multiple choice questions

1. An article in the Wall Street Journal in early 2001 noted two developments in the market for laser eye surgery. The first development concerned side effects from the surgery, including blurred vision. The second development was that the companies renting eye-surgery machinery to doctors had reduced their charges. In the market for laser eye surgeries, these two developments (Points : 1)
decreased demand and decreased supply, resulting in a decrease in the equilibrium quantity and an increase in the equilibrium price of laser eye surgeries.
decreased demand and increased supply resulting in an increase in both the equilibrium quantity and the equilibrium price of laser eye surgeries.
decreased demand and increased supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of laser eye surgeries.
decreased demand and increased supply, resulting in a decrease in both the equilibrium price and the equilibrium quantity of laser eye surgeries.

2. Buyers scrambled to secure stocks of Australian wool following a forecast of an 11 percent decline in wool production. What happens in the Australian wool market as a result of this announcement? (Points : 1)
The demand curve for Australian wool shifts to the left in anticipation of higher prices in the future.
The demand curve for Australian wool shifts to the right in anticipation of higher prices in the future.
The supply curve for Australian wool shifts to the right in anticipation of higher prices in the future.
The supply curve for Australian wool shifts to the left in anticipation of lower quantities in the future.

3. The law of demand implies, holding everything else constant, that (Points : 1)
as the price of bagels increases, the quantity of bagels demanded will decrease.
as the price of bagels increases, the demand for bagels will decrease.
as the price of bagels increases, the quantity of bagels demanded will increase.
as the price for bagels increases, the demand of bagels will increase.

Refer to Figure 3-5. Assume that the graphs in this figure represent the demand and supply curves for used clothing, an inferior good. Which panel describes what happens in this market as a result of a decrease in income? (Points : 1)
Panel (a)
Panel (b)
Panel (c)
Panel (d)

5. George Gnat subscribes to a monthly pest control service for his home. Last week the owner of the service informed George that he will have to raise his monthly service fee because of increases in the price of gasoline used by his workers on their service trips. How is the market for pest control services affected by this? (Points : 1)
There is an increase in the supply of pest control services.
There is a decrease in the demand for pest control services.
There is a decrease in the quantity supplied of pest control services.
There is a decrease in the supply of pest control services.

Figure 4-6 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R0.

Refer to Figure 4-6. What is the area that represents the producer surplus after the imposition of the ceiling? (Points : 1)
F + G
F
D + F + G
A + B + D + F + G

7. Congress passed the Freedom to Farm Act in 1996. What was the purpose of this Act? (Points : 1)
To encourage more people to become farmers.
To grant free land to farmers in order to produce crops that were particularly scarce.
To phase out the use of price ceilings in agricultural markets.
To phase out price floors and return to a free market in agriculture.

Figure 4-7 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf.

Refer to Figure 4-7. What is the area that represents producer surplus after the imposition of the price floor? (Points : 1)
A + B + E
B + E
B + E + F
B + C + D + E

9. Economists have shown that the burden of a tax is the same whether the tax is collected from the buyer or the seller. Why, then, are gasoline and cigarette taxes imposed on sellers? (Points : 1)
Sellers are more honest than buyers.
The demand for both gasoline and cigarettes is very elastic.
The Equal Protection Clause of the U.S. Constitution prohibits the government from imposing taxes like these on buyers.
It is more difficult for buyers to keep track of their purchases, and for the government to verify that the right of amount of tax revenue is collected.

10. David Card and Alan Kruger conducted a study of fast-food restaurants in New Jersey and Pennsylvania. The study found that (Points : 1)
there was a large reduction in employment of low-skilled workers when the minimum wage was raised in these states.
the earned income tax credit is more effective in raising the incomes of low-skilled workers than increases in the minimum wage.
increases in the minimum wage had a very small impact on employment.
increases in the prices of food have a greater effect on wage increases in New Jersey than in Pennsylvania.