CHAPTERl2
1) Whenlthelmarketlislinlequilibrium,
a) Totallsurpluslislminimized
b) Totallsurpluslislmaximizedlwithoutlgovernmentlintervention
c) Governmentlmaximizesltotallrevenue
d) Noneloflthelabove
ANS:lB
2) Theldifferencelbetweenlthelminimumlpricelthelproducerlislwillingltolacceptlandlthelpricelthelprod
ucerlactuallylreceiveslforlalproductlislreferredltolas:
a) marketlsurplus
b) marketlshortage
c) buyerlsurplus
d) sellerlsurplus.
ANS:lD
3) Iflyoularelwillingltolselllyourllawnlmowerlbusinesslforl$355,000landlsomeonelofferslyou
$420,000lforlit,lthisltransactionlwilllgenerate:
a) Therelislnolsurpluslcreated
b) $65,000lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $30,000lworthloflbuyerlsurpluslandl$35,000loflsellerlsurplus
d) $65,000lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurpluslA
NS:lB
4) Taxeslcause:
a) Marketldistortions
b) Reducelincentivesltolwork
c) Decreaselwealthlcreatingltransactions
d) Allloflthelabove
ANS:lD
5) Alpricelceilinglislbindinglwhen
a) thelgovernmentlsetslpricelabovelmarketlequilibriumlprice.
b) thelequivalentloflanlimplicitltaxlonlproducerslandlanlimplicitlsubsidyltolconsumers.
c) thelgovernmentlsetslpricelbelowlmarketlequilibriumlprice.
d) Bothlblandlc.
ANS:lB
6) Economiclreasoninglislbasedlonlthelpremiselthat:
a) allldecisionslorlactionslarelcostless.
b) onlylnon-economicldecisionslorlactionslhavelalcostlassociatedlwithlthem.
c) onlyleconomicldecisionslorlactionslhavelalcostlassociatedlwithlthem.
d) allldecisionslandlactionslhavelalcostlassociatedlwithlthem.
ANS:lD
7) Sociallforces:
a) affectlthelpricelmechanismlthroughlculturallnorms.
b) affectlthelpricelmechanismlthroughltheleducationallsystem.
c) affectlthelpricelmechanismlthroughlscarcity.
d) dolnotlaffectlthelpricelmechanism.
ANS:lA
1
Alllinformationlprovidedlforlreferencelonly
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, 8) Onellessonloflbusiness:
a) isltracinglthelconsequencesloflalpolicy
b) promotinglalpolicylchangeltoleradicatelinefficiencies
c) buylallow-valuedlassetslandlselllitltolsomeonelwholvalueslitlhigher.
d) Noneloflthelabove
ANS:lC
9) Theldifferencelbetweenlthelmaximumlpricelthelconsumerlislwillingltolpaylandlthelpricelthelcons
umerlactuallylpayslforlalproductlislreferredltolas:
a) marketlsurplus
b) marketlshortage
c) buyerlsurplus
d) sellerlsurplus.
ANS:lC
10) Iflyoularelwillingltolselllyourlcarlbusinesslforl$500,000landlsomeonelofferslyoul$420,000lforlit,lthi
sltransactionlwilllgenerate:
a) Therelislnolsurpluslcreated
b) $80,000lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $40,000lworthloflbuyerlsurpluslandl$40,000loflsellerlsurplus
d) $80,000lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurplus
ANS:lA
11) Iflyoularelwillingltolpurchaselalhouselforl$300,000landlyoulpurchaselthelhouselforl$275,000,lthislt
ransactionlwilllgenerate:
a) Therelislnolsurpluslcreated
b) $25,000lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $10,000lworthloflbuyerlsurpluslandl$15,000loflsellerlsurplus
d) $25,000lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurpluslA
NS:lD
12) Iflyoularelwillingltolpurchaselalhouselforl$500,000landlyoulpurchaselthelhouselforl$500,000l,lthislt
ransactionlwilllgenerate:
a) Therelislnolsurpluslcreated
b) $0lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $0lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurplus
d) Notlinformationlprovidedl
ANS:lC
13) Totallsurpluslorlgainslcreatedlfromltradelequal
a) Sellerlsurplus
b) Buyerlsurplus
c) Thelsummationloflsellerlandlbuyerlsurplus
d) Profitslearnedlbylalfirm
ANS:lC
14) Thelbiggestladvantageloflcapitalismlislthat
a) Itlgenerateslwealthlwithlthelhelploflgovernmentlintervention
b) Priceslhinderlinlmovinglassetslfromlhigh-valueltollow-valueluses
c) Itlforceslinvoluntarylexchanges
d) Itlcreateslwealthlbyllettinglalpersonlfollowlhislorlherlownlself-interest
ANS:lD
2
Alllinformationlprovidedlforlreferencelonly
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, 15) Thelauthorslfeellsubsidiesldestroylwealthlbecause
a) subsidieslmovelassetslfromllower-ltolhigher-lvaluedluses
b) subsidieslmovelassetslfromlhigher-ltollower-lvaluedluses
c) subsidieslhelplproducerslonly
d) subsidieslhelplconsumerslonly
ANS:lB
16) Governmentlcanlintervenelinlthelmarketlthrough
a) Pricelfloors
b) Pricelceilings
c) Taxes
d) Alllthelabove
ANS:lD
17) Governmentlintervention
a) provideslincentivesltolconductlbusinesslinlanlillegallblacklmarket
b) playslnolrolelinlgeneratinglwealth
c) islthelbestlwayltoleliminatelpoverty
d) doeslnotlenforcelpropertylrightsl
ANS:lA
18) Wealthlcreatingltransactionslarellessllikelyltoloccur
a) Withoutlprivatelpropertylrights
b) Withoutlcontractlenforcement
c) Bothlalandlb
d) Noneloflthelabove
ANS:lD
19) Anlexampleloflpricelfloorlis
a) Minimumlwages
b) RentlcontrolslinlNewlYork
c) Bothlalandlb
d) Noneloflthelabovel
ANS:lA
20) Pricelceilingslcause
a) Somelsuppliersltoldroploutloflthelmarketlasltheylcannotlchargelthelpriceltheylwerelearlierlchar
ging
b) Alreductionlinlthelqualityloflthelproduct
c) Thelcreationloflblacklmarkets
d) Alllthelabovel
ANS:lD
21) Alconsumerlvalueslalcarlatl$30,000landlalproducerlvalueslthelsamelcarlatl$20,000.lIfltheltrans
actionlislcompletedlatl$24,000,ltheltransactionlwilllgenerate:
a) Nolsurplus
b) $4,000lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $6,000lworthloflbuyerlsurpluslandl$4,000loflsellerlsurplus
d) $6,000lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurpluslA
NS:lC
22) Alconsumerlvalueslalcarlatl$30,000landlalproducerlvalueslthelsamelcarlatl$20,000.lIfltheltrans
actionlislcompletedlatl$24,000,ltheltransactionlwilllnotltakelplacelif:
a) Theltaxlislequalltolthelsellerlsurplus
3
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, b) Theltaxlislsmallerlthanltheltotallsurplus
c) Theltaxlisllargerlthanltheltotallsurplus
d) TheltaxlislsmallerlthanlthelbuyerlsurpluslA
NS:lC
23) Alconsumerlvalueslalcarlatl$30,000landlalproducerlvalueslthelsamelcarlatl$20,000.lIfltheltrans
actionlislcompletedlatl$24,000,lwhatllevellofltaxlratelwilllresultlinlunconsummatedltransacti
on?
a) 0%
b)lll 25%
c)lll 20%
d)lll 40%
ANS:lD
24) Alconsumerlvalueslalcarlatl$525,000landlalproducerlvalueslthelsamelcarlatl$485,000.lIfltheltrans
actionlislcompletedlatl$510,000,ltheltransactionlwilllgenerate:
a) Nolsurplus
b) $25,000lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $15,000lworthloflbuyerlsurpluslandl$25,000loflsellerlsurplus
d) $25,000lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurpluslA
NS:lC
25) Alconsumerlvalueslalcarlatl$525,000landlalproducerlvalueslthelsamelcarlatl$485,000.lIfltheltrans
actionlislcompletedlatl$510,000,lwhatlamountlofltaxlwilllresultlinlunconsummatedltransaction?
a) Altaxlofl$9,000
b) Altaxlofl$14,000
c) Altaxlofl$15,000
d) Altaxlofl$18,000l
ANS:lD
26) Alconsumerlvalueslalcarlatl$525,000landlalproducerlvalueslthelsamelcarlatl$485,000.lIfltheltrans
actionlislcompletedlatl$510,000,lwhatllevellofltaxlratelwilllresultlinlunconsummatedltransactio
n?
a) 1%
b) 5%
c) 3%
d) 2%
ANS:lB
27) Alconsumerlvalueslalcarlatl$525,000landlalproducerlvalueslthelsamelcarlatl$485,000.lIflsalesltaxlisl8%l
andlislleviedlonlthelseller,lthenlthelsellerslbottomllinelpricelis
a)lll $527,000
b)lll $523,800
c)lll $525,000
d)lll $500,000
ANS:lB
28) Alconsumerlvalueslalcarlatl$525,000landlalproducerlvalueslthelsamelcarlatl$485,000.lIflsalesltaxlisl8%l
andlislleviedlonlthelbuyer,lthenlthelbuyersltopldollarlpricelis
a)lll $525,000
b)lll $523,800
c)lll $485,000
d)lll $486,111
4
Alllinformationlprovidedlforlreferencelonly
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1) Whenlthelmarketlislinlequilibrium,
a) Totallsurpluslislminimized
b) Totallsurpluslislmaximizedlwithoutlgovernmentlintervention
c) Governmentlmaximizesltotallrevenue
d) Noneloflthelabove
ANS:lB
2) Theldifferencelbetweenlthelminimumlpricelthelproducerlislwillingltolacceptlandlthelpricelthelprod
ucerlactuallylreceiveslforlalproductlislreferredltolas:
a) marketlsurplus
b) marketlshortage
c) buyerlsurplus
d) sellerlsurplus.
ANS:lD
3) Iflyoularelwillingltolselllyourllawnlmowerlbusinesslforl$355,000landlsomeonelofferslyou
$420,000lforlit,lthisltransactionlwilllgenerate:
a) Therelislnolsurpluslcreated
b) $65,000lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $30,000lworthloflbuyerlsurpluslandl$35,000loflsellerlsurplus
d) $65,000lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurpluslA
NS:lB
4) Taxeslcause:
a) Marketldistortions
b) Reducelincentivesltolwork
c) Decreaselwealthlcreatingltransactions
d) Allloflthelabove
ANS:lD
5) Alpricelceilinglislbindinglwhen
a) thelgovernmentlsetslpricelabovelmarketlequilibriumlprice.
b) thelequivalentloflanlimplicitltaxlonlproducerslandlanlimplicitlsubsidyltolconsumers.
c) thelgovernmentlsetslpricelbelowlmarketlequilibriumlprice.
d) Bothlblandlc.
ANS:lB
6) Economiclreasoninglislbasedlonlthelpremiselthat:
a) allldecisionslorlactionslarelcostless.
b) onlylnon-economicldecisionslorlactionslhavelalcostlassociatedlwithlthem.
c) onlyleconomicldecisionslorlactionslhavelalcostlassociatedlwithlthem.
d) allldecisionslandlactionslhavelalcostlassociatedlwithlthem.
ANS:lD
7) Sociallforces:
a) affectlthelpricelmechanismlthroughlculturallnorms.
b) affectlthelpricelmechanismlthroughltheleducationallsystem.
c) affectlthelpricelmechanismlthroughlscarcity.
d) dolnotlaffectlthelpricelmechanism.
ANS:lA
1
Alllinformationlprovidedlforlreferencelonly
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, 8) Onellessonloflbusiness:
a) isltracinglthelconsequencesloflalpolicy
b) promotinglalpolicylchangeltoleradicatelinefficiencies
c) buylallow-valuedlassetslandlselllitltolsomeonelwholvalueslitlhigher.
d) Noneloflthelabove
ANS:lC
9) Theldifferencelbetweenlthelmaximumlpricelthelconsumerlislwillingltolpaylandlthelpricelthelcons
umerlactuallylpayslforlalproductlislreferredltolas:
a) marketlsurplus
b) marketlshortage
c) buyerlsurplus
d) sellerlsurplus.
ANS:lC
10) Iflyoularelwillingltolselllyourlcarlbusinesslforl$500,000landlsomeonelofferslyoul$420,000lforlit,lthi
sltransactionlwilllgenerate:
a) Therelislnolsurpluslcreated
b) $80,000lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $40,000lworthloflbuyerlsurpluslandl$40,000loflsellerlsurplus
d) $80,000lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurplus
ANS:lA
11) Iflyoularelwillingltolpurchaselalhouselforl$300,000landlyoulpurchaselthelhouselforl$275,000,lthislt
ransactionlwilllgenerate:
a) Therelislnolsurpluslcreated
b) $25,000lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $10,000lworthloflbuyerlsurpluslandl$15,000loflsellerlsurplus
d) $25,000lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurpluslA
NS:lD
12) Iflyoularelwillingltolpurchaselalhouselforl$500,000landlyoulpurchaselthelhouselforl$500,000l,lthislt
ransactionlwilllgenerate:
a) Therelislnolsurpluslcreated
b) $0lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $0lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurplus
d) Notlinformationlprovidedl
ANS:lC
13) Totallsurpluslorlgainslcreatedlfromltradelequal
a) Sellerlsurplus
b) Buyerlsurplus
c) Thelsummationloflsellerlandlbuyerlsurplus
d) Profitslearnedlbylalfirm
ANS:lC
14) Thelbiggestladvantageloflcapitalismlislthat
a) Itlgenerateslwealthlwithlthelhelploflgovernmentlintervention
b) Priceslhinderlinlmovinglassetslfromlhigh-valueltollow-valueluses
c) Itlforceslinvoluntarylexchanges
d) Itlcreateslwealthlbyllettinglalpersonlfollowlhislorlherlownlself-interest
ANS:lD
2
Alllinformationlprovidedlforlreferencelonly
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, 15) Thelauthorslfeellsubsidiesldestroylwealthlbecause
a) subsidieslmovelassetslfromllower-ltolhigher-lvaluedluses
b) subsidieslmovelassetslfromlhigher-ltollower-lvaluedluses
c) subsidieslhelplproducerslonly
d) subsidieslhelplconsumerslonly
ANS:lB
16) Governmentlcanlintervenelinlthelmarketlthrough
a) Pricelfloors
b) Pricelceilings
c) Taxes
d) Alllthelabove
ANS:lD
17) Governmentlintervention
a) provideslincentivesltolconductlbusinesslinlanlillegallblacklmarket
b) playslnolrolelinlgeneratinglwealth
c) islthelbestlwayltoleliminatelpoverty
d) doeslnotlenforcelpropertylrightsl
ANS:lA
18) Wealthlcreatingltransactionslarellessllikelyltoloccur
a) Withoutlprivatelpropertylrights
b) Withoutlcontractlenforcement
c) Bothlalandlb
d) Noneloflthelabove
ANS:lD
19) Anlexampleloflpricelfloorlis
a) Minimumlwages
b) RentlcontrolslinlNewlYork
c) Bothlalandlb
d) Noneloflthelabovel
ANS:lA
20) Pricelceilingslcause
a) Somelsuppliersltoldroploutloflthelmarketlasltheylcannotlchargelthelpriceltheylwerelearlierlchar
ging
b) Alreductionlinlthelqualityloflthelproduct
c) Thelcreationloflblacklmarkets
d) Alllthelabovel
ANS:lD
21) Alconsumerlvalueslalcarlatl$30,000landlalproducerlvalueslthelsamelcarlatl$20,000.lIfltheltrans
actionlislcompletedlatl$24,000,ltheltransactionlwilllgenerate:
a) Nolsurplus
b) $4,000lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $6,000lworthloflbuyerlsurpluslandl$4,000loflsellerlsurplus
d) $6,000lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurpluslA
NS:lC
22) Alconsumerlvalueslalcarlatl$30,000landlalproducerlvalueslthelsamelcarlatl$20,000.lIfltheltrans
actionlislcompletedlatl$24,000,ltheltransactionlwilllnotltakelplacelif:
a) Theltaxlislequalltolthelsellerlsurplus
3
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, b) Theltaxlislsmallerlthanltheltotallsurplus
c) Theltaxlisllargerlthanltheltotallsurplus
d) TheltaxlislsmallerlthanlthelbuyerlsurpluslA
NS:lC
23) Alconsumerlvalueslalcarlatl$30,000landlalproducerlvalueslthelsamelcarlatl$20,000.lIfltheltrans
actionlislcompletedlatl$24,000,lwhatllevellofltaxlratelwilllresultlinlunconsummatedltransacti
on?
a) 0%
b)lll 25%
c)lll 20%
d)lll 40%
ANS:lD
24) Alconsumerlvalueslalcarlatl$525,000landlalproducerlvalueslthelsamelcarlatl$485,000.lIfltheltrans
actionlislcompletedlatl$510,000,ltheltransactionlwilllgenerate:
a) Nolsurplus
b) $25,000lworthloflsellerlsurpluslandlunknownlamountloflbuyerlsurplus
c) $15,000lworthloflbuyerlsurpluslandl$25,000loflsellerlsurplus
d) $25,000lworthloflbuyerlsurpluslandlunknownlamountloflsellerlsurpluslA
NS:lC
25) Alconsumerlvalueslalcarlatl$525,000landlalproducerlvalueslthelsamelcarlatl$485,000.lIfltheltrans
actionlislcompletedlatl$510,000,lwhatlamountlofltaxlwilllresultlinlunconsummatedltransaction?
a) Altaxlofl$9,000
b) Altaxlofl$14,000
c) Altaxlofl$15,000
d) Altaxlofl$18,000l
ANS:lD
26) Alconsumerlvalueslalcarlatl$525,000landlalproducerlvalueslthelsamelcarlatl$485,000.lIfltheltrans
actionlislcompletedlatl$510,000,lwhatllevellofltaxlratelwilllresultlinlunconsummatedltransactio
n?
a) 1%
b) 5%
c) 3%
d) 2%
ANS:lB
27) Alconsumerlvalueslalcarlatl$525,000landlalproducerlvalueslthelsamelcarlatl$485,000.lIflsalesltaxlisl8%l
andlislleviedlonlthelseller,lthenlthelsellerslbottomllinelpricelis
a)lll $527,000
b)lll $523,800
c)lll $525,000
d)lll $500,000
ANS:lB
28) Alconsumerlvalueslalcarlatl$525,000landlalproducerlvalueslthelsamelcarlatl$485,000.lIflsalesltaxlisl8%l
andlislleviedlonlthelbuyer,lthenlthelbuyersltopldollarlpricelis
a)lll $525,000
b)lll $523,800
c)lll $485,000
d)lll $486,111
4
Alllinformationlprovidedlforlreferencelonly
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