Question 1

A price floor set above the equilibrium price is binding.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the government has imposed a price floor on the market for soybeans. Which of the following events could transform the price floor from one that is not binding into one that is binding?

Accepted Answer

A) Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans. 
B) The number of farmers selling soybeans decreases. 
C) Consumers' income increases, and soybeans are a normal good. 
D) The number of consumers buying soybeans increases. 
A) Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans. 
B) The number of farmers selling soybeans decreases. 
C) Consumers' income increases, and soybeans are a normal good. 
D) The number of consumers buying soybeans increases.

Question 3

If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

Accepted Answer

A) True 
 B)False

Question 4

You receive a paycheck from your employer, and your pay stub indicates that $300 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct?

Accepted Answer

A) The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee. 
B) Your employer is required by law to pay $300 to match the $300 deducted from your check. 
C) This type of tax is an example of a payroll tax. 
D) All of the above are correct. 
A) The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee. 
B) Your employer is required by law to pay $300 to match the $300 deducted from your check. 
C) This type of tax is an example of a payroll tax. 
D) All of the above are correct.

Question 5

The United States is the only country in the world with minimum-wage laws.

Accepted Answer

A) True 
 B)False

Question 6

A price ceiling is a legal minimum on the price at which a good or service can be sold.

Accepted Answer

A) True 
 B)False

Question 7

The rationing mechanisms that develop under binding price ceilings are usually inefficient.

Accepted Answer

A) True 
 B)False

Question 8

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

Accepted Answer

A) with rent control, the government guarantees landlords a minimum level of profit. 
B) they become resigned to the fact that many of their apartments are going to be vacant at any given time. 
C) with shortages and waiting lists, they have no incentive to maintain and improve their property. 
D) with rent control, it becomes the government's responsibility to maintain rental housing. 
A) with rent control, the government guarantees landlords a minimum level of profit. 
B) they become resigned to the fact that many of their apartments are going to be vacant at any given time. 
C) with shortages and waiting lists, they have no incentive to maintain and improve their property. 
D) with rent control, it becomes the government's responsibility to maintain rental housing.

Question 9

Figure 6-22  
-Refer to Figure 6-22. The equilibrium price in the market before the tax is imposed is

Accepted Answer

A) $3.50. 
B) $5.00. 
C) $2.00. 
D) $1.50. 
A) $3.50. 
B) $5.00. 
C) $2.00. 
D) $1.50.

Question 10

A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market.

Accepted Answer

A) True 
 B)False

Question 11

Figure 6-36  
-Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer pays $4.

Accepted Answer

A) True 
 B)False

Question 12

A price floor is binding when it is set

Accepted Answer

A) above the equilibrium price, causing a shortage. 
B) above the equilibrium price, causing a surplus. 
C) below the equilibrium price, causing a shortage. 
D) below the equilibrium price, causing a surplus. 
A) above the equilibrium price, causing a shortage. 
B) above the equilibrium price, causing a surplus. 
C) below the equilibrium price, causing a shortage. 
D) below the equilibrium price, causing a surplus.

Question 13

Which of the following would not interfere with market equilibria?

Accepted Answer

A) a minimum wage 
B) a rent control 
C) a non-binding price floor 
D) a binding price ceiling 
A) a minimum wage 
B) a rent control 
C) a non-binding price floor 
D) a binding price ceiling

Question 14

When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

Accepted Answer

A) True 
 B)False

Question 15

​Figure 6-32  
-​Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market?

Accepted Answer

A) ​a shortage will develop when a price ceiling is imposed at a price of $10. 
B) ​a surplus will develop when a price floor is imposed at a price of $8. 
C) ​a surplus will develop when a price floor is imposed at a price of $12. 
D) ​a shortage will develop when a price ceiling is imposed at a price of $14. 
A) ​a shortage will develop when a price ceiling is imposed at a price of $10. 
B) ​a surplus will develop when a price floor is imposed at a price of $8. 
C) ​a surplus will develop when a price floor is imposed at a price of $12. 
D) ​a shortage will develop when a price ceiling is imposed at a price of $14.

Question 16

Table 6-2  
-Refer to Table 6-2. A price ceiling set at $5 will

Accepted Answer

A) be binding and will result in a shortage of 50 units. 
B) be binding and will result in a shortage of 250 units. 
C) be binding and will result in a shortage of 300 units. 
D) not be binding. 
A) be binding and will result in a shortage of 50 units. 
B) be binding and will result in a shortage of 250 units. 
C) be binding and will result in a shortage of 300 units. 
D) not be binding.

Question 17

Figure 6-21  
-Refer to Figure 6-21. Suppose buyers, rather than sellers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in

Accepted Answer

A) buyers bearing a larger share of the tax burden. 
B) sellers bearing a smaller share of the tax burden. 
C) the same amount of tax revenue for the government. 
D) Both a and b are correct. 
A) buyers bearing a larger share of the tax burden. 
B) sellers bearing a smaller share of the tax burden. 
C) the same amount of tax revenue for the government. 
D) Both a and b are correct.

Question 18

Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $20 per ticket, then the

Accepted Answer

A) demand curve will shift upward by $30, and the price paid by buyers will decrease by less than $30. 
B) demand curve will shift upward by $30, and the price paid by buyers will decrease by $30. 
C) supply curve will shift downward by $30, and the effective price received by sellers will increase by less than $30. 
D) supply curve will shift downward by $30, and the effective price received by sellers will increase by $30. 
A) demand curve will shift upward by $30, and the price paid by buyers will decrease by less than $30. 
B) demand curve will shift upward by $30, and the price paid by buyers will decrease by $30. 
C) supply curve will shift downward by $30, and the effective price received by sellers will increase by less than $30. 
D) supply curve will shift downward by $30, and the effective price received by sellers will increase by $30.

Question 19

A price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded.

Accepted Answer

A) True 
 B)False

Question 20

A binding price ceiling causes a shortage in the market.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

A price floor set above the equilibrium price is binding.

Suppose the government has imposed a price floor on the market for soybeans. Which of the following events could transform the price floor from one that is not binding into one that is binding?

If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

You receive a paycheck from your employer, and your pay stub indicates that $300 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct?

The United States is the only country in the world with minimum-wage laws.

A price ceiling is a legal minimum on the price at which a good or service can be sold.

The rationing mechanisms that develop under binding price ceilings are usually inefficient.

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

Figure 6-22 -Refer to Figure 6-22. The equilibrium price in the market before the tax is imposed is

A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market.

Figure 6-36 -Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer pays $4.

A price floor is binding when it is set

Which of the following would not interfere with market equilibria?

When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

​Figure 6-32 -​Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market?

Table 6-2 -Refer to Table 6-2. A price ceiling set at $5 will

Figure 6-21 -Refer to Figure 6-21. Suppose buyers, rather than sellers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in

Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $20 per ticket, then the

A price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded.

A binding price ceiling causes a shortage in the market.

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

Figure 6-32 -Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market?