Question 1

Does a binding price ceiling result in a shortage or a surplus in the market?

Accepted Answer

A binding price ceil

Question 2

Figure 6-5  
-Refer to Figure 6-5. Suppose the market is initially in equilibrium. Then the government imposes a price control, as represented by the solid horizontal line on the graph. If the price control is a price floor, then the price control

Accepted Answer

A) causes the quantity demanded to decrease by 50 units, relative to the initial equilibrium. 
B) causes the quantity supplied to increase by 40 units, relative to the initial equilibrium. 
C) means that some firms will not be able to sell all that they want 
D) All of the above are correct. 
A) causes the quantity demanded to decrease by 50 units, relative to the initial equilibrium. 
B) causes the quantity supplied to increase by 40 units, relative to the initial equilibrium. 
C) means that some firms will not be able to sell all that they want 
D) All of the above are correct.

Question 3

Minimum-wage laws dictate the lowest wage that firms may pay workers.

Accepted Answer

A) True 
 B)False

Question 4

Figure 6-36  
-Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer bears $2 of the tax burden.

Accepted Answer

A) True 
 B)False

Question 5

Figure 6-3
Panel (a)
Panel (b)    
-Refer to Figure 6-3. A nonbinding price floor is shown in

Accepted Answer

A) both panel (a) and panel (b). 
B) panel (a) only. 
C) panel (b) only. 
D) neither panel (a) nor panel (b). 
A) both panel (a) and panel (b). 
B) panel (a) only. 
C) panel (b) only. 
D) neither panel (a) nor panel (b).

Question 6

Figure 6-9  
-Refer to Figure 6-9. At which price would a price floor be nonbinding?

Accepted Answer

A) $8 
B) $7 
C) $6 
D) $9 
A) $8 
B) $7 
C) $6 
D) $9

Question 7

The long-run effects of rent controls are a good illustration of the principle that

Accepted Answer

A) society faces a short-run tradeoff between unemployment and inflation. 
B) the cost of something is what you give up to get it. 
C) people respond to incentives. 
D) government can sometimes improve on market outcomes. 
A) society faces a short-run tradeoff between unemployment and inflation. 
B) the cost of something is what you give up to get it. 
C) people respond to incentives. 
D) government can sometimes improve on market outcomes.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

If a tax is levied on the sellers of a product, then the supply curve will

Accepted Answer

A) shift up. 
B) shift down. 
C) become flatter. 
D) not shift. 
A) shift up. 
B) shift down. 
C) become flatter. 
D) not shift.

Question 10

Figure 6-16  
-Refer to Figure 6-16. In this market, a minimum wage of $2.75 creates a labor

Accepted Answer

A) shortage of 2,250 workers. 
B) shortage of 4,500 workers. 
C) surplus of 2,250 workers. 
D) neither a labor shortage nor surplus. 
A) shortage of 2,250 workers. 
B) shortage of 4,500 workers. 
C) surplus of 2,250 workers. 
D) neither a labor shortage nor surplus.

Question 11

Figure 6-13
This figure shows the market demand and market supply curves for good X.  
-Refer to Figure 6-13. If the government imposes a price floor of $3 on this market, then there will be

Accepted Answer

A) no surplus. 
B) a surplus of 10 units. 
C) a surplus of 15 units. 
D) a surplus of 20 units. 
A) no surplus. 
B) a surplus of 10 units. 
C) a surplus of 15 units. 
D) a surplus of 20 units.

Question 12

Figure 6-9  
-Refer to Figure 6-9. A price ceiling 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 13

In the housing market, supply and demand are

Accepted Answer

A) more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
B) more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
C) more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
D) more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
A) more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
B) more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
C) more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
D) more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.

Question 14

Figure 6-15  
-Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at

Accepted Answer

A) any price below $3. 
B) a price between $2 and $3. 
C) a price between $3 and $4. 
D) any price above $3. 
A) any price below $3. 
B) a price between $2 and $3. 
C) a price between $3 and $4. 
D) any price above $3.

Question 15

If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a shortage of labor will exist.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Most economists are in favor of price controls as a way of allocating resources in the economy.

Accepted Answer

A) True 
 B)False

Question 18

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

Accepted Answer

A) shift the supply curve upward by less than 50 cents. 
B) raise the equilibrium price by 50 cents. 
C) create a 50-cent tax burden each for buyers and sellers. 
D) discourage market activity. 
A) shift the supply curve upward by less than 50 cents. 
B) raise the equilibrium price by 50 cents. 
C) create a 50-cent tax burden each for buyers and sellers. 
D) discourage market activity.

Question 19

If the supply curve is more price elastic than the demand curve in a particular market, will the buyers or the sellers bear a larger burden of a per-unit tax imposed on the market?

Accepted Answer

The buyers will bear

Question 20

Figure 6-6  
-Refer to Figure 6-6. Which of the following price ceilings would be binding in this market?

Accepted Answer

A) $8 
B) $6 
C) $12 
D) $10 
A) $8 
B) $6 
C) $12 
D) $10

Exam 6: Supply, Demand, and Government Policies

Does a binding price ceiling result in a shortage or a surplus in the market?

Figure 6-5 -Refer to Figure 6-5. Suppose the market is initially in equilibrium. Then the government imposes a price control, as represented by the solid horizontal line on the graph. If the price control is a price floor, then the price control

Minimum-wage laws dictate the lowest wage that firms may pay workers.

Figure 6-36 -Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer bears $2 of the tax burden.

Figure 6-3 Panel (a) Panel (b) -Refer to Figure 6-3. A nonbinding price floor is shown in

Figure 6-9 -Refer to Figure 6-9. At which price would a price floor be nonbinding?

The long-run effects of rent controls are a good illustration of the principle that

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

If a tax is levied on the sellers of a product, then the supply curve will

Figure 6-16 -Refer to Figure 6-16. In this market, a minimum wage of $2.75 creates a labor

Figure 6-13 This figure shows the market demand and market supply curves for good X. -Refer to Figure 6-13. If the government imposes a price floor of $3 on this market, then there will be

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

In the housing market, supply and demand are

Figure 6-15 -Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at

If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a shortage of labor will exist.

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

Most economists are in favor of price controls as a way of allocating resources in the economy.

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

If the supply curve is more price elastic than the demand curve in a particular market, will the buyers or the sellers bear a larger burden of a per-unit tax imposed on the market?

Figure 6-6 -Refer to Figure 6-6. Which of the following price ceilings would be binding in this 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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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