Question 1

-In the figure above, the initial demand curve is D0. There are no rent ceilings nor rent floors. The equilibrium monthly rent is

Accepted Answer

A)  $100 per month. 
B)  $200 per month. 
C)  $300 per month. 
D)  $400 per month. 
A)  $100 per month. 
B)  $200 per month. 
C)  $300 per month. 
D)  $400 per month.

Question 2

When a good is made illegal, which of the following definitely results in the price rising?

Accepted Answer

A)  a much higher fine on sellers than on buyers 
B)  a much higher fine on buyers than on sellers 
C)  any fine imposed on both buyers or sellers 
D)  any fine imposed on buyers 
A)  a much higher fine on sellers than on buyers 
B)  a much higher fine on buyers than on sellers 
C)  any fine imposed on both buyers or sellers 
D)  any fine imposed on buyers

Question 3

If the same fine is imposed on buyers and sellers of an illegal good so that the cost of breaking the law is the same for both, then

Accepted Answer

A)  there is more government revenue collected than with an excise tax on the good. 
B)  there is no deadweight loss in this market because the extra producer surplus will exactly offset the lost consumer surplus. 
C)  the supply and demand curves both shift leftward by equal amounts. 
D)  the equilibrium price of the good definitely increases. 
A)  there is more government revenue collected than with an excise tax on the good. 
B)  there is no deadweight loss in this market because the extra producer surplus will exactly offset the lost consumer surplus. 
C)  the supply and demand curves both shift leftward by equal amounts. 
D)  the equilibrium price of the good definitely increases.

Question 4

The government imposes a sales tax on hot dogs. The tax would be paid entirely by hot dog sellers if the

Accepted Answer

A)  supply is perfectly elastic. 
B)  supply is perfectly inelastic. 
C)  demand is perfectly inelastic. 
D)  none of the above 
A)  supply is perfectly elastic. 
B)  supply is perfectly inelastic. 
C)  demand is perfectly inelastic. 
D)  none of the above

Question 5

When a tax is imposed on the suppliers of a good or service, then

Accepted Answer

A)  in general, the producers pay all the tax. 
B)  in general, the consumers pay all the tax. 
C)  the consumers pay a larger part of the tax as the elasticity of demand for the product becomes smaller. 
D)  the consumers pay a larger part of the tax as the elasticity of demand for the product becomes larger. 
A)  in general, the producers pay all the tax. 
B)  in general, the consumers pay all the tax. 
C)  the consumers pay a larger part of the tax as the elasticity of demand for the product becomes smaller. 
D)  the consumers pay a larger part of the tax as the elasticity of demand for the product becomes larger.

Question 6

-The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. Anti-freeze sellers would pay a larger part of this tax than what is shown in the figure if the

Accepted Answer

A)  demand were more inelastic. 
B)  demand curve were steeper. 
C)  supply were more inelastic. 
D)  supply were more elastic. 
A)  demand were more inelastic. 
B)  demand curve were steeper. 
C)  supply were more inelastic. 
D)  supply were more elastic.

Question 7

-The above figure shows the apartment rental market in Bigtown. At what rent will there be neither a shortage nor a surplus of apartments?

Accepted Answer

A)  $1250 per month 
B)  $1000 per month 
C)  $750 per month 
D)  $500 per month 
A)  $1250 per month 
B)  $1000 per month 
C)  $750 per month 
D)  $500 per month

Question 8

-In the Village of Punjab, Sheryl owns a well, which is the only source of drinking water. The supply of water is perfectly inelastic at a quantity of 1,000 gallons of water per day. At a price of $2.00 per gallon, the quantity demanded per day is 1,000 gallons. The government imposes a $0.50 per gallon tax.
a) After the tax is imposed, what is the price paid by the villagers? What is the price received by Sheryl?
b) How much revenue does the government collect?
c) What fraction of the tax does Sheryl pay? What fraction is paid by the villagers?

Accepted Answer

a) Because the supply is perfectly inela

Question 9

-In the figure above, if a tax of $2 per widget is imposed on sellers, then the after-tax amount per widget received by the seller will be

Accepted Answer

A)  more than or equal to $8. 
B)  between $8 and $6. 
C)  $6. 
D)  less than $6. 
A)  more than or equal to $8. 
B)  between $8 and $6. 
C)  $6. 
D)  less than $6.

Question 10

-The market for unskilled labor is illustrated in the figure above. The market is in equilibrium and then a minimum wage of $5 per hour is imposed. Unemployment will equal

Accepted Answer

A)  0 hours. 
B)  10 million hours per year. 
C)  20 million hours per year. 
D)  30 million hours per year. 
A)  0 hours. 
B)  10 million hours per year. 
C)  20 million hours per year. 
D)  30 million hours per year.

Question 11

-A minimum wage set above the equilibrium wage rate is a price

Accepted Answer

A)  ceiling that results in a shortage of low-skilled labor. 
B)  ceiling that results in a surplus of low-skilled labor. 
C)  floor that results in a shortage of low-skilled labor. 
D)  floor that results in a surplus of low-skilled labor. 
A)  ceiling that results in a shortage of low-skilled labor. 
B)  ceiling that results in a surplus of low-skilled labor. 
C)  floor that results in a shortage of low-skilled labor. 
D)  floor that results in a surplus of low-skilled labor.

Question 12

A price ceiling is a price

Accepted Answer

A)  below which a seller cannot legally sell. 
B)  above which a seller cannot legally sell. 
C)  that creates a surplus of the good. 
D)  Both answers A and C are correct. 
A)  below which a seller cannot legally sell. 
B)  above which a seller cannot legally sell. 
C)  that creates a surplus of the good. 
D)  Both answers A and C are correct.

Question 13

-The table above gives the demand and supply schedules for CDs.
a) According to the table, what is the equilibrium price?
b) Suppose the government imposes a price floor of $16 for a CD. What is the result?
c) Suppose the government imposes a price ceiling of $8 for a CD. What is the result?

Accepted Answer

a) The equilibrium price is $14 for a CD

Question 14

When a tax is imposed on sellers of a good, the resulting rise in the equilibrium price is usually less than the amount of the tax itself. Why doesn't the equilibrium price rise by the full amount of the tax?

Accepted Answer

Because firms collect taxes from consume

Question 15

In order to have an effect, a price ceiling must be set ________.

Accepted Answer

A)  above the equilibrium price 
B)  equal to the equilibrium price 
C)  below the equilibrium price 
D)  by suppliers 
A)  above the equilibrium price 
B)  equal to the equilibrium price 
C)  below the equilibrium price 
D)  by suppliers

Question 16

With rent controls set below the equilibrium rent, what mechanism might arise that moves the market closer to the efficient equilibrium?

Accepted Answer

A)  decreased search costs 
B)  black market activity 
C)  increased advertising by landlords 
D)  more favorable leases offered to tenants 
A)  decreased search costs 
B)  black market activity 
C)  increased advertising by landlords 
D)  more favorable leases offered to tenants

Question 17

-In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

Accepted Answer

A)  a shortage of 500,000 apartments. 
B)  a shortage of 400,000 apartments. 
C)  a shortage of 200,000 apartments. 
D)  no shortage nor a surplus of apartments. 
A)  a shortage of 500,000 apartments. 
B)  a shortage of 400,000 apartments. 
C)  a shortage of 200,000 apartments. 
D)  no shortage nor a surplus of apartments.

Question 18

-In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The rent ceiling leads to a

Accepted Answer

A)  shortage of 1000 apartments. 
B)  shortage of 2000 apartments. 
C)  surplus of 1000 apartments. 
D)  surplus of 2000 apartments. 
A)  shortage of 1000 apartments. 
B)  shortage of 2000 apartments. 
C)  surplus of 1000 apartments. 
D)  surplus of 2000 apartments.

Question 19

Suppose that the government wants the burden of the cigarette tax to fall equally on buyers and sellers and declares that a $1.00 tax be imposed on each. Is the burden of the tax shared equally? Why or why not?

Accepted Answer

Not necessarily. A tax has the same effe

Question 20

-The demand and the supply for a good are each neither perfectly elastic nor perfectly inelastic. If a sales tax on sellers of the good is imposed, the tax is paid by

Accepted Answer

A)  only buyers. 
B)  only sellers. 
C)  both buyers and sellers. 
D)  neither buyers nor sellers. 
A)  only buyers. 
B)  only sellers. 
C)  both buyers and sellers. 
D)  neither buyers nor sellers.

Exam 6: Government Actions in Markets

-In the figure above, the initial demand curve is D0. There are no rent ceilings nor rent floors. The equilibrium monthly rent is

When a good is made illegal, which of the following definitely results in the price rising?

If the same fine is imposed on buyers and sellers of an illegal good so that the cost of breaking the law is the same for both, then

The government imposes a sales tax on hot dogs. The tax would be paid entirely by hot dog sellers if the

When a tax is imposed on the suppliers of a good or service, then

-The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. Anti-freeze sellers would pay a larger part of this tax than what is shown in the figure if the

-The above figure shows the apartment rental market in Bigtown. At what rent will there be neither a shortage nor a surplus of apartments?

-In the figure above, if a tax of $2 per widget is imposed on sellers, then the after-tax amount per widget received by the seller will be

-The market for unskilled labor is illustrated in the figure above. The market is in equilibrium and then a minimum wage of $5 per hour is imposed. Unemployment will equal

-A minimum wage set above the equilibrium wage rate is a price

A price ceiling is a price

-The table above gives the demand and supply schedules for CDs. a) According to the table, what is the equilibrium price? b) Suppose the government imposes a price floor of $16 for a CD. What is the result? c) Suppose the government imposes a price ceiling of $8 for a CD. What is the result?

When a tax is imposed on sellers of a good, the resulting rise in the equilibrium price is usually less than the amount of the tax itself. Why doesn't the equilibrium price rise by the full amount of the tax?

In order to have an effect, a price ceiling must be set ________.

With rent controls set below the equilibrium rent, what mechanism might arise that moves the market closer to the efficient equilibrium?

-In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

-In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The rent ceiling leads to a

Suppose that the government wants the burden of the cigarette tax to fall equally on buyers and sellers and declares that a $1.00 tax be imposed on each. Is the burden of the tax shared equally? Why or why not?

-The demand and the supply for a good are each neither perfectly elastic nor perfectly inelastic. If a sales tax on sellers of the good is imposed, the tax is paid by

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

-In the figure above, the initial demand curve is D₀. There are no rent ceilings nor rent floors. The equilibrium monthly rent is

-In the figure above, the demand curve shifts rightward from D₀ to D₁ so that D₁ is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be