ECO 365T Wk 2 – Practice Knowledge Check (2021 New)

1.

If government set a minimum price of $50 in the market, a

2.When there is overproduction of a good,

3.Consumer surplus

4. If the market price of a product increases, then the total

5.

Which of the diagrams illustrate(s) the effect of a decrease in incomes on the market for second-hand clothing?

6. A fall in the price of milk, used in the production of ice cream, will

7.

.

Refer to the provided supply and demand graph of Product X. If there are positive externalities from the consumption of Product X, then the socially optimal demand curve would be

8.If there was initially a shortage in the market for a product, then

9. (Consider This) When you enter a congested roadway,

10. What would best explain why the equilibrium price of pink salmon decreased and the equilibrium quantity increased?

11.Which of the following conditions does not need to occur for a market to achieve allocative efficiency?

12.

Refer to the table. In relation to column (3), a change from column (1) to column (2) would mostly likely be caused by

13.Product reviews help to alleviate problems associated with

14.An increase in demand for oil along with a simultaneous increase in supply of oil will

15. In a free-market economy, a product which entails a positive externality will be

16. The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?

17. Which would be a likely cause of an increase in the demand for pizza?

18. Antipollution policies can be severe in their design and implementation, resulting

19.

Refer to the diagram. From society’s perspective, if MB1 and MC2 are relevant,

20.Which of the following would be an example of a moral hazard problem?

An increase in demand for oil along with a simultaneous increase in supply of oil will

Multiple Choice

• decrease price and increase quantity.

• increase price and decrease quantity.

• increase quantity, but whether it increases price depends on how much each curve shifts.

• increase price, but whether it increases quantity depends on how much each curve shifts.

From an economist’s perspective, an important consideration for policies to address global warming is

Multiple Choice

• the market for recyclable inputs.

• the supply and demand for recycled products.

• the marginal cost and marginal benefit of the policies.

• a lawsuit that can arise from the enactment of the policies.

Quantity Demanded Price Quantity Supplied

52 $ 50 73

62 45 62

72 40 51

82 35 42

92 30 33

If government set a minimum price of $50 in the market, a

Multiple Choice

• shortage of 21 units would occur.

• shortage of 125 units would occur.

• surplus of 21 units would occur.

• surplus of 125 units would occur.

Refer to the diagram. With MB1 and MC1, society’s optimal amount of pollution abatement is

Multiple Choice

• Q1.

• Q2.

• Q3.

•

Which of the following statements is ? (Assume demand is interacting with an upward sloping supply curve that does not shift.)

Multiple Choice

• If demand increases, then price will decrease.

• If demand decreases, then price will decrease.

• If price increases, then demand will decrease.

• If price decreases, then demand will decrease.

Antipollution policies can be severe in their design and implementation, resulting in

Multiple Choice

• the social costs of pollution reduction becoming greater than the benefits.

• the social benefits of pollution reduction becoming zero.

• too few resources being devoted toward reducing pollution.

• the social costs of pollution reduction becoming less than the benefits.

Which of the following conditions does not need to occur for a market to achieve allocative efficiency?

Multiple Choice

• Consumers’ maximum willingness to pay equals producers’ minimum acceptable price for the last unit of output.

• The sum of producer and consumer surplus is maximized.

• The total revenue received by producers equals the total cost of production.

• The marginal benefit of the last unit produced equals the marginal cost of producing that unit.

If a legal ceiling price is set above the equilibrium price,

Multiple Choice

• a shortage of the product will occur.

• a surplus of the product will occur.

• a black market will evolve.

• neither the equilibrium price nor the equilibrium quantity will be affected.

(Consider This) When you enter a congested roadway,

rev: 10_12_2020_QC_CS-234305

Multiple Choice

• you are the only driver that is experiencing a negative externality from the heavy traffic.

• the opportunity cost of idling in slow traffic is the only additional cost.

•

the increased use of gasoline is the only external cost incurred.

• there are mutual external costs from the slow traffic that include increased gasoline costs and more time spent on the roadway.

If the price of a product decreases, we would expect

Multiple Choice

• demand to increase.

• quantity supplied to decrease.

• supply to decrease.

• quantity supplied to increase.

If the market price of a product increases, then the total

Multiple Choice

• consumer surplus will decrease.

• consumer surplus will increase.

• revenues of sellers will definitely increase.

• revenues of sellers will definitely decrease.

A fall in the price of milk, used in the production of ice cream, will

Multiple Choice

• decrease the supply of ice cream.

• increase the supply of ice cream.

• cause a movement along the supply curve of ice cream.

• have no effect on the supply of ice cream.

There is an adverse selection problem in the market for used cars because

Multiple Choice

• owners of poor-quality cars have a strong incentive to sell their cars, while owners of high-quality used cars have more incentive to keep their cars.

• owners of high-quality cars will have a strong incentive to sell their cars to obtain the higher prices, while owners of poor-quality cars will have more incentive to keep theirs.

• most people prefer new cars, but the high prices for new cars force most of them to buy used cars.

• government actions to pass “lemon” laws have reduced information on used cars.

Refer to the diagram. A shortage of 160 units would be encountered if price was

Multiple Choice

• $1.10, that is, $1.60 minus $.50.

• $1.60.

• $1.00.

• $0.50.

What would best explain why the equilibrium price of pink salmon decreased and the equilibrium quantity increased?

Multiple Choice

• The increase in demand was greater than the decrease in supply.

• The decrease in demand was greater than the decrease in supply.

• The increase in supply was greater than the decrease in demand.

• The decrease in supply was greater than the increase in demand.

If the price of Pepsi decreases, other factors constant, then we’d expect to see a consequent shift of the demand curve for

Multiple Choice

• Coke to the left.

• Coke to the right.

• Pepsi to the left.

• Pepsi to the right.

Refer to the diagram. From society’s perspective, if MB1 and MC2 are relevant,

Multiple Choice

• Q2 represents too little pollution abatement.

• Q1 represents too much pollution abatement.

• Q2 represents an optimal amount of pollution abatement.

• Q4 represents too little pollution abatement.

Refer to the diagram. If actual production and consumption occur at Q1,

Multiple Choice

• efficiency is achieved.

• consumer surplus is maximized.

• an efficiency loss (or deadweight loss) of b + d occurs.

• an efficiency loss (or deadweight loss) of e + d occurs.

Refer to the provided supply and demand graph of Product X. If there are positive externalities from the consumption of Product X, then the socially optimal demand curve would be

Multiple Choice

• to the left of the D curve on the graph.

• to the right of the D curve on the graph.

• at the position of the D curve on the graph.

• an upward-sloping line.

The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?

Multiple Choice

• price of electric cars

• price of gasoline cars

• quantity of electric cars demanded by buyers

• how much sellers are charging customers for electric cars