Question

Nine multiple-choice questions, thanks.

1.Many homeowners have a choice between heating oil and natural
gas to heat their houses in winter. Which of the following is most likely
to increase the price of natural gas?
A) An increased preference for solar-powered heating
B) A fall in the price of heating oil
C) The discovery of a new source of natural gas
D) An unusually severe winter

2.Which is NOT a predictable result of making a market (such as for
marijuana) illegal?
A) Unpredictable quality
B) Lower product prices as suppliers enter the market
C) A preference for concentrated potency and binge consumption
D) Private violence by buyers and sellers to enforce contracts and property rights
E) Suppliers with a comparative advantage in selling illegal products

3.Rent controls in Manhattan cause all of the following except:
A) wasted resources for potential tenants associated with the time trying to find an apartment.
B) inefficiently low quality.
C) black markets, including subleasing.
D) relatively costless non-price discrimination by landlords against potential tenants.
E) wasted resources for potential landlords associated with the time trying to find a tenant.

4.Suppose immigration policy leads to a significantly lower supply
of farmworkers in California. How would this affect the market for
fruits and vegetables?
A) Supply will shift to the left.
B) Demand will shift to the right.
C) Supply will shift to the right.
D) Demand will shift to the left.

5. Suppose the government of the oil-rich country of Venezuela
sets gasoline prices at 1 bolivar per liter, when the world market
price is much, much higher. This will:
A) improve efficiency since the low prices will force producers
to find cheaper production methods.
B) result in gasoline surpluses in an oil-rich country.
C) cause gasoline shortages even in an oil-rich country.
D) improve equality between rich and poor since the poor can now afford gasoline.

6.Tax revenue will be higher and deadweight loss will be lower when:
A) both demand and supply are elastic.
B) both demand and supply are inelastic.
C) the demand is elastic and supply is inelastic.
D) the demand is inelastic and supply is elastic.

7. Consumers pay a greater share of an excise tax when:
A) both demand and supply are elastic.
B) both demand and supply are inelastic.
C) the demand is elastic and supply is inelastic.
D) the demand is inelastic and supply is elastic.

8.Producers pay a greater share of an excise tax when:
A) both demand and supply are elastic.
B) both demand and supply are inelastic.
C) the demand is elastic and supply is inelastic.
D) the demand is inelastic and supply is elastic.

Answer 1

1) Option D) Winter will increase the demand for heating houses and so the demand for fuels used for the purpose should increase. This increases the demand for natural gas, thereby raising its price.

2) Option B) When market is made illegal, only few sellers are ready to take the risk of selling the illegal product

3) Option D) Rent control would not result in restricting the price discrimination behaviour, in fact it can encourage the same for some landlords.

4) Option A). With reduced quantity of labor supplied, there will be an increase the wage rate and this increased cost of production causes the market supply of goods produced by them, decrease. Hence supply curve shifts left.

5) Option C)

6) Option B)

7) Option D)

8) Option C)