Question 1

If a price floor is not binding, then

Accepted Answer

A) the equilibrium price is above the price floor. 
B) the equilibrium price is below the price floor. 
C) there will be a surplus in the market. 
D) there will be a shortage in the market. 
A) the equilibrium price is above the price floor. 
B) the equilibrium price is below the price floor. 
C) there will be a surplus in the market. 
D) there will be a shortage in the market.

Question 2

The minimum wage, if it is binding, lowers the incomes of

Accepted Answer

A) no workers. 
B) only those workers who become unemployed. 
C) only those workers who have jobs. 
D) all workers. 
A) no workers. 
B) only those workers who become unemployed. 
C) only those workers who have jobs. 
D) all workers.

Question 3

Economic policies often have effects that their architects did not intend or anticipate.

Accepted Answer

A) True 
 B)False

Question 4

Figure 6-31  
-Refer to Figure 6-31. If the government set a price floor at $17, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price floor set at

Question 5

A tax on buyers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied.

Accepted Answer

A) True 
 B)False

Question 6

Tax incidence

Accepted Answer

A) depends on the legislated burden. 
B) is entirely random. 
C) depends on the elasticities of supply and demand. 
D) falls entirely on buyers or entirely on sellers. 
A) depends on the legislated burden. 
B) is entirely random. 
C) depends on the elasticities of supply and demand. 
D) falls entirely on buyers or entirely on sellers.

Question 7

When a tax is placed on the buyers of tennis racquets, the size of the tennis racquet market

Accepted Answer

A) and the price paid by buyers both decrease. 
B) decreases, but the price paid by buyers increases. 
C) increases, but the price paid by buyers decreases. 
D) and the price paid by buyers both increase. 
A) and the price paid by buyers both decrease. 
B) decreases, but the price paid by buyers increases. 
C) increases, but the price paid by buyers decreases. 
D) and the price paid by buyers both increase.

Question 8

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

Accepted Answer

A) $4 
B) $5 
C) $3 
D) $7 
A) $4 
B) $5 
C) $3 
D) $7

Question 9

Figure 6-12  
-Refer to Figure 6-12. When the price ceiling applies in this market and the supply curve for gasoline shifts from S1 to S2,

Accepted Answer

A) the market price will increase to P3. 
B) a surplus will occur at the new market price of P2. 
C) the market price will stay at P1. 
D) a shortage will occur at the new market price of P2. 
A) the market price will increase to P3. 
B) a surplus will occur at the new market price of P2. 
C) the market price will stay at P1. 
D) a shortage will occur at the new market price of P2.

Question 10

A $2.00 tax levied on the sellers of birdhouses will shift the supply curve

Accepted Answer

A) upward by exactly $2.00. 
B) upward by less than $2.00. 
C) downward by exactly $2.00. 
D) downward by less than $2.00. 
A) upward by exactly $2.00. 
B) upward by less than $2.00. 
C) downward by exactly $2.00. 
D) downward by less than $2.00.

Question 11

If a binding price ceiling is imposed on the baby formula market, then

Accepted Answer

A) the quantity of baby formula demanded will increase. 
B) the quantity of baby formula supplied will decrease. 
C) a shortage of baby formula will develop. 
D) All of the above are correct. 
A) the quantity of baby formula demanded will increase. 
B) the quantity of baby formula supplied will decrease. 
C) a shortage of baby formula will develop. 
D) All of the above are correct.

Question 12

Most labor economists believe that the supply of labor is much more elastic than the demand.

Accepted Answer

A) True 
 B)False

Question 13

Figure 6-4  
-Refer to Figure 6-4. Which of the following statements is not correct?

Accepted Answer

A) When the price is $10, quantity supplied equals quantity demanded. 
B) When the price is $6, there is a surplus of 8 units. 
C) When the price is $12, there is a surplus of 4 units. 
D) When the price is $16, quantity supplied exceeds quantity demanded by 12 units. 
A) When the price is $10, quantity supplied equals quantity demanded. 
B) When the price is $6, there is a surplus of 8 units. 
C) When the price is $12, there is a surplus of 4 units. 
D) When the price is $16, quantity supplied exceeds quantity demanded by 12 units.

Question 14

Figure 6-24  
-Refer to Figure 6-24. What is the amount of the tax per unit?

Accepted Answer

A) $8 
B) $6 
C) $4 
D) $2 
A) $8 
B) $6 
C) $4 
D) $2

Question 15

Figure 6-7  
-Refer to Figure 6-7. For a price ceiling to be binding in this market, it would have to be set at

Accepted Answer

A) any price below $7. 
B) any price above $3. 
C) any price below $9. 
D) any price above $7. 
A) any price below $7. 
B) any price above $3. 
C) any price below $9. 
D) any price above $7.

Question 16

Table 6-3
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 $2 above the equilibrium price in this market.  
-Refer to Table 6-3. Following the imposition of a price floor $2 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) 2 units. 
C) 5 units. 
D) 7 units. 
A) 0 units. 
B) 2 units. 
C) 5 units. 
D) 7 units.

Question 17

If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would

Accepted Answer

A) decrease by less than $500. 
B) decrease by exactly $500. 
C) decrease by more than $500. 
D) increase by an indeterminate amount. 
A) decrease by less than $500. 
B) decrease by exactly $500. 
C) decrease by more than $500. 
D) increase by an indeterminate amount.

Question 18

Which of the following statements is correct?

Accepted Answer

A) A tax levied on buyers will never be partially paid by sellers. 
B) Who actually pays a tax depends on the price elasticities of supply and demand. 
C) Government can decide who actually pays a tax. 
D) A tax levied on sellers always will be passed on completely to buyers. 
A) A tax levied on buyers will never be partially paid by sellers. 
B) Who actually pays a tax depends on the price elasticities of supply and demand. 
C) Government can decide who actually pays a tax. 
D) A tax levied on sellers always will be passed on completely to buyers.

Question 19

A nonbinding price floor
(i)causes a surplus.
(ii)causes a shortage.
(iii)is set at a price above the equilibrium price.
(iv)is set at a price below the equilibrium price.

Accepted Answer

A) (iii) only 
B) (iv) only 
C) (i) and (iii) only 
D) (ii) and (iv) only 
A) (iii) only 
B) (iv) only 
C) (i) and (iii) only 
D) (ii) and (iv) only

Question 20

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

Accepted Answer

A) demand curve will shift upward by $20, and the effective price received by sellers will increase by $20. 
B) demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20. 
C) supply curve will shift downward by $20, and the price paid by buyers will decrease by $20. 
D) supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20. 
A) demand curve will shift upward by $20, and the effective price received by sellers will increase by $20. 
B) demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20. 
C) supply curve will shift downward by $20, and the price paid by buyers will decrease by $20. 
D) supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20.

Exam 6: Supply, Demand, and Government Policies

If a price floor is not binding, then

The minimum wage, if it is binding, lowers the incomes of

Economic policies often have effects that their architects did not intend or anticipate.

Figure 6-31 -Refer to Figure 6-31. If the government set a price floor at $17, would there be a shortage or surplus, and how large would be the shortage/surplus?

A tax on buyers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied.

Tax incidence

When a tax is placed on the buyers of tennis racquets, the size of the tennis racquet market

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

Figure 6-12 -Refer to Figure 6-12. When the price ceiling applies in this market and the supply curve for gasoline shifts from S1 to S2,

A $2.00 tax levied on the sellers of birdhouses will shift the supply curve

If a binding price ceiling is imposed on the baby formula market, then

Most labor economists believe that the supply of labor is much more elastic than the demand.

Figure 6-4 -Refer to Figure 6-4. Which of the following statements is not correct?

Figure 6-24 -Refer to Figure 6-24. What is the amount of the tax per unit?

Figure 6-7 -Refer to Figure 6-7. For a price ceiling to be binding in this market, it would have to be set at

If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would

Which of the following statements is correct?

A nonbinding price floor (i)causes a surplus. (ii)causes a shortage. (iii)is set at a price above the equilibrium price. (iv)is set at a price below the equilibrium price.

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

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

Filters

Figure 6-12 -Refer to Figure 6-12. When the price ceiling applies in this market and the supply curve for gasoline shifts from S₁ to S₂,