Question 1

Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

Accepted Answer

A) True 
 B)False

Question 2

Using a supply and demand diagram, show a labor market with a binding minimum wage. Use the diagram to show those who are helped by the minimum wage and those who are hurt by the minimum wage.

Accepted Answer

a.For this example, a $300 price ceiling

Question 3

The U.S. Congress first instituted a minimum wage in

Accepted Answer

A) 1776. 
B) 1812. 
C) 1938. 
D) 1975. 
A) 1776. 
B) 1812. 
C) 1938. 
D) 1975.

Question 4

In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to

Accepted Answer

A) raise revenue from the wealthy. 
B) prevent wealthy people from buying luxuries. 
C) force producers of luxury goods to reduce employment. 
D) limit exports of luxury goods to other countries. 
A) raise revenue from the wealthy. 
B) prevent wealthy people from buying luxuries. 
C) force producers of luxury goods to reduce employment. 
D) limit exports of luxury goods to other countries.

Question 5

Figure 6-29
Suppose the government imposes a $2 on this market.  
-Refer to Figure 6-29. Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1 represents the supply curve for gasoline in the short run, and S2 represents the supply curve for gasoline in the long run. After the imposition of the $2, the price paid by buyers will be

Accepted Answer

A) higher in the long run than in the short run. 
B) higher in the short run than in the long run. 
C) equivalent in the short run and the long run. 
D) unable to be determined without additional information. 
A) higher in the long run than in the short run. 
B) higher in the short run than in the long run. 
C) equivalent in the short run and the long run. 
D) unable to be determined without additional information.

Question 6

If a tax is levied on the sellers of flour, then

Accepted Answer

A) buyers will bear the entire burden of the tax. 
B) sellers will bear the entire burden of the tax. 
C) buyers and sellers will share the burden of the tax. 
D) the government will bear the entire burden of the tax. 
A) buyers will bear the entire burden of the tax. 
B) sellers will bear the entire burden of the tax. 
C) buyers and sellers will share the burden of the tax. 
D) the government will bear the entire burden of the tax.

Question 7

Figure 6-5  
-Refer to Figure 6-5. If government imposes a price floor at $9, then the price floor causes

Accepted Answer

A) quantity demanded to decrease by 40 units. 
B) quantity supplied to increase by 20 units. 
C) a surplus of 60 units. 
D) All of the above are correct. 
A) quantity demanded to decrease by 40 units. 
B) quantity supplied to increase by 20 units. 
C) a surplus of 60 units. 
D) All of the above are correct.

Question 8

If a price floor is a binding constraint on a market, then

Accepted Answer

A) the equilibrium price must be above the price floor. 
B) the quantity demanded must exceed the quantity supplied. 
C) sellers cannot sell all they want to sell at the price floor. 
D) buyers cannot buy all they want to buy at the price floor. 
A) the equilibrium price must be above the price floor. 
B) the quantity demanded must exceed the quantity supplied. 
C) sellers cannot sell all they want to sell at the price floor. 
D) buyers cannot buy all they want to buy at the price floor.

Question 9

A price ceiling is

Accepted Answer

A) often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. 
B) a legal maximum on the price at which a good can be sold. 
C) often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. 
D) All of the above are correct. 
A) often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. 
B) a legal maximum on the price at which a good can be sold. 
C) often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. 
D) All of the above are correct.

Question 10

The minimum wage is an example of a

Accepted Answer

A) price ceiling. 
B) price floor. 
C) wage subsidy. 
D) tax. 
A) price ceiling. 
B) price floor. 
C) wage subsidy. 
D) tax.

Question 11

Which of the following was not a result of the luxury tax imposed by Congress in 1990?

Accepted Answer

A) The larger part of the tax burden fell on sellers. 
B) A larger part of the tax burden fell on the middle class than on the rich. 
C) Even the wealthy demanded fewer luxury goods. 
D) The tax was never repealed or even modified. 
A) The larger part of the tax burden fell on sellers. 
B) A larger part of the tax burden fell on the middle class than on the rich. 
C) Even the wealthy demanded fewer luxury goods. 
D) The tax was never repealed or even modified.

Question 12

Over time, housing shortages caused by rent control

Accepted Answer

A) increase, because the demand for and supply of housing are less elastic in the long run. 
B) increase, because the demand for and supply of housing are more elastic in the long run. 
C) decrease, because the demand for and supply of housing are less elastic in the long run. 
D) decrease, because the demand for and supply of housing are more elastic in the long run. 
A) increase, because the demand for and supply of housing are less elastic in the long run. 
B) increase, because the demand for and supply of housing are more elastic in the long run. 
C) decrease, because the demand for and supply of housing are less elastic in the long run. 
D) decrease, because the demand for and supply of housing are more elastic in the long run.

Question 13

Figure 6-35  
-Refer to Figure 6-35. A price floor set at $60 would create a surplus of 20 units.

Accepted Answer

A) True 
 B)False

Question 14

​Suppose that a $4 per unit tax is imposed on the sellers of DVDs. The effect of the tax will be to

Accepted Answer

A) ​shift the supply curve up by exactly $4 and the price paid by buyers will remain unchanged. 
B) ​shift the supply curve up by exactly $4 and the price paid by buyers will rise by less than $4. 
C) ​shift the supply curve up by exactly $4 and the price received by sellers will rise by exactly $4. 
D) ​shift the demand curve down by exactly $4 and the price paid by buyers will fall by exactly $4. 
A) ​shift the supply curve up by exactly $4 and the price paid by buyers will remain unchanged. 
B) ​shift the supply curve up by exactly $4 and the price paid by buyers will rise by less than $4. 
C) ​shift the supply curve up by exactly $4 and the price received by sellers will rise by exactly $4. 
D) ​shift the demand curve down by exactly $4 and the price paid by buyers will fall by exactly $4.

Question 15

If the demand curve is very inelastic and the supply curve is very elastic in a market, then the sellers will bear a greater burden of a tax imposed on the market, even if the tax is imposed on the buyers.

Accepted Answer

A) True 
 B)False

Question 16

Figure 6-7  
-Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?

Accepted Answer

A) a price ceiling set at $6 
B) a price ceiling set at $5 
C) a price floor set at $9 
D) a price floor set at $8 
A) a price ceiling set at $6 
B) a price ceiling set at $5 
C) a price floor set at $9 
D) a price floor set at $8

Question 17

Figure 6-9  
-Refer to Figure 6-9. A price floor set at

Accepted Answer

A) $4 will be binding and will result in a shortage of 8 units. 
B) $4 will be binding and will result in a shortage of 16 units. 
C) $7 will be binding and will result in a surplus of 4 units. 
D) $7 will be binding and will result in a surplus of 8 units. 
A) $4 will be binding and will result in a shortage of 8 units. 
B) $4 will be binding and will result in a shortage of 16 units. 
C) $7 will be binding and will result in a surplus of 4 units. 
D) $7 will be binding and will result in a surplus of 8 units.

Question 18

Whether a tax is levied on sellers or buyers, buyers and sellers usually share the burden of taxes.

Accepted Answer

A) True 
 B)False

Question 19

Regardless of whether a tax is levied on sellers or buyers, taxes encourage market activity.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by

Accepted Answer

A) less than $0.50. 
B) $0.50. 
C) between $0.50 and $1. 
D) $1. 
A) less than $0.50. 
B) $0.50. 
C) between $0.50 and $1. 
D) $1.

Exam 6: Supply, Demand, and Government Policies

Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

Using a supply and demand diagram, show a labor market with a binding minimum wage. Use the diagram to show those who are helped by the minimum wage and those who are hurt by the minimum wage.

The U.S. Congress first instituted a minimum wage in

In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to

If a tax is levied on the sellers of flour, then

Figure 6-5 -Refer to Figure 6-5. If government imposes a price floor at $9, then the price floor causes

If a price floor is a binding constraint on a market, then

A price ceiling is

The minimum wage is an example of a

Which of the following was not a result of the luxury tax imposed by Congress in 1990?

Over time, housing shortages caused by rent control

Figure 6-35 -Refer to Figure 6-35. A price floor set at $60 would create a surplus of 20 units.

​Suppose that a $4 per unit tax is imposed on the sellers of DVDs. The effect of the tax will be to

If the demand curve is very inelastic and the supply curve is very elastic in a market, then the sellers will bear a greater burden of a tax imposed on the market, even if the tax is imposed on the buyers.

Figure 6-7 -Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?

Figure 6-9 -Refer to Figure 6-9. A price floor set at

Whether a tax is levied on sellers or buyers, buyers and sellers usually share the burden of taxes.

Regardless of whether a tax is levied on sellers or buyers, taxes encourage market activity.

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters

Suppose that a $4 per unit tax is imposed on the sellers of DVDs. The effect of the tax will be to