Health Economics 2021

Choose the correct Answer:

1. Economics is best defined as the study of
A. financial decision-making.
B. how consumers make purchasing decisions.
C. choices made by people faced with scarcity.
D. inflation, unemployment, and economic growth.

2. Which of the following statements is correct?

A. Economics is a natural science.
B. In large measure, economics is the study of how people make choices.
C. If poverty was eliminated there would be no reason to study economics.
D. Economic analysis can be used to explain how societies, but not individuals,
make decisions.

3. Economics theory deals with:

A. Microeconomics
B. Macroeconomics
C. Both of them
D. None of them

4. In Microeconomics, we study:
A. Aggregates
B. Few units of the economy
C. Large units of the economy
D. Individual units of economy

5. Microeconomics is also known as:

A. Price theory
B. Demand theory
C. Income theory
D. Expenditure theory

6. What lies is at the heart of the allocation of goods and services in a free-market
economy?
A. . Concerns of equity or equal distribution among individuals.
B. . The order or command of the ruling government or dictator.
C. . The wishes of consumers in the market.
D. . The price mechanism.

7. The process by which resources are transformed into useful forms is

A. capitalization. B. consumption. C. allocation. D. production.
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8. The concept of choice would become irrelevant if

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 A. capital were eliminated.
B. scarcity were eliminated.
C. we were dealing with a very simple, one-person economy.
D. poverty were eliminated.

9. Which of the following is not a resource as the term is used by economists?

A. money. B. land. C. buildings. D. labor.

10. Laboratory (or controlled) experiments cannot be performed in economics because:

A. of resource scarcity.
B. economics is a natural science.
C. of the difficulty of distinguishing between normative and positive statements.
D. economics is a social science.

11. Rational choice or rational decision-making involves A. comparing the net benefit of
a choice with the total net benefit foregone of all the alternatives combined
B. weighing up total costs and total benefits associated with a decision
C. weighing up marginal costs and marginal benefits associated with a decision
D. all of the above.

12. A graph showing all the combinations of goods and services that can be produced if all
of society's resources are used efficiently is a
A. demand curve.
B. supply curve
C. production possibility frontier.
D. circular-flow diagram.

13. The production possibility curve is concerned with;

A. Resources of the economy
B. The economic problem
C. Limitations of the economy
D. Qualities of the economy

14. Scarcity means:

A. Nil resources
B. Limited resources
C. Many resources
D. Extra resources

15. When resources at our disposal are limited, then:

A. We have to make a choice
B. We don’t have to make a choice
C. Both A and B
D. None of them

16. Rational choice or rational decision-making involves

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 A. comparing the net benefit of a choice with the total net benefit foregone of all the
alternatives combined
B. weighing up total costs and total benefits associated with a decision
C. weighing up marginal costs and marginal benefits associated with a decision
D. all of the above

17. Price mechanism has also given the name:

A. Ricardian-Faire
B. Price system
C. Laisseze-Faire
D. None of these
18. When resources are allocated by government planning:
A. Capitalism is usually the results
B. The economy is normally more efficient
C. Decision making is decentralized
D. Economics incentivizes are usually weak

19. Periods of “less than full employment” of resources correspond to

A. points on the ppf.
B. points outside the ppf.
C. either points inside or outside the ppf.
D. points inside the ppf.

20. The PPF can be used to illustrate:

A. the principle of opportunity costs and increasing opportunity costs
B. the distinction between micro and macroeconomics
C. efficient, infeasible and inefficient production combinations
D. all of the above

Refer to the information provided in the following figure to answer the questions
that follow.

21. Refer to the above figure: The economy is currently operating at Point A. The best
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explanation for this is that

A) the economy has experienced increasing technology.
B) the economy’s resources are being underemployed.
C) the economy has too few resources to operate on the production curve.
D) the economy is operating above full employment.

22. Refer to the above figure: The economyʹs production possibility frontier ________
due to specialized
23. resources.
A) is convex to the origin
B) displays constant opportunity costs
C) demonstrates decreasing opportunity costs
D) is bowed out from the origin

24. Refer to the above figure: The shape of the economyʹs production possibility frontier
shows
A) decreasing opportunity costs. B) constant opportunity costs.
C) increasing opportunity costs. D) random opportunity costs.

25. Opportunity cost, most broadly define, is

A. the additional cost of producing an additional unit of output.
B. what we forgo, or give up, when we make a choice or a decision.
C. a cost that cannot be avoided, regardless of what is done in the future.
D. the additional cost of buying an additional unit of a product.

26. The concept of opportunity cost can be applied to the analysis of ________ decision-
making processes.
A) only economy-wide B) only global
C) only-small-scale D) any

27. That which we forgo, or give up, when we make a choice or a decision is known as
A) equity. B) causation. C) correlation. D) opportunity cost.
28. Scarce resources give rise to the concept of
A) efficient markets. B) opportunity costs.
C) laissez-faire. D) positive economics.

29. Which of the following is an opportunity cost of attending college?

A) the cost of your apartment or dorm
B) the income you could have earned if you didnʹt attend college
C) the cost of the food that you consume while you are attending college
D) the education you gain from attending college.

30. The 'law of demand' implies that

A. as prices fall, quantity demanded increases.
B. as prices fall, demand increases.
C. as prices rise, quantity demanded increases.
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D. as prices rise, demand decreases.

31. The quantity demanded (Qd) of a soft drink brand A has decreased. This could be
because:
A. A’s consumers have had an increase in income.
B. the price of A has increased.
C. A’s advertising is not as effective as in the past.
D. the price of rival brand B has increased.

32. Demand curves are derived while holding constant

A. consumer tastes and the prices of other goods.
B. incomes, tastes, and the price of the good.
C. incomes and tastes.
D. incomes, tastes, and the prices of other goods.

33. Suppose the demand for good Z goes up when the price of good Y goes down. We can
say that goods Z and Y are
A. perfect substitutes. B. unrelated goods. C. complements. D. substitutes.

34. If the demand for coffee decreases as income decreases, coffee is

A. a normal good.
B. a complementary good.
C. an inferior good.
D. a substitute good.

35. Which of the following will NOT cause a shift in the demand curve for compact discs?
A. a change in the price of pre-recorded cassette tapes.
B. a change in wealth.
C. a change in income.
D. a change in the price of compact discs.

36. Which of the following is consistent with the law of supply?

A. As the price of calculators rises, the supply of calculators increases, ceteris
paribus.
B. As the price of calculators falls, the supply of calculators increases, ceteris paribus.
C. As the price of calculators rises, the quantity supplied of calculators increases,
ceteris paribus.
D. As the price of calculators rises, the quantity supplied of calculators decreases,
ceteris paribus.

37. The price of computer chips used in the manufacture of personal computers has fallen.
This will lead to __________ personal computers.
A. a decrease in the supply of
B. a decrease in the quantity supplied of
C. an increase in the supply of
D. an increase in the quantity supplied of
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38. When there is excess demand in an unregulated market, there is a tendency for
A. quantity demanded to increase.
B. quantity supplied to decrease.
C. price to fall.
D. price to rise.

39. Equilibrium in the market for good A obtains

A. when there is no surplus or shortage prevailing in the market
B. where the demand and supply curves for A intersect
C. when all of what is produced of A is consumed
D. all of the above

40. A shift in the demand curve (drawn in the traditional Price-Quantity space) to the left
may be caused by
A. a decrease in supply.
B. a fall in income.
C. a fall in the price of a complementary good.
D. a fall in the number of substitute goods.

Assume the good is nor mal

41. A shift in the demand curve (drawn in Income-Quantity space) to the left may be
caused by
A. a fall in the price of a complementary good.
B. a fall in income.
C. a change in tastes such that consumers prefer the good more.
D. a rise in the number of substitute goods.

Assume the good is normal

42. A movement along the demand curve (drawn in Quantity-Price space) to the left may
be caused by
A. an increase in supply.
B. a rise in income.
C. a rise in the price of a complementary good.
D. a fall in the number of substitute goods.

43. When the market operates without interference, price increases will distribute what is
available to those who are willing and able to pay the most. This process is known as
A. price fixing.
B. quantity setting.
C. quantity adjustment.
D. price rationing.

44. All consumers want to:

A. Minimize their Utility
B. Maximize their Utility
C. Neutralize their Utility
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 D. Stabilize their Utility

45. Prices are determined by the forces of:

A. Demand and consumption
B. Supply and production
C. Demand and supply
D. None of these

46. If business managers are rewarded on the basis of how much output they create:
A. Consumers will get exactly what they want
B. It causes profits to be as large as possible
C. Productivity growth must be positive
D. There is the potential for quality to suffer

47. When quantity demanded is greater than quantity supplied then prices trend:
A. Falls B.Rises C.Remain ineffective D.Become zero

48. When quantity demanded is less than quantity supplied then prices trend:
A. Falls
B. Rises
C. Remain ineffective
D. Become zero

49. Demand is a function of -----------

A. Income.
B. Advertisement
C. Consumers
D. Price

50. Which will cause a change in the demand for commodity X

A. A Change in Tastes.
B. A Change in Income.
C. A Change in the Price of X.
D. A Change In Price Of Complementary Product

51. . Other things being equal, the law of demand implies that as
A. The demand for increases, the price will decrease.
B. Income increases, the quantity of demanded will increase.
C. the price of increases, the quantity of demanded will decrease
D. the price of increases, the quantity of demanded will increase

52. For inferior commodities, income effect is ______________.

A. Zero.
B. Negative.
C. Infinite.
D. Positive
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53. . In Relatively Elastic Demand ED is =------------
A. E=1
B. E=0
C. E>1
D. E<1

54. A Relative change in quantity demanded is less than the relative change in money
income is ------------------ Income elasticity
A. High
B. Zero
C. Low
D. Negative

55. If two goods are close substitutes, ___________________.

A. An increase in the price of one will decrease the demand for the other.
B. An increase in the price of one will increase the demand for the other.
C. A decrease in the price of one will increase the demand for the other.
D. A decrease in the price of one will have no effect on the demand for the other.

56. People demand more of product X when the price of product Y decreases. This means
X and Y are_______________.
A. Complements.
B. substitutes
C. Not related.
D. both inexpensive

57. An increase in consumer income will increase demand for a ------------ But decrease
demand for a
A. Substitute good, inferior good
B. Normal good, inferior good
C. Inferior good, normal good
D. Normal good, complementary good

58. The demand for a good is highly inelastic if __________________

A. The price elasticity of the good is close to zero.
B. the income elasticity of the good is close to one
C. if it is a necessity
D. both a and c

59. A perfectly inelastic demand curve __________________.

A. Is a vertical line parallel to Y-axis?
B. Is a vertical line parallel to X-axis?
C. Indicates a good with no close substitutes.
D. a and c.
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60. Demand curve is a _____________.
A. falling curve
A. rising curve
B. Downward sloping curve
C. upward sloping curve

61. A positive cross elasticity of demand coefficient indicates that -----------

A. A product is an inferior good
B. A product is a normal good
C. Two products are substitute goods
D. Two products are complementary goods

62. When we know the quantity of a product that buyers wish to purchase at each possible
price, we know
A. Demand
B. Supply
C. Excess demand
D. Excesses supply

63. In case of inferior goods, the increase in income of the consumer results in:
A. Less purchase
B. Higher purchase
C. Constant purchase
D. None of them

64. Which causes the rise of prices of goods:

A. There is fall in income in consumer
B. There is rise income of consumer
C. Income of the consumer does not change
D. None of the above

65. The slope of the Marshallian demand curve is:

A. Upward B. Downward C. Vertical D. Horizontal

66. The relationship shown by demand curve between price and quantity is:
A. Positive B. Negative C. Neutral D. Zero

67. The coefficient of the price elasticity of demand is :

A. Always negative or zero
B. Always positive or zero
C. Positive only when the supply curve slopes upward
D. Sometimes positive and sometime negative

68. The coefficient of the price elasticity of demand is computed as the absoulate value of
the percentage change in quantity demanded divided by:
A. The change in price
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 B. The change in supply
C. The percentage change in supply
D. The percentage change in price

69. Demand is elastic when the coefficient of elasticity is:

A. Greater than zero
B. Less than one
C. Greater than one
D. Negative

70. If a consumer spends more on a product after a fall in supply, then demand is:
A. Elastic
B. Unitary elastic
C. Volatile
D. Inelastic

71. If demand curve is inelastic, then

A. Quantity demanded is hardly affected by income
B. It may be nearly vertical
C. Quantity demanded is very sensitive to income
D. Close subsidiaries for the good are in abundant

72. Market demand curve is:

A. Vertical summation of individual demand curves
B. Upward summation of individual demand curves
C. Downward summation of individual demand curves
D. Horizontal summation of individual demand curves .

73. In case of Giffen goods, demand curve is:

A. Positively sloped
B. Negatively sloped
C. Horizontal
D. Vertical

74. If demand for a good inelastic and its price rises due to shift in supply, then seller’s
total revenue:
A. Decreases
B. Remains constant
C. Increases
D. Becomes zero.

75. Moving down along a linear demand curve

A. Demand becomes less elastic
B. Demand has unitary elasticity
C. Demand becomes more elastic
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D. Demand approaches perfects elasticity

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76. Quantity demand is inversely affected by change in:
A. Quantity
B. Price
C. Income
D. None of them

77. The elasticity of demand is equal to slope of demand function divided by:
A. Ratio of quantity relative to price
B. Ratio of in quantity relative to change price
C. Ratio of old quantity relative to old price
D. Ratio of price relative to quantity

78. Elasticity of demand is greater than one when there are proportional changes in
quantity as a result of proportional change in
A. Demand
B. Price
C. Production
D. Consumption

79. With elasticity of demand, the :

A. Negative sign is ignored
B. Positive sign is ignored
C. None of them
D. Both of them

80. The arc elasticity is the measure of average elasticity at the mid-point of the chord and
connects:
A. Two points on demands curve
B. Two points on supply curve
C. Many points on demands curve
D. Many points on supply curve

81. The elasticity of demand on the rectangular hyperbola curve

A. Increases
B. Deceases
C. Remains the same
D. Changes

82. The demand of the luxuries is:

A. More elastic
B. Less elastic
C. Unit elastic
D. Zero elastic
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83. The demand of the necessities is:

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 A. More elastic
B. Less elastic
C. Unit elastic
D. Zero elastic

84. The change in demand for z as a result of change in price of y is concerned with:
A. Arc elasticity of demand
B. Income elasticity of demand
C. Price elasticity of demand
D. Cross elasticity of demand

85. In case of inferior goods, income elasticity of demand is:

A. Negative B. Positive C. Zero D. Neutral

86. The Giffen paradox is an exception to law of :

A. Supply
B. Demand
C. Production
D. Consumption

87. A good tends to have relatively inelastic demand, if:

A. Close substitutes are available
B. It has a high price
C. It is a luxury
D. It has no very close substitutes

88. The cross-price elasticity of the demand for orange juice with respect to the price of
apple juice is probably:
A. Negative
B. Positive
C. Near infinity
D. Zero

89. Economists define luxuries as goods with:

A. Positive income elastic
B. Income elastic greater than one
C. Zero income elastic
D. Negative income elastic

90. Economists define substitutes as pair of goods with:

A. Positive cross-price elasticities
B. Positive income elasticities
C. Negative cross-price elasticities
D. Negative income elasticities
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91. In the immediate run:

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 A. The supply curves are inelastic
B. The supply curves are perfectly inelastic
C. Supply curves are elastic
D. Demand curves are elastic

92. In the long run:

A. New firms can enter the market
B. No entry and exist of new firm is possible
C. Capacity is expanded but no entry of ne firms is possible
D. Supply is perfect

93. Supply curves are most elastic

A. In the long run
B. In the short run
C. For luxuries
D. In the immediate

94. Most of the supply curves with which average consumers deal are:
A. Vertical
B. Horizontal
C. Unaffected by inflation
D. Upward

95. Airlines that try to lower fares in order to increase revenues, believe that demand for
airlines services is:
A. Price elastic
B. Price inelastic
C. Income elastic
D. Income inelastic

96. The good with the highest income elasticity is:

A. Beef B. fish C. beans D. Motion-picture tickets

97. The phrase 'ceteris paribus' is best expressed as

A. 'all else equal.'
B. 'everything affects everything else.'
C. 'scarcity is a fact of life.'
D. 'there is no such thing as a free lunch.'
98. Laboratory (or controlled) experiments cannot be performed in economics because:
A. of resource scarcity.
B. economics is a natural science.
C. of the difficulty of distinguishing between normative and positive statements.
D. economics is a social science.

99. How many different equilibria can obtain when you allow for shifts in the demand
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and/or the supply curves?

A. 2 B. 4 C. 8 D. 16

100. What will happen to equilibrium price and quantity when the demand curve shifts
to the left and the supply curve shifts to the right
A. price falls unambiguously but the effect on quantity cannot be determined
B. both price and quantity falls unambiguously
C. quantity falls unambiguously but the effect on price cannot be deter mined
D. the effect on both price and quantity cannot be determined

101. What will happen to equilibrium price and quantity when both the demand and
supply curves shift to the left
A. price falls unambiguously but the effect on quantity cannot be determined
B both price and quantity falls unambiguously
C. quantity falls unambiguously but the effect on price cannot be determined
D. the effect on both price and quantity cannot be determined

102. A price ceiling imposed by the government can cause a shortage (excess demand)
A. when the price ceiling is above the free (or unregulated) market price
B. when the price ceiling is below the free (or unregulated) market price
C. when the price ceiling is equal to the free (or unregulated) market price
D. either of the above

103. What is the effect of imposing a fixed per unit tax on a good on its equilibrium
price and quantity?
A. Price falls, quantity rises
B. Price rises, quantity falls
C. Both price and quantity fall
D. Both price and quantity rise
104. A price floor is
A. a maximum price usually set by government, that sellers may charge for a good or
service.
B. a minimum price usually set by government, that sellers must charge for a good
or service .
C. the difference between the initial equilibrium price and the equilibrium price after a
decrease in supply.
D. the minimum price that consumers are willing to pay for a good or service.
105. The need for rationing a good arises when
A. there is a perfectly inelastic demand for the good.
B. supply exceeds demand.
C. demand exceeds supply.
D. a surplus exists.

106. If the “regulated-market” price is below the equilibrium (or “free-market” price)
price,
A. the quantity demanded will be greater than quantity supplied .
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B. demand will be less than supply.

C. quantity demanded will be less than quantity supplied.
D. quantity demanded will equal quantity supplied.

107. If a government were to fix a minimum wage for workers that was higher than the
market clearing equilibrium wage, economists would predict that
A. more workers would become employed.
B. there would be more unemployment.
C. the costs and prices of firms employing cheap labor would increase.
D. wages in general would fall as employers tried to hold down costs.

108. Alpha Corporation produces chairs. An economist working for the firm predicts
that 'if people's incomes rise next year, then the demand for our chairs will increase,
ceteris paribus.' The accuracy of the economist's prediction depends on whether the
chairs Alpha produce
A. are normal goods.
B. have few complementary goods.
C. have many complementary goods.
D. have few substitutes.

109. When the decrease in the price of one good causes the demand for another good
to decrease, the goods are
A. complements. B. normal. C. inferior. D. substitutes.

110. The price elasticity of demand is the

A. ratio of the percentage change in quantity demanded to the percentage change in
price.
B. ratio of the change in price to the change in quantity demanded.
C. ratio of the change in quantity demanded to the change in price .
D. ratio of the percentage change in price to the percentage change in quantity demanded.

111. The price of apples falls by 5% and quantity demanded increases by 6%. Demand
for apples is:
A. inelastic. B. perfectly inelastic. C. elastic. D. perfectly elastic.

112. The price of bread increases by 22% and the quantity of bread demanded falls by
25%. This indicates that demand for bread is
A. inelastic. B. perfectly inelastic. C. elastic. D. perfectly elastic.

113. If the cross-price elasticity of demand between two goods is negative, then the
two goods are
A. unrelated goods. B. substitutes. C. complements. D. normal goods.

114. If the quantity demanded of beef increases by 5% when the price of chicken
increases by
20%, the cross-price elasticity of demand between beef and chicken is
15

A. -4. B. 4. C. -0.25. D. 0.25.

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115. The government is considering placing a tax on cigarettes to raise revenue to
finance healthcare projects. The demand for cigarettes is price inelastic. Which of the
following statements is TRUE?
A. This is a very good way to raise revenue both in the short term and in the long term
because there are no substitutes for cigarettes.
B. The tax on cigarettes will raise substantial revenue in the short term, but may
not raise as much revenue as anticipated in the long term because the demand
for cigarettes is likely to become more elastic over time .
C. This tax will not raise much revenue either in the short term or the long term since
demand is price inelastic.
D. No tax revenue can be raised in this way because sellers of cigarettes will just lower
their price by the amount of the tax and therefore the price of cigarettes to consumers
will not change.

116. The burden (incidence) of a tax will fall mainly on the producers if:
A. The producers are the ones legally obliged to pay the tax .
B. Supply is inelastic and demand is elastic.
C. Demand is inelastic and supply is elastic.
D. There are many producers in the market.

117. Income elasticity of demand is the % change in quantity demanded divided by the
% change in income. Which type of goods has a negative income elasticity of
demand?
A. Inferior goods. B. Normal goods. C. Substitute goods. D. Complementary goods

118. Each type of elasticity has its own set of determinants. You are given four
determinants below. Match them with the three types of elasticity given:
A. The number and closeness of substitute goods:
B. Time:
C. The proportion of income spent on the goods :
D. The rate at which the desire for a good is satisfies as consumption increases:
119. If total revenue rises by 10% when price increases by 5%, this means:
A . demand is price inelastic
B. demand is price elastic
C. demand is unit elastic
D. demand is perfectly inelastic

120. If a 5% increase in price causes no change in total revenue, this means:

A. demand is price inelastic
B. demand is price elastic
C. demand is unit elastic
D. demand is perfectly inelastic
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121. Which of the following statements is true:

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A. Because a straight line demand curve has constant slope, price elasticity of demand
will remain constant as we move along various points on the curve.
B. Three supply curves, with different slopes, but all originating from the origin will have
different price elasticities of supply.
C . We only need to know the magnitude of the elasticity, not its sign, to determine
whether it falls in the elastic or inelastic range
D. A straight line demand curve with a slope of -1 delivers unit elasticity.
Study the following table and answer:

122. Refer to Table. This market will be in equilibrium if the quantity of gardenburgers
demanded is
A) 300. B) 600. C) 900. D) 1,200.

123. Refer to Table. If the price per gardenburger is $5, the price will
A) remain constant because the market is in equilibrium.
B) decrease because there is an excess demand in the market.
C) increase because there is an excess demand in the market.
D) decrease because there is an excess supply in the market.

124. Refer to Table. If the price per gardenburger is $6, there is a(n)
A) market equilibrium. B) excess demand of 1,000 units.
C) excess demand of 500 units. D) excess supply of 700 units.

125. Refer to Table . If the price per gardenburger is $8, there is an excess
A) demand of 600 gardenburgers. B) supply of 500 gardenburgers.
C) demand of 300 gardenburgers. D) supply of 1,100 gardenburgers.

126. Refer to Table . In this market there will be an excess demand of 500
gardenburgers at a
price of
A) $5. B) $6. C) $7. D) $8.

127. Refer to Table. In this market there will be an excess supply of 1,000
gardenburgers at a
price of
A) $5. B) $6. C) $7. D) $9.
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128. Refer to Table. If the price per gardenburger is $8, the price will
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 A) remain constant because the market is in equilibrium.
B) decrease because there is an excess demand in the market.
C) increase because there is an excess supply in the market.
D) decrease because there is an excess supply in the market.
129. When there is an excess demand of a product in an unregulated market, the
tendency is for
A) price to rise. B) price to decrease.
C) quantity supplied to decrease. D) quantity demanded to increase.

130. When there is a surplus of a product in an unregulated market, there is a tendency

for
A) price to rise. B) price to fall.
C) quantity demanded to increase. D) quantity supplied to decrease.

131. If the market for blue tooth headsets is unregulated and is presently characterized
by excess demand, you can accurately predict that price will
A) increase, the quantity demanded will fall, and the quantity supplied will rise.
B) increase, the quantity demanded will rise, and the quantity supplied will fall.
C) decrease, the quantity demanded will rise, and the quantity supplied will fall.
D) decrease, the quantity demanded will fall, and the quantity supplied will rise.

132. Cell phones and blue tooth headsets are complements. An increase in the price of
blue tooth headsets would cause which of the following in the market for cell phones?
A) The equilibrium price and quantity of cell phones would increase.
B) The equilibrium price and quantity of cell phones would decrease.
C) The equilibrium price of cell phones would increase and the equilibrium quantity
would decrease.
D) The equilibrium price of cell phones would decrease and the equilibrium quantity
would increase.

Study the following Figure and answer:

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133. Refer to the figure. The market for sunglasses ________ at a price of $60 and a
quantity of 450 sunglasses.
A) has a surplus B) has a shortage
C) is in equilibrium D) cannot remain in business

134. Refer to the figure. At a quantity demanded of 750, there is an excess

A) demand of 450 sunglasses if the price is $60.
B) demand of 450 sunglasses if the price is $30.
C) demand of 300 sunglasses if the price is $60.
D) supply of 300 sunglasses if the price is $30.

135. Refer to the figure. If this market is unregulated and the price is currently $30,
you would expect that the price
A) of sunglasses would remain at $30, because firms would not want to increase the
price.
B) of sunglasses would rise to $90, so the firm could meet its excess demand.
C) of sunglasses would rise to $60, where quantity demanded equals quantity supplied.
D) of sunglasses would rise, but the new price is indeterminate from the information
provided.
136. Refer to the figure. At a price of $60, there is an excess
A) demand of 150 sunglasses. B) supply of 300 sunglasses.
C) demand of 300 sunglasses. D) supply of zero sunglasses.

Refer to the information provided in the figure below to answer the questions
that follow.

137. Refer to the figure . The market is initially in equilibrium at Point A. If demand
shifts from D1 to D2 and there is an excess demand of 150 million pounds of burritos,
the price of burritos would be
A) $1.50. B) $3.00. C) $4.00. D) $6.00.
138. Refer to the figure . The market is initially in equilibrium at Point B. If demand
shifts from D2 to D1 and there is an excess supply of 200 million pounds of burritos,
19

the price of burritos would be

Page

A) $1.50. B) $3.00. C) $4.00. D) $6.00.

139. Refer to the figure . The market is initially in equilibrium at Point A. If demand
shifts from D1 to D2, the equilibrium price will change from ________ and the
equilibrium quantity will change from ________.
A) $4.00 to $3.00; 250 to 350 B) $4.00 to $3.00; 350 to 250
C) $3.00 to $4.00; 250 to 350 D) $3.00 to $4.00; 350 to 250
140. Refer to the figure . The market is initially in equilibrium at Point B. If demand
shifts from D2 to D1, the equilibrium price will change from ________ and the
equilibrium quantity will change from ________.
A) $4.00 to $3.00; 250 to 350 B) $4.00 to $3.00; 350 to 250
C) $3.00 to $4.00; 250 to 350 D) $3.00 to $4.00; 350 to 250

141. 22) The rationing mechanism in market economies is the adjustment of

A) supply. B) demand. C) quantity. D) price.
142. An effective price ceiling must be set
A) above the equilibrium price.
B) below the equilibrium price.
C) at the equilibrium price.
D) either at or above the equilibrium price.

143. An effective price floor must be set

A) above the equilibrium price.
B) below the equilibrium price.
C) at the equilibrium price.
D) either at or below the equilibrium price.

144. For a particular product, an effective price ceiling results in

A) quantity demanded greater than quantity supplied.
B) quantity supplied greater than quantity demanded.
C) quantity demanded equal to quantity supplied.
D) demand equal to supply.

145. The type of non-price rationing that most closely approaches the market outcome
is
A) favored customer rationing.
B) first-come, first-served basis or queuing.
C) coupon rationing with coupons that can be resold.
D) coupon rationing with coupons that cannot be resold.

Refer to the information provided in the figure below to answer the questions
that follow.
20
Page
146. Refer to the figure . The government setting the price of pencils at $0.40 would be
an example of an effective
A) price floor. B) price ceiling. C) market equilibrium. D) price surplus.

147. Refer to the figure . The government setting the price of pencils at $0.50 would be
an example of an effective
A) price floor. B) price ceiling.
C) market equilibrium. D) price shortage.

148. Refer to the figure . In the market for pencils, the quantity demanded will be
greater than the quantity supplied if the government imposes an effective
A) price floor. B) price ceiling.
C) market equilibrium price. D) price surplus.

149. Refer to the figure . A non-price rationing system such as queuing must be used to
ration the available supply of pencils if the government will not allow retailers to
charge more than ________ for a pencil.
A) $0.40 B) $0.45 C) $0.50 D) $0.55

150. Refer to the figure . Retailers will have an excess supply of pencils if the
government will not allow retailers to charge less than ________ for a pencil.
A) $0.50 B) $0.45 C) $0.40 D) the equilibrium price
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