Quiz 5:

1) The central problem of every economic system is to

A) to transform mere wants into genuine needs.

B) get people to cooperate effectively in using what is available to provide what is wanted.

C) get people to see that what is available is all that is necessary.

D) increase the number of jobs available.

2) Pencils are produced in the market economy

A) only because people need pencils.

B) only because pencil production is centrally planned, from the growing of the trees and mining of the graphite to the final stages of pencil assembly.

C) even though the final assemblers of pencils have no idea how to produce the paint, graphite, wood, rubber, and metal ferrules.

D) by government decree.

3) The process of supply and demand

A) guarantees shortages or surpluses will never exist.

B) guarantees the greatest amount of social happiness.

C) ensures that people will be able to obtain all that they need.

D) generates useful information regarding the relative scarcities of goods and services.

4) If the supply curve illustrates the quantities producers plan to sell at given prices, and the demand curve illustrates the quantities consumers plan to buy at given prices, then the plans of producers and consumers are fully coordinated at the point where

A) the supply curve lies above the demand curve.

B) the supply curve intersects the demand curve.

C) the demand curve lies above the supply curve.

D) the amount of a good needed by consumers exactly equals the amount supplied by producers.

5) When demand for a product increases,

A)suppliers change their plans.

B) demanders change their plans.

C) the price changes.

D) all of the above occur.

6) If there is a shortage of gasoline, then

A) the purchase plans of buyers are not being fully achieved.

B) buyers will tend to compete amongst themselves for more gasoline.

C) the price of gasoline will tend to rise.

D) all the above are true.

7) DVD players have become more abundant, and cheaper, over the past few years. Explain the decline in DVD player prices.

A) DVD manufacturers have become less interested in trying to maximize their profits.

B) The demand curve for DVDs has shifted to the left.

C) The supply curve for DVDs has shifted to the right.

D) The supply curve for DVDs has shifted to the left.

8) Suppose the market clearing price for apples falls from $3.00 to $2.00 per pound, and the overall market clearing output decreases from 1 million to 1/2 million pounds. How can we explain the fall in price and fall in market output?

A) Supply decreased and demand remained unchanged.

B) Supply remained unchanged and demand decreased.

C) Demand increased and supply remained unchanged.

D) Demand remained unchanged and supply increased.

9) If a severe drought causes the harvest of corn to be 10 percent less than anticipated, it will cause a large increase in the price of corn if

A) corn is scarce.

B) the demand for corn is highly elastic.

C) the demand for corn is highly inelastic.

D) the supply of corn is highly elastic.

10) If you travel through the western United States in the summer, you are much more likely to encounter a shortage of camping spaces than a shortage of motel rooms because

A) camping sites are usually less expensive than motel rooms.

B) motels are more often privately owned.

C) the government has not provided as many camping spaces as the public wants.

D) there are more motel rooms than camping spaces.

11) When scarce goods are allocated according to some generally known criteria,

A) no one is discriminated against as long as the criteria are socially and legally accepted.

B) people will compete to satisfy the criteria.

C) rationing of scarce goods becomes unnecessary.

D) surpluses almost inevitably appear.

12) Which statement best describes the relationship between scarcity and shortage?

A) Neither scarcity nor shortages will exist if money prices are allowed to determine who gets what.

B) Scarcity and shortages are unavoidable as long as money prices are allowed to determine who gets what.

C) Scarcity is an inescapable fact of life but shortages are avoidable.

D) Shortages are an inescapable fact of life but scarcity can be eliminated.

13) If 80,000 people want tickets to the World Series at the current price, and there are only 55,000 tickets available,

A) the cost of obtaining a ticket for someone who doesn't yet have one will be greater than the price stamped on its face.

B) the demand for tickets is highly elastic.

C) the price is too low.

D) the quantity purchased will be greater than the quantity supplied.

14) Effective cooperation among the members of a commercial society is more likely when

A) economic decisions are placed in the hands of democratically-elected committees.

B) everyone's income is approximately the same.

C) people produce for use rather than for profit.

D) prices do not change in response to temporary changes in circumstances.

E) property rights are clearly defined.

15) Which institution tends to increase specialization in society?

A) Barter

B) Government planning bureaus

C) Money

D) Price regulation

16) Interest is most fundamentally a measure of

A) the cost of money.

B) the scarcity of money.

C) the greater subjective value of present over future goods.

D) all of the above.

17) Suppose the nominal interest rate is 15% and the rate of inflation is 3%. The real interest rate is therefore

A) 3%.

B) 5%.

C) 12%.

D) 18%.

Quiz 6:

1)During crisis periods, such as major snowstorms, the prices of basic goods, such as bread and milk rise. The price increases are clear evidence of

A) price gouging.

B) government regulation.

C) the market making it possible for the people who place the highest monetary value on bread and milk get bread and milk.

D) corruption.

2) When the market clearing price of gasoline after a hurricane spikes to $6.00 but legislators enact "anti-gouging" legislation that keeps prices at $4,

A)consumers as a whole will tend to benefit.

B) producers will have less incentive to bring gasoline to the areas where gasoline is most highly valued.

C) government will ensure that no shortages will develop.

D) gasoline will be easier to purchase.

3) Which would be an example of a price ceiling?

A) rent controls.

B) a legally-specified maximum interest rate on student loans.

C) government-mandated lower prices and fees charged by physicians.

D) all of the above.

4) When a government mandate sets the rental price of an apartment below the market clearing level, which of the following result?

A) A shortage

B) A surplus

C) Scarcity

D) The outcome is unknowable.

5) Why do landlords tend to discriminate against a person's race, religion, or age more when rent controls are imposed?

A) Landlords are naturally racist and bigoted.

B) Only minority groups will take an interest in apartments with controlled rents.

C) Economists will encourage landlords to discriminate.

D) Rent controls lower the personal costs of discriminatory behavior among landlords.

6) From the apartment landlord's perspective, what might be a substitute use of his rental property?

A) A parking lot

B) An office complex

C) A condominium

D) Any of the above.

7) According to your authors, the prohibition on alcohol kept the ________ curve relatively stable while the ________ curve became more ________.

A) supply; demand; elastic

B) supply; demand; inelastic

C) demand; supply; elastic

D) demand; supply; inelastic

8) Beer and wine were difficult to find during the prohibition on alcohol, but whisky and gin were plentiful. Why?

A) Beer and wine were illegal; whisky and gin weren't.

B) The drinking public only wanted whisky and gin.

C) Criminals found it much more efficient to produce liquor.

D) Police were willing to overlook production and consumption of whisky and gin because they believed liquor was less dangerous than beer and wine.

9) A legal ceiling set below the market-clearing interest rate would tend to

A) create a surplus of loans.

B) create a shortage of loans.

C) increase the demand for loans.

D) decrease the supply of loans.

10) An effective minimum wage tends to create unemployment among unskilled workers because it

A) reduces the demand for their labor services.

B) increases the supply of their labor services.

C) reduces the marginal productivity of their labor services.

D) reduces the quantity demanded for their labor services while increasing the quantity supplied of their labor services.

11) Your textbook authors argue that the redemption efforts to free Sudanese slaves

A) generally succeeded until the government stepped in and created unintended shortages.

B) worked poorly because slave surpluses became rampant.

C) unintentionally increased profitability and slave supply.

D) proved that underground markets do not coordinate the plans of participants.

12) Your textbook authors argue that the redemption efforts to free Sudanese slaves

A) generally succeeded until the government stepped in and created unintended shortages.

B) worked poorly because slave surpluses became rampant.

C) unintentionally increased profitability and slave supply.

D) proved that underground markets do not coordinate the plans of participants.

13) When a good becomes more scarce, and the government prevents sellers from raising prices,

A) demanders are prevented from competing against one another to obtain the good.

B) the opportunity cost to purchasers of obtaining the good will nonetheless rise as long as the quantity demanded is greater than the quantity supplied.

C) the quantity purchased will be greater than the quantity supplied.

D) there will be no rationing system to allocate the good among competing users.

14) Your friend shows you the towels she took from a hotel while on a business trip. She then tells you she steals because "many people steal, so hotels already figure the cost of the stolen towels into the hotel bill of all customers." From the economic point of view, your friend's logic is

A) correct, because what's fair is fair.

B) correct, because economics champions such selfish behavior.

C) impeccable.

D) incorrect, because it suggests that cost determines price.

15) Why do prices have to be based on supply and demand, rather than cost?

A) Costs, unlike supply and demand, are based on subjective factors.

B) People cannot be compelled to base prices on costs

C) People should be free to set whatever prices they prefer.

D) Supply and demand determine costs.

16) Typically, in towns and villages across the Midwest, bowling alleys are one-story buildings. In Manhattan, one is more likely to bowl in alleys found in multi-story high rises. Why?

A) Because Midwesterners live on flat lands, they think flat and build flat.

B) The bowling cultures are different.

C) The cost of building single-story bowling alleys in Manhattan is too high.

D) Midwestern zoning codes must prohibit bowling alleys in multi-story structures.

17) Typically, in towns and villages across the Midwest, bowling alleys are one-story buildings. In Manhattan, one is more likely to bowl in alleys found in multi-story high rises. Why?

A) Because Midwesterners live on flat lands, they think flat and build flat.

B) The bowling cultures are different.

C) The cost of building single-story bowling alleys in Manhattan is too high.

D) Midwestern zoning codes must prohibit bowling alleys in multi-story structures.

18) An increase in the demand for a good will tend to bid up the cost of acquiring the good more

A) if suppliers respond by quickly making larger quantities available.

B) if the cost of transferring resources out of other uses into production are low.

C) in the short run than in the long run.

D) if the supply curve is highly elastic.

19) The prediction of permanent, growing shortages of fresh drinking water by the year 2050 assumes

A) water prices will increase.

B) water prices will decrease.

C) water prices will not adjust appropriately to coordinate the market.

D) nobody will be able to collect water from rain and snowstorms.