Chapter 8 - Summative Quiz

# Chapter 8 - Summative Quiz - 1 How does the free market...

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1. How does the free market eliminate a shortage? a. by causing the price to rise b. by causing the price to fall c. by increasing demand d. by increasing supply 2. Which of the following best describes when a price ceiling is effective in keeping the actual market price below the equilibrium market price? a. Quantity supplied is greater than quantity demanded. b. Quantity supplied is less than quantity demanded. c. Quantity supplied is equal to quantity demanded. d. Any of the above is possible. 3. Suppose that the quantity demanded and quantity supplied in the market for milk is as follows: What is the equilibrium price and quantity of milk? a. price = \$2; quantity = 2,000 b. price = \$3; quantity = 3,500 c. price = \$3; quantity = 7,000 d. price = \$2; quantity = 7,000

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4. Suppose that the quantity demanded and quantity supplied in the market for milk is as follows: If the government places a price ceiling of \$2 on milk, will there be a shortage or surplus of milk? How large will it be? How many gallons of milk will be sold? a. There will be a shortage of 2,100; 2,000 units of milk will actually be sold. b. There will be a surplus of 2,100; 2,000 units of milk will actually be sold. c. There will be a shortage of 2,100; 4,100 units of milk will actually be sold. d. There will be a surplus of 2,100; 4,100 units of milk will actually be sold. 5. If a government decides to make health insurance affordable by requiring all health insurance companies to cut their prices by 30%, what will probably happen to the number of people covered by health insurance? a. It will go up because now more people can afford to purchase health coverage. b. It will go up because insurance companies will want to insure more people now that the price is lower. c. It will go down because insurance companies will only sell insurance to healthy people now that the rates are set at lower levels. The quantity of coverage supplied will decrease. d. It will go down because only sick people will be willing to purchase health insurance now. 6. The Canadian government has wage controls for medical doctors. To keep things simple, let's assume that they set one wage for all doctors: \$100,000 per year. It takes about six years to become a general practitioner or a pediatrician, but it takes about eight or nine years to become a specialist like a gynecologist, surgeon, or ophthalmologist. (Note: The actual Canadian system allows specialists to earn a bit more than general practitioners, but the difference isn't big enough to matter.) What do you suppose the situation is in the Canadian health system? a. There are lots of specialists and few general practitioners or pediatricians. b. There are lots of general practitioners and pediatricians, but few specialists. c. There are plenty of all types of doctors. d. I have absolutely no idea what this has to do with the numbers of different types of doctors.
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