Question

QUESTION 5 Governments can pass laws affecting market outcomes:

And therefore negate the laws of supply and demand.

But cannot negate the laws of supply and demand.

Negating the law of demand but not the law of supply.

Negating the law of supply but not the law of demand.

All of the above. 1 points

QUESTION 6 The supply and demand model shows how individuals respond to incentives:

Purely with desirable consequences.

Purely with undesirable consequences.

Frequently with undesirable consequences.

All of the above.

None of the above. 1 points

QUESTION 7 A government imposes price ceilings in order to:

Punish members of society. Keep the price of some product affordable.

Keep the production of some product profitable.

Benefit everybody involved in the market for some product.

All of the above. 1 points

QUESTION 8 One of the ironies of price ceilings is that while rent controls were created to help renters,

They actually help the landlords.

They actually do help all renters.

There are actually fewer apartments rented.

There are actually more apartments rented.

They actually help only the targeted landlords. 1 points

QUESTION 9 How much is spent in high-income areas of the world in supporting farmers?

At least $2 billion per day. Exactly $2 billion per day.

Roughly $1 billion per day.

Less than ½ billion dollars per day.

All of the above. 1 points

QUESTION 10 What is the outcome of governmental support of farmers?

Farmers will benefit from the price floor, but taxpayers and consumers pay the costs.

Taxpayers will benefit from the price floor, but farmers and consumers pay the costs.

Consumers will benefit from the price floor, but farmers and taxpayers pay the costs.

Everybody benefits.

Nobody benefits. 1 points

QUESTION 11 Efficiency in the demand and supply model means:

The optimal amount of each good and service is produced.

The economy is getting as much benefit as possible from its scarce resources.

All the possible gains from trade have been achieved.

All of the above.

None of the above. 1 points

QUESTION 12 The amount that individuals would be willing and able to pay, less the amount they actually pay:

Is called consumer surplus .

Is called producer surplus.

Is represented by the area above the market price and below the demand curve.

Answers A and B above.

Answers A and C above. 1 points

QUESTION 13 The sum of consumer surplus and producer surplus is called:

Total surplus.

Economic surplus.

Social surplus.

All of the above.

None of the above. 1 points

QUESTION 14 Price floors and ceilings:

Create inefficiency.

May transfer some consumer surplus to producers.

May transfer some producer surplus to consumers.

All of the above.

None of the above. 1 points

QUESTION 15 Deadweight loss is:

Necessary.

The loss in total surplus that occurs when the economy produces at an inefficient level of output.

Creates a benefit to society.

Is like money thrown away that benefits no one.

Both answers B and D above. 1 points

QUESTION 16 Removing these barriers would increase the economy’s social surplus.

Price floors.

Price ceilings.

Both price floors and price ceilings.

Neither price floors nor price ceilings.

Popcorn. 1 points

QUESTION 17 Asking whether supply or demand determines a price is like:

Wrestling with an alligator. Ice skating.

Arguing whether it is the upper or under blade of a scissors that cuts the paper.

Working in a fudge factory.

Licking a flagpole in winter. 1 points

QUESTION 18 This is the primary social mechanism for answering the basic questions about what is produced,

how it is produced and for whom it is produced.

Tradition.

Command.

Markets.

Planning

None of the above.

Answer 1

Solution:

5. Option - 2 is correct which states but cannot negate the laws of supply and demand.

The Reason:

The government can pass laws affecting market outcomes such as,

(i) Price Ceiling - A legal maximum price fixed by the government. For exampe- Price ceiling for rent in certain cities.

(ii) Price Floor - A legal minimum price fixed by the government. For example- Price floor for wages, for farmer's produce, etc.

(iii) Tax Incidence - Tax levied by the government to discourage a good's demand or supply. For example- Tax incidence on Cigarettes to discourage their consiumption.

All of the above laws or measures of the government can increase or decreases the demand or supply of a good i.e can affect the market outcome but cannot negate the laws of supply and demand

Because law of demand and supply is a reaction of buyers and sellers towards their consumption and production, respectively due to changes in certain factors in the market and the government laws are one of those factors.

Therefore, Government laws can affect the market outcome but cannot negate the laws of supply and demand.

Reasons for other incorrect options:

Option - 1 is incorrect because government laws and intervention is a factor that affect demand and supply but this factor cannot negate the laws of supply and demand. Therefore, this option is incorrect.

Option - 3 and 4 is incorrect because government laws and intervention cannot negate either law of demand or law of supply as explained above. Therefore, this option is incorrect.

Option - 5 is incorrect because all of the above options are not correct only one that option - 2 is correct as explained above. Therefore, this option is incorrect.