Question 1

Lawmakers can decide whether the buyers or the sellers must send a tax to the government,but they cannot legislate the true burden of a tax.

Accepted Answer

A) True 
 B)False

Question 2

You have responsibility for economic policy in the country of Freedonia.Recently,the neighboring country of Sylvania has cut off all exports of oranges to Freedonia.Harpo,who is one of your advisors,suggests that you should impose a binding price ceiling in order to avoid a shortage of oranges.Chico,another one of your advisors,argues that without a binding price floor,a shortage will certainly develop.Zeppo,a third advisor,says that the best way to avoid a shortage of oranges is to take no action at all.Which of your three advisors is most likely to have studied economics?

Accepted Answer

A)  Harpo 
B)  Chico 
C)  Zeppo 
D)  Apparently, all three advisors have studied economics, but their views on positive economics are different. 
A)  Harpo 
B)  Chico 
C)  Zeppo 
D)  Apparently, all three advisors have studied economics, but their views on positive economics are different.

Question 3

Using the graph shown,in which the vertical distance between points A and B represents the tax in the market,answer the following questions.
a.What was the equilibrium price and quantity in this market before the tax?
b.What is the amount of the tax?
c.How much of the tax will the buyers pay?
d.How much of the tax will the sellers pay?
e.How much will the buyer pay for the product after the tax is imposed?
f.How much will the seller receive after the tax is imposed?
g.As a result of the tax,what has happened to the level of market activity?

Accepted Answer

a.$8; 8,000 units
b.$5
c.$3
d.

Question 4

Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy.Further,suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle.Which of the following statements is correct?

Accepted Answer

A)  This tax causes the demand curve for tequila to shift downward by $1.00 at each quantity of tequila. 
B)  The price paid by buyers is $0.20 per bottle more than it was before the tax. 
C)  Eighty percent of the burden of the tax falls on sellers. 
D)  All of the above are correct. 
A)  This tax causes the demand curve for tequila to shift downward by $1.00 at each quantity of tequila. 
B)  The price paid by buyers is $0.20 per bottle more than it was before the tax. 
C)  Eighty percent of the burden of the tax falls on sellers. 
D)  All of the above are correct.

Question 5

Economists blame the long lines at gasoline stations in the U.S.in the 1970s on

Accepted Answer

A)  U.S. government regulations pertaining to the price of gasoline. 
B)  the Organization of Petroleum Exporting Countries (OPE
C) . 
C)  major oil companies operating in the U.S. 
D)  consumers who bought gasoline frequently, even when their cars' gasoline tanks were nearly full. 
A)  U.S. government regulations pertaining to the price of gasoline. 
B)  the Organization of Petroleum Exporting Countries (OPE
C) . 
C)  major oil companies operating in the U.S. 
D)  consumers who bought gasoline frequently, even when their cars' gasoline tanks were nearly full.

Question 6

As rationing mechanisms,prices

Accepted Answer

A)  and long lines are efficient. 
B)  are efficient, but long lines are inefficient. 
C)  are inefficient, but long lines are efficient. 
D)  and long lines are inefficient. 
A)  and long lines are efficient. 
B)  are efficient, but long lines are inefficient. 
C)  are inefficient, but long lines are efficient. 
D)  and long lines are inefficient.

Question 7

Minimum-wage laws are precise policy instruments that can specifically target workers whose family incomes are low.

Accepted Answer

A) True 
 B)False

Question 8

Figure 6-16
  
-Refer to Figure 6-16.Suppose a tax of $5 per unit is imposed on this market.How much will sellers receive per unit after the tax is imposed?

Accepted Answer

A)  $5 
B)  between $5 and $10 
C)  between $10 and $14 
D)  $14 
A)  $5 
B)  between $5 and $10 
C)  between $10 and $14 
D)  $14

Question 9

Table 6-1
  
-Refer to Table 6-1.Suppose the government imposes a price ceiling of $1 on this market.What will be the size of the shortage in this market?

Accepted Answer

A)  0 units 
B)  2 units 
C)  8 units 
D)  10 units 
A)  0 units 
B)  2 units 
C)  8 units 
D)  10 units

Question 10

Figure 6-7
  
-Refer to Figure 6-7.Suppose a price ceiling of $5 is imposed on this market.As a result,

Accepted Answer

A)  the quantity of the good supplied decreases by 20 units. 
B)  the demand curve shifts to the left so as to now pass through the point (quantity = 40, price = $5). 
C)  buyers' total expenditure on the good decreases by $100. 
D)  the price of the good continues to serve as the rationing mechanism. 
A)  the quantity of the good supplied decreases by 20 units. 
B)  the demand curve shifts to the left so as to now pass through the point (quantity = 40, price = $5). 
C)  buyers' total expenditure on the good decreases by $100. 
D)  the price of the good continues to serve as the rationing mechanism.

Question 11

In 1990,Congress passed a new luxury tax on items such as yachts,private airplanes,furs,jewelry,and expensive cars.The goal of the tax was to

Accepted Answer

A)  raise revenue from the wealthy. 
B)  prevent wealthy people from buying luxuries. 
C)  force producers of luxury goods to reduce employment. 
D)  limit exports of luxury goods to other countries. 
A)  raise revenue from the wealthy. 
B)  prevent wealthy people from buying luxuries. 
C)  force producers of luxury goods to reduce employment. 
D)  limit exports of luxury goods to other countries.

Question 12

Figure 6-21
  
-Refer to Figure 6-22.The burden of the tax on buyers is

Accepted Answer

A)  $1 per unit. 
B)  $1.50 per unit. 
C)  $2 per unit. 
D)  $3 per unit. 
A)  $1 per unit. 
B)  $1.50 per unit. 
C)  $2 per unit. 
D)  $3 per unit.

Question 13

To say that a price ceiling is nonbinding is to say that the price ceiling

Accepted Answer

A)  results in a surplus. 
B)  is set above the equilibrium price. 
C)  causes quantity demanded to exceed quantity supplied. 
D)  All of the above are correct. 
A)  results in a surplus. 
B)  is set above the equilibrium price. 
C)  causes quantity demanded to exceed quantity supplied. 
D)  All of the above are correct.

Question 14

Figure 6-20
  
-Refer to Figure 6-20.The per-unit burden of the tax on buyers of the good is

Accepted Answer

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

Question 15

When a free market for a good reaches equilibrium,anyone who is willing and able to sell at the market price can sell the good.

Accepted Answer

A) True 
 B)False

Question 16

Figure 6-21
  
-Refer to Figure 6-22.Suppose the same supply and demand curves apply,and a tax of the same amount per unit as shown here is imposed.Now,however,the sellers of the good,rather than the buyers,are required to pay the tax to the government.After the sellers are required to pay the tax,relative to the case depicted in the graph,the burden on buyers will be

Accepted Answer

A)  larger, and the burden on sellers will be smaller. 
B)  smaller, and the burden on sellers will be larger. 
C)  the same, and the burden on sellers will be the same. 
D)  The relative burdens in the two cases cannot be determined without further information. 
A)  larger, and the burden on sellers will be smaller. 
B)  smaller, and the burden on sellers will be larger. 
C)  the same, and the burden on sellers will be the same. 
D)  The relative burdens in the two cases cannot be determined without further information.

Question 17

If the demand curve is very elastic and the supply curve is very inelastic in a market,then the sellers will bear a greater burden of a tax imposed on the market,even if the tax is imposed on the buyers.

Accepted Answer

A) True 
 B)False

Question 18

A binding price ceiling causes quantity demanded to be less than quantity supplied.

Accepted Answer

A) True 
 B)False

Question 19

Assume the demand for cigarettes is relatively inelastic,and the supply of cigarettes is relatively elastic.When cigarettes are taxed,we would expect

Accepted Answer

A)  most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. 
B)  most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. 
C)  the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government. 
D)  a large percentage of smokers to quit smoking in response to the tax. 
A)  most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. 
B)  most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. 
C)  the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government. 
D)  a large percentage of smokers to quit smoking in response to the tax.

Question 20

Workers determine the supply of labor,and firms determine the demand for labor.

Accepted Answer

A) True 
 B)False

Lawmakers can decide whether the buyers or the sellers must send a tax to the government,but they cannot legislate the true burden of a tax.

Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy.Further,suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle.Which of the following statements is correct?

Economists blame the long lines at gasoline stations in the U.S.in the 1970s on

As rationing mechanisms,prices

Minimum-wage laws are precise policy instruments that can specifically target workers whose family incomes are low.

Figure 6-16 -Refer to Figure 6-16.Suppose a tax of $5 per unit is imposed on this market.How much will sellers receive per unit after the tax is imposed?

Table 6-1 -Refer to Table 6-1.Suppose the government imposes a price ceiling of $1 on this market.What will be the size of the shortage in this market?

Figure 6-7 -Refer to Figure 6-7.Suppose a price ceiling of $5 is imposed on this market.As a result,

In 1990,Congress passed a new luxury tax on items such as yachts,private airplanes,furs,jewelry,and expensive cars.The goal of the tax was to

Figure 6-21 -Refer to Figure 6-22.The burden of the tax on buyers is

To say that a price ceiling is nonbinding is to say that the price ceiling

Figure 6-20 -Refer to Figure 6-20.The per-unit burden of the tax on buyers of the good is

When a free market for a good reaches equilibrium,anyone who is willing and able to sell at the market price can sell the good.

If the demand curve is very elastic and the supply curve is very inelastic in a market,then the sellers will bear a greater burden of a tax imposed on the market,even if the tax is imposed on the buyers.

A binding price ceiling causes quantity demanded to be less than quantity supplied.

Assume the demand for cigarettes is relatively inelastic,and the supply of cigarettes is relatively elastic.When cigarettes are taxed,we would expect

Workers determine the supply of labor,and firms determine the demand for labor.

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.

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.

Oligopoly.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters

Exam 6: Supply, Demand, And Government Policies.

Lawmakers can decide whether the buyers or the sellers must send a tax to the government,but they cannot legislate the true burden of a tax.

Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy.Further,suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle.Which of the following statements is correct?

Economists blame the long lines at gasoline stations in the U.S.in the 1970s on

As rationing mechanisms,prices

Minimum-wage laws are precise policy instruments that can specifically target workers whose family incomes are low.

Figure 6-16 -Refer to Figure 6-16.Suppose a tax of $5 per unit is imposed on this market.How much will sellers receive per unit after the tax is imposed?

Table 6-1 -Refer to Table 6-1.Suppose the government imposes a price ceiling of $1 on this market.What will be the size of the shortage in this market?

Figure 6-7 -Refer to Figure 6-7.Suppose a price ceiling of $5 is imposed on this market.As a result,

In 1990,Congress passed a new luxury tax on items such as yachts,private airplanes,furs,jewelry,and expensive cars.The goal of the tax was to

Figure 6-21 -Refer to Figure 6-22.The burden of the tax on buyers is

To say that a price ceiling is nonbinding is to say that the price ceiling

Figure 6-20 -Refer to Figure 6-20.The per-unit burden of the tax on buyers of the good is

When a free market for a good reaches equilibrium,anyone who is willing and able to sell at the market price can sell the good.

If the demand curve is very elastic and the supply curve is very inelastic in a market,then the sellers will bear a greater burden of a tax imposed on the market,even if the tax is imposed on the buyers.

A binding price ceiling causes quantity demanded to be less than quantity supplied.

Assume the demand for cigarettes is relatively inelastic,and the supply of cigarettes is relatively elastic.When cigarettes are taxed,we would expect

Workers determine the supply of labor,and firms determine the demand for labor.

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.

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.

Oligopoly.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters