Question

8.Milk is an input in the production of cheese, and cheese and humus are substitutes. An increase in the price of milk will _________ the producer surplus in the market for humus.

1. Decrease
2. increase
3. not change
4. first increase and then decrease

1 9. Rubber is an input in the production of tires, and tires and cars are complements. An increase in the price of rubber will _________ the total surplus in the market for cars (assume that neither curve is perfectly inelastic).

1. Decrease
2. increase
3. not change
4. first increase and then decrease

10. If a price ceiling is imposed below the equilibrium price:

1. the quantity demanded will be higher than it would be otherwise
2. the quantity supplied will be higher than it would be otherwise
3. supply will increase above what it would be otherwise
4. demand will decrease below what it would be otherwise

11. The going rent in the market for 1-bedroom apartments in your neighborhood is $800. If the government imposes a price ceiling of $400 in this market:

1. Less people will rent apartments
2. More people will rent apartments
3. The same number of apartments will be rented
4. More people will be willing to rent apartments at every price

12. A price floor is:

1. a maximum price established by government intervention
2. a minimum price established by government intervention
3. the highest price a consumer will pay for a good
4. the lowest price a producer will accept for a good

13. A price floor in the market for wheat that is set above the current market price:

1. decreases the price received by farmers
2. decreases the price paid by consumers
3. does not change the price received by farmers
4. increases the price paid by consumers

1 14. The current price in the market for cab rides in your neighborhood is $1.00/mile. If the government imposes a price ceiling of $2.50/mile in this market total surplus in this market will:

1. decrease
2. increase
3. decrease first, and then increase
4. not change

15. The current price in the market for milk is $2.00 If the government imposed a price floor of $4.00 in this market total surplus would ____________.

1. decrease
2. increase
3. decrease first, and then increase

Answer 1

8)option B... increase

9) option A.....decrease

10) option A...... quantity demanded will be higher than it would be otherwise. If we keep price ceiling below the equilibrium price,it will generate either excess demand or shortages.

11) option D...... Since government kept price ceiling below the market price, more people will be willing to rent apartments at evry price.

12) option B.....price floor is a minimum price established by government intervention. Govt uses price floor to keep certain prices from going too low.

13) option D..... because, if we keep price floor of wheat above the market price, it increases the price received by farmers and price paid by consumers due to high cost.

14) option D..... because, keeping price ceiling above market price will not change producer surplus.

15) option A... decrease....