ap microeconomics mcqs: critical thinking set (30 questions)\na city government sets a legal maximum rent…

ap microeconomics mcqs: critical thinking set (30 questions)\na city government sets a legal maximum rent for apartments that is below the equilibrium price. which of the following is a likely and unintended side - effect of this policy?\na) the quality and maintenance of existing apartments will improve. x\nb) landlords will begin building many new apartment buildings.\nc) people will make illegal side - deals to rent apartments for more than the legal price.\nd) fewer people will want to rent an apartment at the new, lower price.\nthe demand for salt is very inelastic, while its supply is relatively elastic. if the government taxes salt producers, what will happen?\na) the tax cost will be split evenly between buyers and sellers.\nb) producers will have to pay most of the tax, and many will go out of business.\nc) buyers will have to pay most of the tax, and the total amount of salt sold will barely change.\nd) buyers will have to pay most of the tax, and the total amount of salt sold will fall dramatically.\nimagine the market for smartphones is in balance. a major technological discovery makes them much cheaper to produce. at the same time, a popular new app is released that only works on the newest smartphones. what is the definite impact on the price and quantity of new smartphones?\na) the price will go down, and the quantity sold will go up.\nb) the quantity sold will go up, but we cannot be sure what will happen to the price.\nc) the price will go up, but we cannot be sure what will happen to the quantity sold.\nd) both the price and the quantity sold will go down.\na pizza parlor knows that the demand for its pizza is elastic. if it wants to increase its total revenue, what should it do?

ap microeconomics mcqs: critical thinking set (30 questions)\na city government sets a legal maximum rent for apartments that is below the equilibrium price. which of the following is a likely and unintended side - effect of this policy?\na) the quality and maintenance of existing apartments will improve. x\nb) landlords will begin building many new apartment buildings.\nc) people will make illegal side - deals to rent apartments for more than the legal price.\nd) fewer people will want to rent an apartment at the new, lower price.\nthe demand for salt is very inelastic, while its supply is relatively elastic. if the government taxes salt producers, what will happen?\na) the tax cost will be split evenly between buyers and sellers.\nb) producers will have to pay most of the tax, and many will go out of business.\nc) buyers will have to pay most of the tax, and the total amount of salt sold will barely change.\nd) buyers will have to pay most of the tax, and the total amount of salt sold will fall dramatically.\nimagine the market for smartphones is in balance. a major technological discovery makes them much cheaper to produce. at the same time, a popular new app is released that only works on the newest smartphones. what is the definite impact on the price and quantity of new smartphones?\na) the price will go down, and the quantity sold will go up.\nb) the quantity sold will go up, but we cannot be sure what will happen to the price.\nc) the price will go up, but we cannot be sure what will happen to the quantity sold.\nd) both the price and the quantity sold will go down.\na pizza parlor knows that the demand for its pizza is elastic. if it wants to increase its total revenue, what should it do?

Answer

Brief Explanations:

  1. When a city government sets a legal maximum rent (price - ceiling) below the equilibrium price, landlords have less incentive to maintain apartments. Also, they are less likely to build new ones. And since the legal price is low, there will be a shortage, so people may make illegal side - deals to rent at a higher price. Option c is correct as it is a common unintended consequence of price - ceilings.
  2. When demand is inelastic and supply is elastic, and the government taxes producers, buyers will bear most of the tax burden because they are less responsive to price changes. The quantity sold will barely change as demand is inelastic. So option c is correct.
  3. A major technological discovery that makes smartphones cheaper to produce will increase supply (shift the supply curve to the right). A popular new app that only works on the newest smartphones will increase demand (shift the demand curve to the right). The definite impact is that the quantity sold will go up, but the effect on price depends on the magnitude of the shifts of supply and demand curves. So option b is correct.

Answer:

  1. c) People will make illegal side - deals to rent apartments for more than the legal price.
  2. c) Buyers will have to pay most of the tax, and the total amount of salt sold will barely change.
  3. b) The quantity sold will go up, but we cannot be sure what will happen to the price.