Black markets are associated with

| November 24, 2016

Question
Black markets are associated with: (Points : 1)
price floors and the resulting product surpluses.
price floors and the resulting product shortages.
price ceilings and the resulting product shortages.
price ceilings and the resulting product surpluses.

2. It has been proposed that a government agency be charged with the responsibility for determining the amount of pollution which the atmosphere or a body of water can safely recycle, and sell these limited rights to polluters. From an economist’s perspective, what would be the advantage of such a market for pollution rights? (Points : 1)
Government agencies can make a great deal of money.
Pollution would be eliminated because nobody would want to pay for such a right.
The quality of water or air can be maintained at some acceptable standard through economic incentives.
The social consciousness of people would be raised as they obtain more appreciation for the importance of conservation.

3. If in the short run the demand for mass transit is inelastic and in the long run the demand is elastic, then a price: (Points : 1)
increase will decrease total revenue in the short run but increase total revenue in the long run.
increase will increase total revenue in the short run but decrease total revenue in the long run.
decrease will increase total revenue in the short run but decrease total revenue in the long run.
decrease will decrease total revenue in the short run and decrease total revenue in the long run.

4. The law of supply indicates that: (Points : 1)
producers will offer more of a product at high prices than they will at low prices.
the product supply curve is downsloping.
consumers will purchase less of a good at high prices than they will at low prices.
producers will offer more of a product at low prices than they will at high prices.

5. Which will cause a demand curve to be relatively elastic? (Points : 1)
There are few substitutes.
The time interval considered is large.
The good is considered a necessity.
Purchases of the good require a small portion of consumers’ budgets.

6. If some activity creates positive externalities as well as private benefits, then economic theory suggests that the activity ought to be: (Points : 1)
taxed.
prohibited.
subsidized.
left alone.

7. If there are positive externalities associated with the consumption of a good or service: (Points : 1)
the private demand curve will overestimate the true demand curve.
the private demand curve will underestimate the true demand curve.
consumers will be willing to pay for all these benefits in private markets.
the market demand curve will be the vertical summation of the individual demand costs.

8. Consider a situation where the U.S. Congress wants to place a special tax on private airplanes to increase tax revenue. This tax would be most effective in raising new tax revenues if the price elasticity of: (Points : 1)
supply is elastic.
supply is inelastic.
demand is elastic.
demand is inelastic.

9. To economists, the main differences between “the short run” and “the long run” are that: (Points : 1)
the law of diminishing returns applies in the long run, but not in the short run.
in the short run all resources are fixed, while in the long run all resources are variable.
in the long run all resources are variable, while in the short run at least one resource is fixed.
fixed costs are more important to decision making in the long run than they are in the short run.

10. A competitive market will: (Points : 1)
achieve an equilibrium price.
produce shortages.
produce surpluses.
create disorder.

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