Micro Practice Exam 2A questions well
answered
Land used to grow corn can also grow soybeans. As the demand for corn used in ethanol
began to increase the price of corn, what happened to the price of soybeans? - ANS ✔✔The
price of soybeans rose since farmers began planting corn instead of soybeans, thus
decreasing the supply of soybeans.
In a free market, the price of a good is equal to the value of the good: - ANS ✔✔in its next
highest-valued use.
The text states: "The great economic problem is to arrange our limited resources to satisfy
as many of our wants as possible. How does a market achieve this goal? - ANS ✔✔The forces of
demand and supply use prices as a signaling device that directs resources
to their highest-value uses.
If speculators expect that the future price of corn will be higher, they will cause today's price
of corn to and the future price of corn to be than it would have been
without speculation. - ANS ✔✔increase; lower
Price ceilings create five important effects: - ANS ✔✔shortages, reductions in product quality,
wasteful lineups, a loss from gains to trade, and
a misallocation of resources
In Ancient Egypt, the "Bronze Law" set maximum prices for wages, preventing them from
rising above what rulers perceived as the minimum needed to survive. If this was 10¢/day
, a day for a porter (someone who carries things short distances) and the market wage was
8¢/day, which of the following would be a plausible consequence of this law? - ANS ✔✔Nothing
unusual would happen.
The lower the price ceiling is relative to the market equilibrium price, the: - ANS ✔✔larger the
shortage
Which would most likely result after setting a price ceiling on automobiles? - ANS ✔✔fewer
safety features
A free market maximizes the gains from trade, the sum of consumer and producer surplus,
meeting all of the following conditions except: - ANS ✔✔all buyers who are willing to pay
positive prices are able to receive goods from trade
In 1972-1973, the swimming pools in California were heated but homes in New Jersey were
cold, is an example of a(n): - ANS ✔✔misallocation of resources caused by price controls
If a tin of sardines creates a noxious odor for nonsardine-eaters equivalent to $1 per tin, it
follows that the market produces: - ANS ✔✔too many tins of sardines relative to the social
optimum.
You are considering planting a garden of beautiful flowers in your front yard. It would cost
you $45 in time and materials to plant it. You would get $40 worth of benefits from the
garden and your neighbor, who walks by your front yard every day, would get $10 worth of
benefits from it. Which statement is true? - ANS ✔✔The efficient equilibrium is to plant the
garden, but you would not do so since your
private costs exceed your private benefits.
answered
Land used to grow corn can also grow soybeans. As the demand for corn used in ethanol
began to increase the price of corn, what happened to the price of soybeans? - ANS ✔✔The
price of soybeans rose since farmers began planting corn instead of soybeans, thus
decreasing the supply of soybeans.
In a free market, the price of a good is equal to the value of the good: - ANS ✔✔in its next
highest-valued use.
The text states: "The great economic problem is to arrange our limited resources to satisfy
as many of our wants as possible. How does a market achieve this goal? - ANS ✔✔The forces of
demand and supply use prices as a signaling device that directs resources
to their highest-value uses.
If speculators expect that the future price of corn will be higher, they will cause today's price
of corn to and the future price of corn to be than it would have been
without speculation. - ANS ✔✔increase; lower
Price ceilings create five important effects: - ANS ✔✔shortages, reductions in product quality,
wasteful lineups, a loss from gains to trade, and
a misallocation of resources
In Ancient Egypt, the "Bronze Law" set maximum prices for wages, preventing them from
rising above what rulers perceived as the minimum needed to survive. If this was 10¢/day
, a day for a porter (someone who carries things short distances) and the market wage was
8¢/day, which of the following would be a plausible consequence of this law? - ANS ✔✔Nothing
unusual would happen.
The lower the price ceiling is relative to the market equilibrium price, the: - ANS ✔✔larger the
shortage
Which would most likely result after setting a price ceiling on automobiles? - ANS ✔✔fewer
safety features
A free market maximizes the gains from trade, the sum of consumer and producer surplus,
meeting all of the following conditions except: - ANS ✔✔all buyers who are willing to pay
positive prices are able to receive goods from trade
In 1972-1973, the swimming pools in California were heated but homes in New Jersey were
cold, is an example of a(n): - ANS ✔✔misallocation of resources caused by price controls
If a tin of sardines creates a noxious odor for nonsardine-eaters equivalent to $1 per tin, it
follows that the market produces: - ANS ✔✔too many tins of sardines relative to the social
optimum.
You are considering planting a garden of beautiful flowers in your front yard. It would cost
you $45 in time and materials to plant it. You would get $40 worth of benefits from the
garden and your neighbor, who walks by your front yard every day, would get $10 worth of
benefits from it. Which statement is true? - ANS ✔✔The efficient equilibrium is to plant the
garden, but you would not do so since your
private costs exceed your private benefits.
