Supply and Demand II (The Revenge)

Using the graph above, what is the effect of the government setting the price at P1?
1. It would have no effect.
2. It would create a surplus.
3. It would create a shortage.
4. It would create an equilibrium
5. It would create a deficit.
An effective price floor would
1. be set above the equilibrium price
2. be set below the equilibrium price
3. be set at the equilibrium price
4. create a shortage
5. eliminate all consumer surplus
Market prices are preferred to administered prices by economists for which of the following reasons?
1. Market prices are lower
2. Market prices are higher
3. Market prices are more efficient
4. Market prices are less efficient
5. Market prices create surplus
What will be the effect on equilibrium price and equilibrium quantity if the supply increases and the demand increases?
1. Price will increase, quantity will increase
2. Price will increase, quantity wil decrease
3. Price effect will be indeterminate, quantity will increase
4. Price effect will be indeterminate, quantity will decrease
5. Price effect will be indeterminate, quantity effect will be indeterminate
Changes in which of the following will NOT affect the supply of economics workbooks?
1. The cost of producing economics workbooks
2. The demand for economics workbooks
3. Expectations of future profitability in the economics workbook market
4. A corporate tax on economics workbooks
5. The price of paper
In the graph above, assuming that we begin at point A a movement to point D could be caused by
1. a decrease in the price of hte good
2. in increase in production cost and a decrease in popularity of the good
3. an increase in production cost and an increase in the price of a substitute good
4. an increase in production cost and an incrase in teh price of a complementary good
5. a decrease in production cost and an increase in the price of a complementary good
If the actual price in the figure above is $15, one should conclude that
1. a shortage of 20 exists
2. a shortage of 40 exists
3. a surplus of 10 exists
4. a surplus of 20 exists
5. a surplus of 30 exists
An upward sloping supply curve can be explained by the fact that:
I. Higher prices mean greater profits for a producer.
II. Eventually costs rise as production increases.
III. Consumers find goods more valuable at higher prices.
1. I only
2. II only
3. III only
4. I and II only
5. I, II, and III
An increase in the price of gasoline shifts the demand for tires in which direction?
1. To the left, because gasoline and tire aare substitutes.
2. To the left, because gasoline and tires are normally used together.
3. To the right, because gasoline and tires are substitutes.
4. To the right, because gasoline an tires are normally used together.
5. To the right, becuase an increase in the price of gasoline makes consumers poor and thus not willing to pay as much for tires.
The price of coal fell and the quantity sold also fell. Which of the following events is consistent with this observation (everything else equal)?
1. the price of oil fell
2. large wage increase to coal miners
3. installation of more efficient coal mining equipment
4. consumer incomes rose
5. the demand curve was inelastic

Supply and Demand II (The Revenge)

Quiz