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Exam 5: Markets in Action

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Question 51

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$\text { Demand and Supply Schedules for Chocolate Bars }$ $\begin{array}{|c|c|c|}\hline \begin{array}{c}\text { Price } \\(\$) \end{array} & \begin{array}{c}\text { Quantity Demanded } \\\text { (thousandsperweek) }\end{array} & \begin{array}{c}\text { Quantity Supplied } \\\text { (thousands per week) }\end{array} \\\hline 2.00 & 1500 & 2100 \\\hline 1.80 & 1600 & 2050 \\\hline 1.60 & 1700 & 2000 \\\hline 1.40 & 1800 & 1950 \\\hline 1.20 & 1900 & 1900 \\\hline 1.00 & 2000 & 1850 \\\hline 0.80 & 2100 & 1800 \\\hline 0.60 & 2200 & 1750 \\\hline 0.40 & 2300 & 1700 \\\hline\end{array}$ $\text { TABLE 5-1 }$ -Refer to Table 5- 1. Suppose that as a public- health measure the government wants to reduce the number of chocolate bars that children consume. To achieve this outcome the government could implement which of the following policies?

A) Impose an equilibrium price of $1.20.
B) Impose a price ceiling of $2.00.
C) Impose a price floor of $1.80.
D) Impose an equilibrium price of $1.80.
E) Impose a price ceiling of $1.80.

F) A) and D)
G) B) and D)

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Question 52

Multiple Choice

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FIGURE 5- 3 -Refer to Figure 5- 3. If the government imposes a price floor at P3, the result would be a price and quantity combination of

A) P1 and Q0.
B) P3 and Q0.
C) P3 and Q3.
D) P2and Q1.
E) P3 and Q4.

F) C) and D)
G) A) and D)

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Question 53

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Consider a market that is in equilibrium with a market- clearing price. Economic surplus is shown by

Each point on a supply curve shows the _ _ acceptable price to firms for selling that unit; this price reflects to firms from producing that unit.

$\text { Demand and Supply Schedules for Chocolate Bars }$ $\begin{array}{|c|c|c|}\hline \begin{array}{c}\text { Price } \\(\$) \end{array} & \begin{array}{c}\text { Quantity Demanded } \\\text { (thousandsperweek) }\end{array} & \begin{array}{c}\text { Quantity Supplied } \\\text { (thousands per week) }\end{array} \\\hline 2.00 & 1500 & 2100 \\\hline 1.80 & 1600 & 2050 \\\hline 1.60 & 1700 & 2000 \\\hline 1.40 & 1800 & 1950 \\\hline 1.20 & 1900 & 1900 \\\hline 1.00 & 2000 & 1850 \\\hline 0.80 & 2100 & 1800 \\\hline 0.60 & 2200 & 1750 \\\hline 0.40 & 2300 & 1700 \\\hline\end{array}$ $\text { TABLE 5-1 }$ -Refer to Table 5- 1. Suppose the government imposed a price of $0.60 per chocolate bar. The result would be

The long- run elasticity of supply of rental housing is greater than the short- run elasticity of supply because

In free and competitive markets, surpluses are eliminated by

One measure of market inefficiency is

In competitive markets, price floors and price ceilings usually lead to

An excess demand for some product is the same thing as

Consider the following demand and supply schedules for some agricultural commodity. $\begin{array}{l}\begin{array} { | l | l | l | } \hline \text { Price } & \begin{array} { l } \text { Quantity } \\\text { Supplied }\end{array} & \begin{array} { l } \text { Quantity } \\\text { Demanded }\end{array} \\\hline \$ 10 & 300 & 1100 \\\hline \$ 30 & 500 & 900 \\\hline \$ 50 & 700 & 700 \\\hline \$ 70 & 900 & 500 \\\hline \$ 90 & 1100 & 300 \\\hline \$ 110 & 1300 & 100 \\\hline\end{array}\\\text { TABLE 5- } 2\end{array}$ -Refer to Table 5- 2. Suppose we begin in a free- market equilibrium. If the government then imposes a production quota of 500 units, total farmers' income

In the short run, the supply of rental accommodations tends to be

FIGURE 5- 7 -Refer to Figure 5- 7. The market for good X is in equilibrium at P0 and Q0. Now suppose the government imposes a at P2. One result would be .

FIGURE 5- 6 -Refer to Figure 5- 6. The market for good X is in equilibrium at P0 and Q0. Economic surplus is represented by

Each point on a demand curve shows the quantity. The demand curve therefore shows the product.

The short- run supply for housing is quite while the long- run supply for housing is quite .

An excess supply of some product is the same thing as

FIGURE 5- 1 -Refer to Figure 5- 1. To be binding, a legal price ceiling must lie

With respect to some commodity, X, if government objectives are to (1) restrict production and (2) keep prices down to protect consumers, then legislated price ceilings will

If the government imposes a price ceiling for some product, and a black market subsequently develops that gains control of all of the reduced output of the product, then