MODULE 9: Supply and Demand: Quantity Controls

Multiple-Choice Questions

Question

Which of the following changes will most likely result in an increase in the demand for hamburgers in your hometown?
A.
The price of hotdogs decreases.
B.
The price of drinks sold at hamburger restaurants increases.
C.
Income in your town decreases and hamburgers are a normal good.
D.
The local newspaper publishes a story on health problems caused by red meat.
E.
The number of vegetarians in your town decreases and the population size remains the same.

Which of the following changes will most likely result in an increase in the demand for hamburgers in your hometown?
Question

Which of the following changes will most likely result in a decrease in the supply of guitars?
A.
The popularity of guitar music increases.
B.
Consumer incomes decrease.
C.
A new firm enters the guitar industry.
D.
The guitar-making process is reengineered to be more efficient.
E.
The wages of guitar makers increase.

Which of the following changes will most likely result in a decrease in the supply of guitars?
Question

Which of the following will most likely result in a decrease in the quantity of lemons demanded?
A.
an increase in the price of lemons
B.
an increase in the price of limes
C.
an increase in the price of lemonade
D.
an increase in the number of lemonade stands
E.
a decrease in consumer income

Which of the following will most likely result in a decrease in the quantity of lemons demanded?
Question

Page 101

Which of the following will occur if consumer incomes increase?
A.
The demand for inferior goods will increase.
B.
The demand for normal goods will increase.
C.
The demand for all goods will increase.
D.
The demand for normal goods will decrease.
E.
The demand for all goods will decrease.

Which of the following will occur if consumer incomes increase?
Question

If two goods are complements, an increase in the price of one good will cause which of the following?
A.
a decrease in the demand for the other
B.
a decrease in the quantity demanded of the other
C.
an increase in the demand for the other
D.
an increase in the quantity demanded of the other
E.
no change in the demand for the other

If two goods are complements, an increase in the price of one good will cause which of the following?
Question

An increase in the wages of workers producing a good will most likely lead to which of the following?
A.
a decrease in the quantity of the good supplied
B.
a decrease in the supply of the good
C.
an increase in the quantity of the good supplied
D.
an increase in the supply of the good
E.
no change in the supply of the good

An increase in the wages of workers producing a good will most likely lead to which of the following?
Question

Which of the following is true at the equilibrium price in a market?
A.
Consumers who purchase the good may be better off buying something else instead.
B.
The market has not yet cleared.
C.
There is a tendency for the price to decrease over time.
D.
There may be either a surplus or a shortage of the good.
E.
The quantity demanded of the good equals the quantity supplied.

Which of the following is true at the equilibrium price in a market?
Question

A survey indicated that chocolate is America’s favorite ice cream flavor. Which of the following will lead to a decrease in the price of chocolate ice cream?
A.
A drought in the Midwest causes farmers to reduce the number of dairy cows they raise.
B.
A new report from the American Medical Association concludes that chocolate has significant health benefits.
C.
The price of vanilla ice cream increases.
D.
New freezer technology lowers the cost of producing ice cream.
E.
The price of ice cream toppings decreases.

A survey indicated that chocolate is America’s favorite ice cream flavor. Which of the following will lead to a decrease in the price of chocolate ice cream?
Question

Which of the following events will increase both the price and the quantity of pizza?
A.
The price of mozzarella cheese increases.
B.
New health hazards of eating pizza are widely publicized.
C.
The price of pizza ovens rises.
D.
Consumers expect the price of pizza to fall next week.
E.
Consumer income falls and pizza is an inferior good.

Which of the following events will increase both the price and the quantity of pizza?
Question

Use the following situation and diagram to answer Questions 10–15.

For the last 70 years, the U.S. government has used price supports to provide income assistance to U.S. farmers. At times, the government has used price floors, which it maintains by buying up the surplus farm products. At other times, it has used target prices, giving the farmer an amount equal to the difference between the market price and the target price for each unit sold.

What are the equilibrium price and quantity in the market for corn?
PriceQuantity
A.
$1800
B.
$11,200
C.
$31,000
D.
$5800
E.
$51,200

Use the following situation and diagram to answer Questions 1
Question

If the government sets a price floor of $5 per bushel, how many bushels of corn are produced?
A.
0
B.
400
C.
800
D.
1,000
E.
1,200

If the government sets a price floor of $5 per bushel, how many bushels of corn are produced?
Question

If the government sets a price floor of $5 per bushel, how many bushels of corn are purchased by consumers?
A.
0
B.
400
C.
800
D.
1,000
E.
1,200

If the government sets a price floor of $5 per bushel, how many bushels of corn are purchased by consumers?
Question

How many bushels of corn are purchased by the government if it maintains a price floor of $5 by buying all surplus corn?
A.
0
B.
400
C.
800
D.
1,000
E.
1,200

How many bushels of corn are purchased by the government if it maintains a price floor of $5 by buying all surplus corn?
Question

Page 102

How much does a price floor of $5 cost the government if it maintains the price floor by buying any surplus corn?
A.
$0
B.
$2,000
C.
$4,000
D.
$5,000
E.
$6,000

How much does a price floor of $5 cost the government if it maintains the price floor by buying any surplus corn?
Question

How much revenue do corn farmers receive if there is a price floor at $5?
A.
$0
B.
$1,200
C.
$3,000
D.
$4,000
E.
$6,000

How much revenue do corn farmers receive if there is a price floor at $5?
Question

Where must an effective price ceiling in this market be set?

Use the following diagram to answer Questions 16–20.
A.
at $500
B.
above $400
C.
above $500
D.
below $600
E.
below $500

Where must an effective price ceiling in this market be set?
Question

If the government sets a price ceiling at $400, how many apartments will be demanded by consumers?
A.
0
B.
40,000
C.
180,000
D.
200,000
E.
220,000

If the government sets a price ceiling at $400, how many apartments will be demanded by consumers?
Question

How many apartments will be offered for rent if the government sets a price ceiling at $400?
A.
0
B.
40,000
C.
180,000
D.
200,000
E.
220,000

How many apartments will be offered for rent if the government sets a price ceiling at $400?
Question

A price ceiling set at $400 will result in which of the following in the market for apartments?
A.
a surplus of 40,000 apartments
B.
a surplus of 220,000 apartments
C.
no surplus or shortage
D.
a shortage of 40,000 apartments
E.
a shortage of 220,000 apartments

A price ceiling set at $400 will result in which of the following in the market for apartments?
Question

A price ceiling set at $600 will result in which of the following in the market for apartments?
A.
a surplus of 40,000 apartments
B.
a surplus of 220,000 apartments
C.
no surplus or shortage
D.
a shortage of 40,000 apartments
E.
a shortage of 220,000 apartments

A price ceiling set at $600 will result in which of the following in the market for apartments?
Question

Refer to the following table and information to answer Questions 21–24.

Only fishing boats licensed by the U.S. government are allowed to catch swordfish in the waters off the North Atlantic coast. The following table shows hypothetical demand and supply schedules for swordfish caught in the United States each year.

Quantity of swordfish (millions of pounds per year)
Price of swordfish (per pound) Quantity demanded Quantity supplied
$20 6 15
18 7 13
16 8 11
14 9 9
12 10 7

Page 103

If the government establishes a quota of 7 million pounds in the market, what will the demand price of swordfish be (per pound)?
A.
$20
B.
$18
C.
$16
D.
$14
E.
$12

Refer to the following table and information to answer Questions 2
Question

If the government establishes a quota of 7 million pounds in the market, what will the supply price of swordfish be (per pound)?
A.
$20
B.
$18
C.
$16
D.
$14
E.
$12

If the government establishes a quota of 7 million pounds in the market, what will the supply price of swordfish be (per pound)?
Question

What is the quota rent per pound of swordfish received by licensed fishing boats when the government sets a quota of 7 million pounds?
A.
$0
B.
$6
C.
$12
D.
$18
E.
$30

What is the quota rent per pound of swordfish received by licensed fishing boats when the government sets a quota of 7 million pounds?
Question

If there is a quota of 7 million pounds and swordfish fishing licenses are traded in a market, how much will the price of a fishing license be per pound?
A.
$0
B.
$6
C.
$12
D.
$18
E.
$30

If there is a quota of 7 million pounds and swordfish fishing licenses are traded in a market, how much will the price of a fishing license be per pound?
Question

When transactions do not occur due to price or quantity controls, what is the term for the lost gains?
A.
wasted resources
B.
inefficient quality
C.
price wedge
D.
black market losses
E.
deadweight loss

When transactions do not occur due to price or quantity controls, what is the term for the lost gains?

	Quantity of swordfish (millions of pounds per year)
Price of swordfish (per pound)	Quantity demanded	Quantity supplied
$20	6	15
18	7	13
16	8	11
14	9	9
12	10	7