Exam 6: Government Actions in Markets

-When a tax is imposed on a good or service, buyers respond only to the price that ________ the tax, and sellers respond to the price that ________ the tax.

Discrimination based on age, race, gender, or family status very likely increases as a result of rent ceilings.

Consider the market for purple magic markers. The demand for purple magic markers is perfectly elastic and the supply curve is upward sloping. If sellers of purple magic markers are taxed $1 per marker, how will the tax be divided between the buyer and seller?

-In the above figure, at what minimum wage is the unemployment level equal to 200 million hours?

"The tax on insulin in the Philippines is anywhere between 10 and 20 percent. If you are rich and living in the Philippines, this is not a problem, but if you are poor, then insulin becomes something that you cannot afford." Why do buyers care so much about a tax on insulin, a vital daily medicine for those with diabetes?

When the government passes a law making a particular good illegal, does it matter for the black market price and quantity if the penalties for breaking the law are imposed on the buyers or on the sellers?

If penalties are imposed on both the buyers and the sellers of illegal goods or services, then an effect in the market for the illegal good or service would definitely be

If the elasticities of demand for alcohol, tobacco and gasoline are low and the elasticities of supply are high, then the burden of these taxes (excise taxes) falls more heavily on buyers than on sellers.

-The above figure shows the apartment rental market in Bigtown. If severe flooding resulted in the destruction of many of the city's apartment buildings, then the

-In the above figure, a minimum wage of ________ would result in employment of ________.

A sales tax on sellers of a good shifts the supply curve leftward because the tax is like a cost of production.

The federal minimum wage in 2010 was $7.25. If this wage rate was less than the equilibrium wage, what is the effect?

The federal government pays airlines to service small cities in the United States through a subsidy program called Essential Air Service which was established in 1978 when the airline industry was deregulated. Most subsidies can't exceed $200 per passenger. What would happen if the government increased the subsidy to $400 per passenger?

-The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $4 per hour, how many hours of students' labor are unemployed?

-You are in the business of producing and selling hamburgers, french fries, pizza, and ice cream. The mayor plans to impose a tax on one of these products. Based on the elasticities in the above table, on which of these goods would your customers least like to be taxed?

A policy of raising the minimum wage is beneficial to all low-skilled workers.

In 1920 a constitutional amendment was passed that outlawed the production, sale, purchase, and consumption of alcoholic beverages. "Prohibition" encouraged bootlegging and black markets for whiskey, wine, and beer. The amendment was eventually repealed in 1933. In 1920, what alternative economic policy was available to the government as a means of reducing alcohol consumption nationwide?

When a government imposes penalties on both sellers and buyers of an illegal good, the price of the good ________ and the quantity ________.

-In the above figure, a black market emerges with a

The Volumetric Ethanol Excise Tax Credit (VEETC) is a tax credit (which acts like a subsidy) for registered ethanol-gasoline blenders. Qualified blenders receive $0.51 for each gallon of pure ethanol they blend into gasoline. What statement is true?