ECON101 Fall 2014 Chapter 4 Study Guide

ECON101
Fall 2014
Chapter 4 Study Guide
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Among the methods of nonprice rationing are
A) favored customers.
C) waiting in line.
B) coupons.
D) all of the above
2) The price system
A) requires government help to allocate goods.
C) is inefficient.
B) automatically distributes scarce goods.
D) is the only way to allocate goods.
3) In a "black market,"
A) illegal trading at market prices takes place.
C) only illegal goods and services are traded.
B) suppliers take advantage of buyers.
D) price is illegally below market price.
Refer to the information provided in Figure 4.1 below to answer the questions that follow.
Figure 4.1
4) Refer to Figure 4.1. At the world price of 30 cents per apple the United States imports ________ million
apples per day.
A) 2
B) 4
C) 6
D) 10
5) Refer to Figure 4.1. Assume that initially there is free trade. If the United States then imposes a 10-cent tax
per apple,
A) the price of apples in the United States will increase to 40 cents per apple.
B) the quantity of apples demanded will be reduced by 2 million apples per day.
C) the quantity of apples supplied by U.S. firms will increase by 2 million apples per day.
D) all of the above
6) An example of an ineffective price ceiling would be the government setting the price of wheat at ________
per bushel when the market price is at $5.00 per bushel.
A) $2.25
B) $3.00
C) $4.75
D) $6.00
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7) An example of a price ceiling would be the government setting the price of sugar
A) above the equilibrium market price.
B) below the equilibrium market price.
C) at the equilibrium market price.
D) none of the above
8) The adjustment of ________ is the rationing mechanism in market economies.
A) quantity
B) supply
C) demand
D) price
9) A price floor is
A) a minimum price set by government that sellers must charge for a good.
B) the difference between the initial equilibrium price and the equilibrium price after a decrease in
supply.
C) a maximum price set by government that sellers may charge for a good.
D) the minimum price that consumers are willing to pay for a good.
Refer to the information provided in Figure 4.3 below to answer the questions that follow.
Figure 4.3
10) Refer to Figure 4.3. An example of an effective price floor would be the government setting the price of
pencils at
A) $0.00.
B) $0.40.
C) $0.45.
D) $0.50.
11) If the most someone is willing to pay for ticket to see their favorite team is $100 and the market price of the
ticket is $35, then this buyer will get consumer surplus of
A) 1 ticket.
B) $35.
C) $65.
D) $100.
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Refer to the information provided in Figure 4.6 below to answer the questions that follow.
Equilibrium in this market occurs at the intersection of curves S and D.
Figure 4.6
12) In figure 4.6 at equilibrium, consumer surplus is area
A) E+F+G.
B) A+B+C.
C) A.
D) G.
13) In figure 4.6 at equilibrium, producer surplus is area
A) A+B+C.
B) E+F+G.
C) G.
D) A.
14) In figure 4.6 if price is P1, consumer surplus is area
A) G.
B) A.
C) A+B+E.
D) B+C+E+F+G.
15) In figure 4.6 if price is P1, producer surplus is area
A) A.
B) A+B+E.
C) B+E+G.
D) G.
16) In figure 4.6 if price is P1, the deadweight loss due to under production is area
A) F+G.
B) A+C.
C) E+G.
D) C+F
17) In figure 4.6 if price goes from equilibrium to P1, producer surplus changes by the area
A) E+F.
B) B-F.
C) E-C.
D) C+E
18) In figure 4.6 if price goes from equilibrium to P1, consumer surplus changes by the area
A) B-F.
B) E-C.
C) E+F.
D) C+E.
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Answer Key
Testname: STUDY GUIDE 4 F2014
1) D
2) B
3) A
4) C
5) D
6) D
7) B
8) D
9) A
10) D
11) C
12) B
13) B
14) C
15) D
16) D
17) A
18) B
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