Question 1

A price floor is a legal minimum on the price of a good or service.

Accepted Answer

A) True 
 B)False

Question 2

Graph 6-7  
-According to Graph 6-7, the price buyers will pay after the tax is imposed is:

Accepted Answer

A) $8.00 
B) $6.00 
C) $5.00 
D) $3.50 
A) $8.00 
B) $6.00 
C) $5.00 
D) $3.50

Question 3

Price controls are:

Accepted Answer

A) usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers 
B) used to make markets more efficient 
C) nearly always effective in eliminating inequities 
D) established by firms with monopoly power 
A) usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers 
B) used to make markets more efficient 
C) nearly always effective in eliminating inequities 
D) established by firms with monopoly power

Question 4

If a tax is levied on a market, sellers will receive more for their goods and buyers will have to pay more for their purchases.

Accepted Answer

A) True 
 B)False

Question 5

The minimum wage creates the most benefits for teenage workers as their wages are typically much lower than adult workers.

Accepted Answer

A) True 
 B)False

Question 6

Suppliers of a good are likely to favor a binding:

Accepted Answer

A) price floor, as the quantity sold will be higher than in a competitive market 
B) price floor, as the price received will be higher than in a competitive market 
C) price ceiling, as the quantity demanded will be higher than in a competitive market 
D) price ceiling, as the price received will be higher than in a competitive market 
A) price floor, as the quantity sold will be higher than in a competitive market 
B) price floor, as the price received will be higher than in a competitive market 
C) price ceiling, as the quantity demanded will be higher than in a competitive market 
D) price ceiling, as the price received will be higher than in a competitive market

Question 7

Suppose that the equilibrium wage rate in an industry is $10 per hour.The government then sets a minimum wage of $12 per hour.The result will be a surplus of labour supply.

Accepted Answer

A) True 
 B)False

Question 8

Using the graph below, analyse the effect a $70 price floor would have on the market for tennis shoes.Would this be a binding price floor? Why would policymakers choose to impose a price floor?

Accepted Answer

For this example, a $70 price floor woul

Question 9

Tax incidence ultimately depends on the legislated burden.

Accepted Answer

A) True 
 B)False

Question 10

If supply is perfectly inelastic, then a subsidy paid to buyers of a good can never increase the size of the market.

Accepted Answer

A) True 
 B)False

Question 11

When sellers are legally required to pay a tax, the burden of the tax falls solely on the sellers.

Accepted Answer

A) True 
 B)False

Question 12

Price controls are an effective way of allocating resources in an economy.For this reason there is widespread support for price controls among economists.

Accepted Answer

A) True 
 B)False

Question 13

A tax paid by buyers of a good or service:

Accepted Answer

A) encourages market activity and decreases the price received by sellers 
B) encourages market activity and increases the price paid by buyers 
C) discourages market activity and decreases the price received by sellers 
D) discourages market activity and increases the price received by sellers 
A) encourages market activity and decreases the price received by sellers 
B) encourages market activity and increases the price paid by buyers 
C) discourages market activity and decreases the price received by sellers 
D) discourages market activity and increases the price received by sellers

Question 14

Graph 6-8  
-According to Graph 6-8, the amount of the tax imposed in this market is:

Accepted Answer

A) $1.00 
B) $1.50 
C) $2.50 
D) $3.50 
A) $1.00 
B) $1.50 
C) $2.50 
D) $3.50

Question 15

If the demand for coffee and the supply of coffee are both elastic then:

Accepted Answer

A) coffee buyers will bear most of the burden of the tax 
B) coffee sellers will bear most of the burden of the tax 
C) the burden of the tax will be shared equally between buyers and sellers 
D) it is impossible to determine how the burden of the tax will be shared 
A) coffee buyers will bear most of the burden of the tax 
B) coffee sellers will bear most of the burden of the tax 
C) the burden of the tax will be shared equally between buyers and sellers 
D) it is impossible to determine how the burden of the tax will be shared

Question 16

Many advocates of raising the minimum wage argue that the adverse effects of such a move, for example higher unemployment, are likely to be small.Suppose the minimum wage is binding.Under what conditions will an increase in the minimum wage lead to only a small increase in unemployment?

Accepted Answer

A given increase in price leads to a sma

Question 17

Graph 6-8  
-According to Graph 6-8, the price buyers will pay after the tax is imposed is:

Accepted Answer

A) $1.00 
B) $3.50 
C) $5.00 
D) $6.00 
A) $1.00 
B) $3.50 
C) $5.00 
D) $6.00

Question 18

To fund new green energy research, suppose the government requires every buyer of a new car to pay a $100 tax.When compared to the pre-tax equilibrium, such a tax will:

Accepted Answer

A) make buyers $100 worse off without affecting sellers 
B) make buyers $100 worse off, but make sellers better off 
C) increase the price sellers receive for cars 
D) make both buyers and sellers worse off, but we cannot say by how much without more information 
A) make buyers $100 worse off without affecting sellers 
B) make buyers $100 worse off, but make sellers better off 
C) increase the price sellers receive for cars 
D) make both buyers and sellers worse off, but we cannot say by how much without more information

Question 19

Which of the following is the most correct statement about price controls?

Accepted Answer

A) Price controls always help those they are designed to help. 
B) Price controls never help those they are designed to help. 
C) Price controls often hurt those they are designed to help. 
D) Price controls always hurt those they are designed to help. 
A) Price controls always help those they are designed to help. 
B) Price controls never help those they are designed to help. 
C) Price controls often hurt those they are designed to help. 
D) Price controls always hurt those they are designed to help.

Question 20

A legal maximum price at which a good can be sold is a price:

Accepted Answer

A) floor 
B) stabilisation 
C) support 
D) ceiling 
A) floor 
B) stabilisation 
C) support 
D) ceiling

Exam 6: Supply, Demand and Government Policies

A price floor is a legal minimum on the price of a good or service.

Graph 6-7 -According to Graph 6-7, the price buyers will pay after the tax is imposed is:

Price controls are:

If a tax is levied on a market, sellers will receive more for their goods and buyers will have to pay more for their purchases.

The minimum wage creates the most benefits for teenage workers as their wages are typically much lower than adult workers.

Suppliers of a good are likely to favor a binding:

Suppose that the equilibrium wage rate in an industry is $10 per hour.The government then sets a minimum wage of $12 per hour.The result will be a surplus of labour supply.

Using the graph below, analyse the effect a $70 price floor would have on the market for tennis shoes.Would this be a binding price floor? Why would policymakers choose to impose a price floor?

Tax incidence ultimately depends on the legislated burden.

If supply is perfectly inelastic, then a subsidy paid to buyers of a good can never increase the size of the market.

When sellers are legally required to pay a tax, the burden of the tax falls solely on the sellers.

Price controls are an effective way of allocating resources in an economy.For this reason there is widespread support for price controls among economists.

A tax paid by buyers of a good or service:

Graph 6-8 -According to Graph 6-8, the amount of the tax imposed in this market is:

If the demand for coffee and the supply of coffee are both elastic then:

Many advocates of raising the minimum wage argue that the adverse effects of such a move, for example higher unemployment, are likely to be small.Suppose the minimum wage is binding.Under what conditions will an increase in the minimum wage lead to only a small increase in unemployment?

Graph 6-8 -According to Graph 6-8, the price buyers will pay after the tax is imposed is:

To fund new green energy research, suppose the government requires every buyer of a new car to pay a $100 tax.When compared to the pre-tax equilibrium, such a tax will:

Which of the following is the most correct statement about price controls?

A legal maximum price at which a good can be sold is a price:

Ten Lessons From 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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