Exam 6: Supply, Demand and Government Policies

How does elasticity affect the burden of a tax? Justify your answer using supply-demand diagrams.

In general, advocates of the minimum wage:

Suppose the local government decides to implement rent controls.The housing shortage in the short run is likely to be less severe than the housing shortage in the long run.

A binding price floor causes a surplus.

Opponents of the minimum wage note that a high minimum wage creates unemployment, causes teenagers to drop out of school and prevents some unskilled workers from getting the on-the-job training that they need.

Graph 6-10 -In Graph 6-10, the price that will be paid after the tax is:

If sellers of a product are required to pay a tax, the supply curve for the product will shift left by exactly the size of the tax.

Graph 6-7 -According to Graph 6-7, the amount of the tax imposed in this market is:

A tax on golf clubs will cause the equilibrium market price of golf clubs to increase and the equilibrium quantity sold to decrease.

When OPEC raised the price of crude oil in the 1970s, this lead to long lines at the petrol station because:

Graph 6-10 -In Graph 6-10, the per-unit burden of the tax on buyers is:

In part as an effort to discourage smoking, Australia has some of the highest levels of cigarette taxation in the world.Do you think a tax on cigarettes dramatically decreases the number of people smoking? Is taxing cigarettes an effective way to raise revenue for the government from smokers? (Hint: given that smoking is addictive, what does this imply about the elasticity of demand?)

A binding price floor on wheat will:

The initial impact of a tax on the sellers of a product is on:

Domestic producers of natural gas would welcome being a signatory to the world price regime if it is set above the equilibrium, as they can export the surplus.

Graph 6-7 -According to Graph 6-7, the equilibrium price in the market before the tax is imposed is:

Workers with high levels of skill and experience are not affected by the minimum wage because:

Graph 6-3 -According to Graph 6-3, which panel(s) best represent(s) a binding rent control in the long run?

Graph 6-1 -In Graph 6-1, a price ceiling that is not binding is shown in:

Suppose the market equilibrium price for cigarettes is $20 before the government introduced a $22 price floor.This price floor will not be binding as it is above market price.