output
Can Be Sold For $2. What Is The Marginal Revenue Product Of The 52nd Worker?
A. 2
B. 5
C. 10
D. 20
E. 50
44. The Law Of Diminishing Returns States That, As Additional Units Of A Variable
Input Are Added To A Given Amount Of A Fixed Input, Increases In Output Will
A. Increase
B. Decline
C. Stay The Same
D. Accelerate
E. Become Erratic
45. A Firm Has A Given Amount Of Capital. When It Hires 10 Workers, Output Is 30.
When It Hires 11 Workers, Output Is 40. If The Law Of Diminishing Returns Applies,
Which Of The Following Is The Most Likely Amount Of Output When The Firm
Hires 12 Workers?
A. 70
B. 60
C. 50
D. 45
E. -10
46. Which Of The Following Represents The Demand Curve For Labor For A Firm?
A. The Mr Curve
B. The Mp Curve
C. The Mrp Curve
D. The Mc Curve
E. None Of The Above
Questions 47 - 51 Refer To The Table Below.
47. The Marginal Product Of The 4th Worker Is
A. 20
B. 40
C. 100
D. 140
E. 160
48. If Each Unit Of Output Is Sold For $5, The Marginal Revenue Of The Second
Unit Of Output Sold Is
A. $5
B. $10
C. $40
D. $50
E. $200
49. The Marginal Product Of The First Worker Is
A. 0
B. 10
C. 40
D. 50
E. Unable To Be Determined
50. If Each Unit Of Output Is Sold For $5, The Marginal Revenue Product Of The 3rd
Worker Is
A. 5
B. 50
C. 200
D. 250
E. 300
51. If Each Unit Of Output Is Sold For $2, The Marginal Revenue Product Of The 6th
Worker Is
A. 2
B. 4
C. 10
D. 20
E. 170
52. As The Wage Increases, A Worker Will Choose To Work
A. More
B. Less
C. The Same Amount
D. Overtime
E. An Amount That Cannot Be Determined
53. A Change In The Hours Of Work That Occurs In Response To A Wage Change,
Other Things Equal, Is Known As The
A. Supply Of Labor
B. Substitution Effect
C. Income Effect
D. Wage Effect
E. Opportunity Cost Of Labor
54. An Increase In The Wage From $6 Per Hour To $6.50 Per Hour Causes A Worker
To Increase Her Hours Worked From 40 To 45 Hours Per Week. For This Worker,
Which Effect Dominates?
A. Substitution
B. Income
C. Wage
D. Wealth
E. Leisure
55. Which Of The Following Measures The Change In The Hours Of Work That
Occurs When There Is A Change In Income, Other Things Equal?
A. The Supply Of Labor Curve
B. The Substitution Effect
C. The Income Effect
D. Marginal Productivity
E. The Wage Effect
56. If An Increase In The Wage Rate From $6.00 Per Hour To $6.50 Per Hour Causes
A Worker To Decrease His Hours Worked From 40 To 35 Hours Per Week, Which
Effect Dominates?
A. Substitution
B. Income
C. Wage
D. Wealth
E. Leisure
57. Which Effect Dominates If A Workers Supply Curve For Labor Is Negatively
Sloped?
A. Substitution
B. Income
C. Wage
D. Wealth
E. Leisure
Questions 58 - 63 Refer To The Graph Below.
58. Equilibrium Wage And Quantity In The Labor Market Are
A. $3 And 8
B. $5 And 22
C. $7 And 16
D. $10 And 8
E. $10 And 22
59. At A Wage Of $10, The Mrp Of Labor Is
A. $8
B. $10
C. $80
D. $216
E. Impossible To Determine Using This Graph
60. If The Wage Rate Is $10, What Is The Quantity Of Labor Demanded?
A. 0
B. 8
C. 16
D. 22
E. 25
61. If The Wage Rate Is $10, What Is The Quantity Of Labor Supplied?
A. 0
B. 8
C. 16
D. 22
E. 25
62. If The Wage Rate Is $3, Which Of The Following Will Occur?
A. A Shortage Of 8
B. A Surplus Of 8
C. A Shortage Of 17
D. A Surplus Of 17
E. A Surplus Of 16
63. To Be Effective, A Minimum Wage In This Market Would Have To Be Set
A. Above $7
B. Above $10
C. Below $5
D. Below $7
E. Below $10
Questions 64 - 68 Refer To The Graph Below.
64. A Minimum Wage Set At $12 Per Hour Would Result In A Surplus Of
A. 0
B. 10
C. 20
D. 35
E. None Of The Above
65. A Minimum Wage Of $12 Would Lead To A Quantity Of Labor Demanded Equal
To
A. 0
B. 15
C. 25
D. 35
E. More Than 35
66. A Minimum Wage Of $12 Would Lead To A Quantity Of Labor Supplied Equal
To
A. 0
B. 15
C. 25
D. 35
E. More Than 35
67. A Minimum Wage Set At $4 Would Result In A Shortage Of
A. 0
B. 10
C. 20
D. 35
E. None Of The Above
68. If A Minimum Wage Is Set At $4, The Quantity Of Labor Demanded In The
Market Will Be
A. 0
B. 15
C. 25
D. 35
E. More Than 35
69. Which Of The Following Groups Most Suffers The Costs Of Minimum Wage
Laws?
A. College Graduates
B. Senior Citizens
C. Teenagers
D. Manufacturing Workers
E. Agricultural Workers
70. Which Of The Following Is Of The Minimum Wage?
A. It Has Significantly Reduced Poverty In The United States
B. A Worker Earning The Minimum Wage Will Keep A Family Of Three Out Of
Poverty
C. It Results In A Much More Equal Distribution Of Income In The United States
D. Unemployment Rates Are Unaffected By The Minimum Wage
E. None Of The Above Is
71. Research Suggests That As The Minimum Wage Is Increased By 10%, The
Associated Increase In The Teenage Unemployment Rate Is Nearly
A. 1 Percent
B. 10 Percent
C. 20 Percent
D. 25 Percent
E. 30 Percent
72. The Alternative Analysis Of The Minimum Wage Indicates That Which Of The
Following May Be ?
A. The Demand Curve Is Vertical Over The Relevant Range
B. The Supply Curve Is Vertical Over The Relevant Range
C. There Is Only A Very Slight Unemployment Effect Of A Minimum Wage
D. All Of The Above
E. None Of The Above
73. According To The Alternative Analysis Of The Minimum Wage, Which Of The
Following Might Lead The Demand Curve For Labor To Be Vertical Over The
Relevant Range?
A. Firms Offset Higher Wages By Allowing Longer Lines During Peak Hours
B. Higher Wages Are Offset By Increased Efficiency
C. Prices Are Increased For Goods That Are Not Price-Sensitive
D. All Of The Above
E. None Of The Above
74. Which Of The Following Individuals Lose As A Result Of An Effective Minimum
Wage Law?
A. Those Who Remain Employed After The Minimum Wage Is Instituted
B. Teenagers Who Lose Their Jobs And Valuable On-The-Job Training
C. Skilled Workers Who Earn Wages Above The Minimum Wage
D. All Of The Above
E. None Of The Above
75. If There Is A Price Ceiling Set For Milk At $2.50 Per Gallon And The Current
Equilibrium Price Is $2.25 Per Gallon, Then We Can Conclude
A. That The Price Ceiling Is Doing Its Job, Keeping Prices Low
B. That The Price Ceiling Is Non-Binding And Has No Effect On The Market
Equilibrium
C. That Milk Imports Are Reducing The Price
D. That Grocery Stores Are Afraid To Raise The Price To The Ceiling Level, For Fear
Of Prosecution By The Government
E. That Price Ceilings Set A Minimum Price
76. Given That A Firm Is Selling Its Product In A Competitive Market, Meaning That
Its Marginal Revenue Is Constant, What Would The Law Of Diminishing Returns To
Labor Inputs Imply About The Demand For Labor?
A. That The Demand For Labor Would Be Constant If The Market Is Stable
B. That The Firm Would Pay Increasing Wages To Attract Qualified Employees
C. The Demand Would Diminish With The Output Of New Workers
D. The Demand Curve For Labor Has A Negative Slope Resulting From Declining
Marginal Product
E. The Law Of Diminishing Returns Has No Effect On Labor Demand
77. The Fact That We Observe Positively Sloped Market Labor Supply Curves
Implies That
A. The Substitution Effect Is Stronger That The Income Effect For Most Workers
B. The Income Effect Is Stronger Than The Substitution Effect For Most Workers
C. Most Workers Don't Have Income Or Substitution Effects
D. The Income Effect Plus Substitution Effect Results In The Positive Slope
E. Labor Laws Require Workers To Work At Least 40 Hours Per Week
True / False Questions
78. In A Mixed Economy, Markets Adjust Freely And All Markets Are Cleared.
79. In A Mixed Economy, Governments Intervene In Markets To Affect The Prices Of
Individual Goods.
80. In A Mixed Economy, Governments Intervene In Markets To Control Inflation.
81. Approximately 20 U.S. Cities Have Rent Control Laws.
82. There Are Examples Of Rent Controls From As Early As The 1700s.
83. Many Rent Controls Were Established As A Result Of World War Ii And Were
Kept Even After The War Ended.
84. Some Universities Have Rent Controlled Student Housing.
85. Price Floors Are Instituted To Increase The Income Of Sellers.
86. The 1938 Fair Labor Standards Act Created The First U.S. Rent Control Law.
87. The First U.S. Minimum Wage Was Set At 25 Cents An Hour.
88. The U.S. Minimum Wage Did Not Change Throughout The 1980s And 1990s.
89. All U.S. Workers Are Covered Under The U.S. Minimum Wage Law.
90. Some States Enact Their Own Minimum Wage Laws.
91. The Quantity Of Housing Demanded Does Not Change When Prices Increase
Because People Have To Live Somewhere.
92. In The Short-Run, The Supply Of Housing Can Increase Quickly.
93. A Price Ceiling Must Be Set Above Equilibrium To Have Any Effect On The
Market For Housing.
94. Rent Controls Result In Illegal Payments To Acquire Housing.
95. Rent Controls Decrease Renters' Housing Search Costs.
96. Rent Controls Lead To Increased Commuting.
97. 6 Of The 10 Cities With The Highest Homelessness Have Rent Control Laws.
98. Rent Controls Create Profit Incentives To Increase The Supply Of Rental
Housing.
99. Minimum Housing Standards Prevent Any Property Deterioration In Rent
Controlled Housing.
100. Rent Controls Result In A Misallocation Of Resources.
101. The Majority Of Individuals Support The Minimum Wage.
102. The Minimum Wage Allows An Individual To Earn Enough To Keep A Family
Of Three Above The Poverty Line.
103. Rent Controls Lead To Housing Shortages.
104. Rent Controls Lead To Conversion Of Rental Housing To Commercial Uses.
105. Rent Controls Make Housing More Accessible To Homeless Individuals.
106. The Demand For A Product Is A Derived Demand.
107. If 10 Workers Produce 100 Units Of Output And 11 Workers Produce 108 Units
Of Output, The Marginal Product Of The 11th Worker Is 8.
108. If All Units Of A Firm's Output Sell For $10 Each, Marginal Revenue Is
Constant.
109. The Additional Revenue A Firm Receives As A Result Of Hiring An Additional
Worker Is Mrp.
110. Limited Amounts Of Capital Eventually Lead To Diminishing Returns To Labor.
111. A Firm's Marginal Revenue Curve Is Also Its Demand Curve.
112. As The Wage Increases, The Quantity Of Labor An Individual Supplies Will
Increase.
113. As The Wage Increases, The Quantity Of Labor An Individual Supplies May
Decrease.
114. If A Worker Works More As The Wage Increases, The Substitution Effect Is
Dominating.
115. If A Worker Works More As The Wage Increases, The Income Effect Is
Dominating.
116. If The Supply Of Labor Curve Is Positively Sloped, The Substitution Effect Is
Dominating.
117. If The Supply Curve Of Labor Is Positively Sloped, The Income Effect Is
Dominating.
118. Evidence Indicates The Supply Curve Of Labor Is Positively Sloped.
119. A Surplus Of Labor Is Unemployment.
120. Teenagers Are The Group Most Likely To Work For Minimum Wage.
121. Working For The Minimum Wage Provides Valuable On-The-Job-Training.
122. The Minimum Wage In 2008 Was Approximately 37% Of Average Earnings.
123. The Minimum Wage Is 100% Of The Poverty Level.
124. A 10% Increase In The Minimum Wage Is Estimated To Increase Teenage
Unemployment By 15%.
125. Firms Can Offset Increased Wage Costs Due To An Increase In The Minimum
Wage By Increasing Efficiency.
126. Evidence Indicates The Minimum Wage Has Little Effect On The Income
Distribution.
127. The Supply Of Labor Is Very Responsive To Changes In The Wage.
