Question 1

A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve

Accepted Answer

A) upward by exactly $1.50. 
B) upward by less than $1.50. 
C) downward by exactly $1.50. 
D) downward by less than $1.50. 
A) upward by exactly $1.50. 
B) upward by less than $1.50. 
C) downward by exactly $1.50. 
D) downward by less than $1.50.

Question 2

When OPEC raised the price of crude oil in the 1970s, it caused the

Accepted Answer

A) supply of gasoline to decrease. 
B) quantity of gasoline demanded to decrease. 
C) equilibrium price of gasoline to increase. 
D) All of the above are correct. 
A) supply of gasoline to decrease. 
B) quantity of gasoline demanded to decrease. 
C) equilibrium price of gasoline to increase. 
D) All of the above are correct.

Question 3

Most labor economists believe that the supply of labor is

Accepted Answer

A) less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. 
B) less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. 
C) more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. 
D) more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. 
A) less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. 
B) less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. 
C) more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. 
D) more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.

Question 4

Table 6-1  
-Refer to Table 6-1. Suppose the government imposes a price floor of $70 on this market. What will be the size of the surplus in this market?

Accepted Answer

A) 0 units 
B) 400 units 
C) 600 units 
D) 1000 units 
A) 0 units 
B) 400 units 
C) 600 units 
D) 1000 units

Question 5

If a price ceiling is not binding, then

Accepted Answer

A) there will be a surplus in the market. 
B) there will be a shortage in the market. 
C) the market will be less efficient than it would be without the price ceiling. 
D) there will be no effect on the market price or quantity sold. 
A) there will be a surplus in the market. 
B) there will be a shortage in the market. 
C) the market will be less efficient than it would be without the price ceiling. 
D) there will be no effect on the market price or quantity sold.

Question 6

The quantity sold in a market will decrease if the government

Accepted Answer

A) decreases a binding price floor in that market. 
B) increases a binding price ceiling in that market. 
C) increases a tax on the good sold in that market. 
D) All of the above are correct. 
A) decreases a binding price floor in that market. 
B) increases a binding price ceiling in that market. 
C) increases a tax on the good sold in that market. 
D) All of the above are correct.

Question 7

Table 6-4
The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $3 above the equilibrium price in this market.  
-Refer to Table 6-4. Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting shortage is

Accepted Answer

A) 0 units. 
B) 4 units. 
C) 5 units. 
D) 10 units. 
A) 0 units. 
B) 4 units. 
C) 5 units. 
D) 10 units.

Question 8

Rent-control laws dictate

Accepted Answer

A) the exact rent that landlords must charge tenants. 
B) a maximum rent that landlords may charge tenants. 
C) a minimum rent that landlords may charge tenants. 
D) both a minimum rent and a maximum rent that landlords may charge tenants. 
A) the exact rent that landlords must charge tenants. 
B) a maximum rent that landlords may charge tenants. 
C) a minimum rent that landlords may charge tenants. 
D) both a minimum rent and a maximum rent that landlords may charge tenants.

Question 9

If the government levies a $0.25 tax per MP3 music file downloaded on buyers of MP3 music files, then the price received by sellers of MP3 music files would

Accepted Answer

A) decrease by more than $0.25. 
B) decrease by exactly $0.25. 
C) decrease by less than $0.25. 
D) increase by an indeterminate amount. 
A) decrease by more than $0.25. 
B) decrease by exactly $0.25. 
C) decrease by less than $0.25. 
D) increase by an indeterminate amount.

Question 10

Figure 6-16  
-Refer to Figure 6-16. In this market, a minimum wage of $7.25 creates a labor

Accepted Answer

A) shortage of 2,250 workers. 
B) shortage of 4,500 workers. 
C) surplus of 2,250 workers. 
D) surplus of 4,500 workers. 
A) shortage of 2,250 workers. 
B) shortage of 4,500 workers. 
C) surplus of 2,250 workers. 
D) surplus of 4,500 workers.

Question 11

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

Accepted Answer

A) increase by more than $1,000. 
B) increase by exactly $1,000. 
C) increase by less than $1,000. 
D) decrease by an indeterminate amount. 
A) increase by more than $1,000. 
B) increase by exactly $1,000. 
C) increase by less than $1,000. 
D) decrease by an indeterminate amount.

Question 12

In response to a shortage caused by the imposition of a binding price ceiling on a market,

Accepted Answer

A) price will no longer be the mechanism that rations scarce resources. 
B) long lines of buyers may develop. 
C) sellers could ration the good or service according to their own personal biases. 
D) All of the above are correct. 
A) price will no longer be the mechanism that rations scarce resources. 
B) long lines of buyers may develop. 
C) sellers could ration the good or service according to their own personal biases. 
D) All of the above are correct.

Question 13

If the government removes a tax on a good, then the quantity of the good sold will

Accepted Answer

A) increase. 
B) decrease. 
C) not change. 
D) All of the above are possible. 
A) increase. 
B) decrease. 
C) not change. 
D) All of the above are possible.

Question 14

Figure 6-21  
-Refer to Figure 6-21. How is the burden of the tax shared between buyers and sellers? Buyers bear

Accepted Answer

A) three-fourths of the burden, and sellers bear one-fourth of the burden. 
B) two-thirds of the burden, and sellers bear one-third of the burden. 
C) one-half of the burden, and sellers bear one-half of the burden. 
D) one-fourth of the burden, and sellers bear three-fourths of the burden. 
A) three-fourths of the burden, and sellers bear one-fourth of the burden. 
B) two-thirds of the burden, and sellers bear one-third of the burden. 
C) one-half of the burden, and sellers bear one-half of the burden. 
D) one-fourth of the burden, and sellers bear three-fourths of the burden.

Question 15

Figure 6-25  
-Refer to Figure 6-25. The effective price that sellers receive after the tax is imposed is

Accepted Answer

A) $5. 
B) $6. 
C) $7. 
D) $8. 
A) $5. 
B) $6. 
C) $7. 
D) $8.

Question 16

Which of the following is correct?

Accepted Answer

A) Rent control and the minimum wage are both examples of price ceilings. 
B) Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor. 
C) Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling. 
D) Rent control and the minimum wage are both examples of price floors. 
A) Rent control and the minimum wage are both examples of price ceilings. 
B) Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor. 
C) Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling. 
D) Rent control and the minimum wage are both examples of price floors.

Question 17

To say that a price ceiling is binding is to say that the price ceiling

Accepted Answer

A) results in a surplus. 
B) is set above the equilibrium price. 
C) causes quantity demanded to exceed quantity supplied. 
D) All of the above are correct. 
A) results in a surplus. 
B) is set above the equilibrium price. 
C) causes quantity demanded to exceed quantity supplied. 
D) All of the above are correct.

Question 18

One common example of a price floor is the minimum wage.

Accepted Answer

A) True 
 B)False

Question 19

Figure 6-20  
-Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

Accepted Answer

A) $5 
B) between $5 and $10 
C) between $10 and $14 
D) $14 
A) $5 
B) between $5 and $10 
C) between $10 and $14 
D) $14

Question 20

Advocates of the minimum wage admit that it has some adverse effects, but they believe that these effects are small and that a higher minimum wage makes the poor better off.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve

When OPEC raised the price of crude oil in the 1970s, it caused the

Most labor economists believe that the supply of labor is

Table 6-1 -Refer to Table 6-1. Suppose the government imposes a price floor of $70 on this market. What will be the size of the surplus in this market?

If a price ceiling is not binding, then

The quantity sold in a market will decrease if the government

Rent-control laws dictate

If the government levies a $0.25 tax per MP3 music file downloaded on buyers of MP3 music files, then the price received by sellers of MP3 music files would

Figure 6-16 -Refer to Figure 6-16. In this market, a minimum wage of $7.25 creates a labor

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

In response to a shortage caused by the imposition of a binding price ceiling on a market,

If the government removes a tax on a good, then the quantity of the good sold will

Figure 6-21 -Refer to Figure 6-21. How is the burden of the tax shared between buyers and sellers? Buyers bear

Figure 6-25 -Refer to Figure 6-25. The effective price that sellers receive after the tax is imposed is

Which of the following is correct?

To say that a price ceiling is binding is to say that the price ceiling

One common example of a price floor is the minimum wage.

Figure 6-20 -Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

Advocates of the minimum wage admit that it has some adverse effects, but they believe that these effects are small and that a higher minimum wage makes the poor better off.

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

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