Multiple Choice:
1. If, in a given market, the price of inputs increases and income increases (assuming it is a normal good), then
a. Price would increase but the change in quantity exchanged would be indeterminate.
b. Price would decrease but the change in quantity exchanged would be indeterminate.
c. Quantity exchanged would increase but the change in price would be indeterminate.
d. Quantity exchanged would decrease but the change in price would be indeterminate.
2. Which of the following is true?
a. A price ceiling reduces the quantity exchanged in the market, but a price floor increases the quantity exchanged in the market.
b. A price ceiling increases the quantity exchanged in the market, but a price floor decreases the quantity exchanged in the market.
c. Both price floors and price ceilings reduce the quantity exchanged in the market.
d. Both price floors and price ceilings increase the quantity exchanged in the market.
3. If a price floor was set at the current equilibrium price, which of the following would cause a surplus as a result?
a. An increase in demand
b. A decrease in demand
c. An increase in supply
d. A decrease in supply
e. Either b or c
4. The quantity exchanged on a market tends to
a. Increase for both price floors and price ceilings.
b. Decrease for both price floors and price ceilings.
c. Increase for price floors and decrease for price ceilings.
d. Decrease for price floors and increase for price ceilings.
5. A current shortage is due to a price ceiling. If the price ceiling is removed,
a. Price would increase, quantity supplied would increase, and quantity demanded would decrease.
b. Price would increase, quantity supplied would decrease, and quantity demanded would increase.
c. Price would decrease, quantity supplied would increase, and quantity demanded would decrease.
d. Price would decrease, quantity supplied would decrease, and quantity demanded would increase.
6. A current surplus is due to a price floor. If the price floor is removed,
a. Price would increase, quantity demanded would increase, and quantity supplied would increase.
b. Price would increase, quantity demanded would decrease, and quantity supplied would decrease.
c. Price would decrease, quantity demanded would increase, and quantity supplied would decrease.
d. Price would decrease, quantity demanded would decrease, and quantity supplied would increase.
7. Which of the following will most likely occur with a 20 percent increase in the minimum wage?
a. Higher unemployment rates among experienced and skilled workers
b. Higher unemployment rates among young and low-skilled workers
c. Lower unemployment rates for young and low-skilled workers
d. The price floor (minimum wage) will be binding in the young and low-skilled labor market but not in the experienced and skilled labor market
e. Both b and d