4-51 The price of scandricks has fallen while the quantity sold has also fallen.Such an event is

A. Incorrect. An increase in the demand for scandricks would have the opposite effect.

B. Correct. A decrease in the demand for scandricks would lower price and quantity.

C. Incorrect. An increase in the supply of scandricks would raise the quantity sold.

D. Incorrect. A decrease in the supply of scandricks would raise the price.

E. Incorrect. If demand changes, it is not a violation of the law of demand.

4-52 The price of azurite has risen while the quantity sold has also risen.Such an event is

A. Correct. An increase in the demand for azurite would raise both price and quantity sold.

B. Incorrect. A decrease in the demand for azurite would cause the opposite effect.

C. Incorrect. An increase in the supply of azurite would cause the price to fall.

D. Incorrect. A decrease in the supply of azurite would cause the quantity to fall.

E. Incorrect. A decrease in supply accompanied by an increase in demand would cause the price to rise, but its effect on quantity is not certain.

4-53 A new, inexpensive substitute for copper wire is discovered at the same time as new copper deposits are discovered and mined. What is the likely result of these events?

A. Incorrect. This would be true only if the supply alone changed.

B. Incorrect. This would be true only if the demand alone changed.

C. Correct. The increase in supply and drop in demand will both cause price to fall, but the effects on quantity sold may cancel each other out.

D. Incorrect. The increase in supply and drop in demand will both cause price to fall, but the effects on quantity sold may cancel each other out.

E. Incorrect. The increase in supply and drop in demand will both cause price to fall, but the effects on quantity sold may cancel each other out.

4-54 Drought reduces the supply of wheat, at the same time as the demand for wheat falls. From this information, we can expect

A. Incorrect. This would be true if the supply increased and there was no change in demand.

B. Incorrect. This would be true if the supply went down while the demand rose.

C. Incorrect. This would be true if the supply rose while the demand went down.

D. Correct. The decrease in supply and decrease in demand will both cause quantity sold to fall, but the effects on price may cancel each other out.

E. Incorrect. This would be true if the demand went up while the supply also rose.

4-55 Suppose a new law went into effect that required that all college students (part-time or full time) be paid a wage of at least $25 per hour by their employers. What would you expect to happen?

A. Incorrect. This price floor would discourage employers from hiring college students and encourage them to hire less expensive substitutes (non-students).

B. Incorrect. The price floor would cause a surplus of college students willing to work; the quantity demanded would be lower than the quantity supplied.

C. Incorrect. The price floor would cause a surplus of college students willing to work; many who want to work or who depend on employment income could not find jobs.

D. Incorrect. The price floor would cause a surplus of college students willing to work.

E. Correct. The price floor would cause the quantity demanded to be less than it would be in equilibrium.

4-56 A price ceiling of fifty cents per pound is placed on steaks sold at grocery stores (to make it more affordable). What results would you expect?

A. Incorrect. The price ceiling would reduce the quantity supplied.

B. Incorrect. The price ceiling would reduce the quantity supplied, and this would determine the amount consumers could buy.

C. Incorrect. The price ceiling would reduce the quantity supplied; unless low income people have some special way of getting sellers to sell what they don't want to sell, they still won't get any steaks.

D. Incorrect. The price ceiling would reduce the quantity supplied, so many who now buy steak could not get any (and what they can get will probably be of poor quality).

E. Correct. The price ceiling would reduce the quantity supplied, and this would determine the amount consumers could buy.

4-57 All of the apartments in Santa Monica, California are subject to rent control. The rent control price is set below the market equilibrium price. Economic theory suggests that this rent control price would probably

A. Incorrect. A price ceiling will increase quantity demanded.

B. Incorrect. Some units may have to be rented at a price less than the opportunity cost of supplying them.

C. Correct. Some units may have to be rented at a price less than the opportunity cost of maintaining them.

D. Incorrect. A price ceiling will increase quantity demanded and reduce quantity supplied, causing a shortage.

E. Incorrect. There will be a shortage; the landlords will decide which of the potential tenants will get the apartments, and this will mean some type of discrimination (legal or illegal).

4-58 Which of the following is true?

A. Incorrect. A price floor will reduce quantity demanded, and that will determine the amount actually purchased.

B. Correct. A price floor will reduce quantity demanded, and that will determine the amount actually purchased.

C. Incorrect. A surplus of a good means quantity demanded is less than quantity supplied at the current price. It doesn't mean buyers could get the good without paying any price.

D. Incorrect. Consumer surplus is the excess of value received over the price paid.

E. Incorrect. Producer surplus is the excess of price received over the cost of selling.

4-59 A price ceiling of $1 per pound is placed on steaks sold at grocery stores (to make it more affordable). What results would you expect?

A. Incorrect. The price ceiling would reduce the quantity supplied.

B. Incorrect. The price ceiling would reduce the quantity supplied, and this amount would determine the amount consumers would buy.

C. Incorrect. The price ceiling would reduce the quantity supplied; unless low income people have some special way of getting sellers to sell what they don't want to sell, they still won't get any steaks.

D. Incorrect. The price ceiling would reduce the quantity supplied, so many who now buy steak could not get any (and what they can get will probably be of poor quality)..

E. Correct. People who can't buy steak in the grocery store will seek out substitutes (demand for restaurant steaks will rise).

4-60 Suppose a new law went into effect that required that all college students (part-time or full time) be paid by their employers at least $25 per hour. What would you expect to happen?

A. Incorrect. This price floor would discourage employers from hiring college students and encourage them to hire less expensive substitutes (non-students).

B. Correct. This price floor would discourage employers from hiring college students and encourage them to hire less expensive substitutes (non-students).

C. Incorrect. Since college students would have more trouble finding jobs, they may have to quit school in order to get work (and accept a wage less than $25).

D. Incorrect. This price floor would discourage employers from hiring college students and encourage them to hire less expensive substitutes (non-students).

E. Incorrect. Since college students would have more trouble finding jobs, they may have to quit school in order to get work, thus lowering demand for textbooks.