Exam 6: Supply, Demand, and Government Policies

Scenario 6-1 Suppose that demand in the market for good X is given by the equation $Q ^ { D } = 30 - P$ and that supply in the market for good X is given by the equation $Q ^ { S } = 2 P$ -Refer to Scenario 6-1. If the government set a price floor at $13, would there be a shortage or surplus, and how large would be the shortage/surplus?

If the government levies a $1600 tax per boat on sellers of boats, then the price paid by buyers of boats would

When a tax of $1.00 per gallon is imposed on sellers of gasoline, the supply curve for gasoline shifts upward, but by less than $1.00.

A tax of $1 on sellers always increases the equilibrium price by $1.

Figure 6-19 ​ -Refer to Figure 6-19. If the government set a price floor at $55, would there be a shortage or surplus, and how large would be the shortage/surplus?

The minimum wage is more often binding for teenagers than for other members of the labor force.

Figure 6-11 ​ -Refer to Figure 6-11. Suppose a tax of $2 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

If a price floor is not binding, then

One disadvantage of government subsidies over price controls is that subsidies

Price floors are typically imposed to benefit buyers.

A price ceiling set below the equilibrium price is binding.

When the government imposes a binding price ceiling on a competitive market, a surplus of the good arises, and sellers must ration the scarce goods among the large number of potential buyers.

Figure 6-1 Graph (a) Graph (b) ​ ​ -Refer to Figure 6-1. The price ceiling shown in graph (a)

Rent-control laws dictate a minimum rent that landlords may charge tenants.

The economy contains many labor markets for different types of workers.

If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

Scenario 6-1 Suppose that demand in the market for good X is given by the equation $Q ^ { D } = 30 - P$ and that supply in the market for good X is given by the equation $Q ^ { S } = 2 P$ -Refer to Scenario 6-1. If the government set a price ceiling at $8, would there be a shortage or surplus, and how large would be the shortage/surplus?

A large majority of economists favor eliminating the minimum wage.

Minimum-wage laws benefit society by creating a surplus of labor.

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