Question 1

Figure 6-5
  
-Refer to Figure 6-5.In this market,which of the following price controls would be binding?

Accepted Answer

A) a price ceiling of $2.00, and it would cause a shortage 
B) a price ceiling of $5.00, and it would cause a surplus 
C) a price floor of $2.00, and it would cause a shortage 
D) All of the above are correct. 
A) a price ceiling of $2.00, and it would cause a shortage 
B) a price ceiling of $5.00, and it would cause a surplus 
C) a price floor of $2.00, and it would cause a shortage 
D) All of the above are correct.

Question 2

A binding price floor in a market is set

Accepted Answer

A) above equilibrium price and causes a shortage. 
B) above equilibrium price and causes a surplus. 
C) below equilibrium price and causes a surplus. 
D) below equilibrium price and causes a shortage. 
A) above equilibrium price and causes a shortage. 
B) above equilibrium price and causes a surplus. 
C) below equilibrium price and causes a surplus. 
D) below equilibrium price and causes a shortage.

Question 3

If the equilibrium wage rate is $4 per hour,and the minimum wage is $5.15 per hour,a shortage of labor will exist.

Accepted Answer

A) True 
 B)False

Question 4

Using the graph shown,answer the following questions.
a.What was the equilibrium price 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. $10
b. $3
c. $1
d. $2
e. $1

Question 5

A price ceiling will be binding only if it is set

Accepted Answer

A) equal to equilibrium price. 
B) above equilibrium price. 
C) below equilibrium price. 
D) none of the above; a price ceiling is never binding. 
A) equal to equilibrium price. 
B) above equilibrium price. 
C) below equilibrium price. 
D) none of the above; a price ceiling is never binding.

Question 6

Figure 6-14.
  
-Refer to Figure 6-14.The per-unit burden of the tax on sellers is

Accepted Answer

A) $16. 
B) $14. 
C) $8. 
D) $6. 
A) $16. 
B) $14. 
C) $8. 
D) $6.

Question 7

Which of the following statements is true?

Accepted Answer

A) A tax levied on buyers will never be even 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 even 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 8

Figure 6-13
  
-Refer to Figure 6-13 The amount of the tax per unit is

Accepted Answer

A) P₂ minus P₀. 
B) P₂ minus P₁. 
C) P₁ minus P₀. 
D) Q₁ minus Q₀. 
A) P₂ minus P₀. 
B) P₂ minus P₁. 
C) P₁ minus P₀. 
D) Q₁ minus Q₀.

Question 9

When a tax is placed on the buyers of a product,a result is that,relative to the pre-tax situation,

Accepted Answer

A) buyers pay more and sellers receive more. 
B) buyers pay more and sellers receive less. 
C) buyers pay less and sellers receive more. 
D) buyers pay less and sellers receive less. 
A) buyers pay more and sellers receive more. 
B) buyers pay more and sellers receive less. 
C) buyers pay less and sellers receive more. 
D) buyers pay less and sellers receive less.

Question 10

If a price ceiling of $2 per gallon is imposed on gasoline,and the market equilibrium price is $1.50,the price ceiling is a binding constraint on the market.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that a tax is placed on books.If the buyers pay the majority of the tax,we know that the

Accepted Answer

A) demand is more inelastic than the supply. 
B) supply is more inelastic than the demand. 
C) government has required that buyers remit the tax payments. 
D) government has required that buyers remit the tax payments 
A) demand is more inelastic than the supply. 
B) supply is more inelastic than the demand. 
C) government has required that buyers remit the tax payments. 
D) government has required that buyers remit the tax payments

Question 12

Over time,housing shortages caused by rent control

Accepted Answer

A) increase, because the demand for, and supply of, housing are less elastic in the long run. 
B) increase, because the demand for, and supply of, housing are more elastic in the long run. 
C) decrease, because the demand for, and supply of, housing are less elastic in the long run. 
D) decrease, because the demand for, and supply of, housing are more elastic in the long run. 
A) increase, because the demand for, and supply of, housing are less elastic in the long run. 
B) increase, because the demand for, and supply of, housing are more elastic in the long run. 
C) decrease, because the demand for, and supply of, housing are less elastic in the long run. 
D) decrease, because the demand for, and supply of, housing are more elastic in the long run.

Question 13

Who bears the majority of a tax burden when a product is taxed depends on whether the tax is placed on the buyers or the sellers.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) no workers. 
B) only those workers who cannot find jobs. 
C) only those workers who have jobs. 
D) all workers. 
A) no workers. 
B) only those workers who cannot find jobs. 
C) only those workers who have jobs. 
D) all workers.

Question 15

A tax on the sellers of cell phones will

Accepted Answer

A) reduce the size of the cell phone market. 
B) place a burden on the sellers of cell phones but not on the buyers of cell phones. 
C) affect the price paid by buyers of cell phones, but not the size of the market. 
D) affect the size of the market, but it will have no effect on the effective price received by sellers of cell phones. 
A) reduce the size of the cell phone market. 
B) place a burden on the sellers of cell phones but not on the buyers of cell phones. 
C) affect the price paid by buyers of cell phones, but not the size of the market. 
D) affect the size of the market, but it will have no effect on the effective price received by sellers of cell phones.

Question 16

Figure 6-13
  
-Refer to Figure 6-13.The equilibrium price before the tax is imposed is

Accepted Answer

A) P₀. 
B) P₁. 
C) P₂. 
D) None of the above is correct. 
A) P₀. 
B) P₁. 
C) P₂. 
D) None of the above is correct.

Question 17

The demand for salt is inelastic and the supply of salt is elastic.The demand for caviar is elastic and the supply of caviar is inelastic.Suppose that a tax of $1 per pound is levied on the sellers of salt and a tax of $1 per pound is levied on the buyers of caviar.We would expect that most of the burden of these taxes will fall on

Accepted Answer

A) sellers of salt and the buyers of caviar. 
B) sellers of salt and the sellers of caviar. 
C) buyers of salt and the sellers of caviar. 
D) buyers of salt and the buyers of caviar. 
A) sellers of salt and the buyers of caviar. 
B) sellers of salt and the sellers of caviar. 
C) buyers of salt and the sellers of caviar. 
D) buyers of salt and the buyers of caviar.

Question 18

Figure 6-2
  
-Refer to Figure 6-2.Which of the following statements is correct?

Accepted Answer

A) A price ceiling set at $12 would be binding, but a price ceiling set at $8 would not be binding. 
B) A price floor set at $8 would be binding, but a price ceiling set at $8 would not be binding. 
C) A price ceiling set at $9 would result in an excess supply. 
D) A price floor set at $11 would result in a surplus. 
A) A price ceiling set at $12 would be binding, but a price ceiling set at $8 would not be binding. 
B) A price floor set at $8 would be binding, but a price ceiling set at $8 would not be binding. 
C) A price ceiling set at $9 would result in an excess supply. 
D) A price floor set at $11 would result in a surplus.

Question 19

A tax on golf clubs will cause buyers of golf clubs to pay a higher price,and the equilibrium quantity will decrease.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following observations would be consistent with a binding price ceiling in a market?

Accepted Answer

A) A smaller quantity of the good is bought and sold after the price ceiling becomes effective than before the price ceiling became effective. 
B) A smaller quantity of the good is demanded after the price ceiling becomes effective than before the price ceiling became effective. 
C) A larger quantity of the good is supplied after the price ceiling becomes effective than before the price ceiling became effective. 
D) All of the above are correct. 
A) A smaller quantity of the good is bought and sold after the price ceiling becomes effective than before the price ceiling became effective. 
B) A smaller quantity of the good is demanded after the price ceiling becomes effective than before the price ceiling became effective. 
C) A larger quantity of the good is supplied after the price ceiling becomes effective than before the price ceiling became effective. 
D) All of the above are correct.

Exam 6: Supply, demand, and Government Policies

Figure 6-5 -Refer to Figure 6-5.In this market,which of the following price controls would be binding?

A binding price floor in a market is set

If the equilibrium wage rate is $4 per hour,and the minimum wage is $5.15 per hour,a shortage of labor will exist.

A price ceiling will be binding only if it is set

Figure 6-14. -Refer to Figure 6-14.The per-unit burden of the tax on sellers is

Which of the following statements is true?

Figure 6-13 -Refer to Figure 6-13 The amount of the tax per unit is

When a tax is placed on the buyers of a product,a result is that,relative to the pre-tax situation,

If a price ceiling of $2 per gallon is imposed on gasoline,and the market equilibrium price is $1.50,the price ceiling is a binding constraint on the market.

Suppose that a tax is placed on books.If the buyers pay the majority of the tax,we know that the

Over time,housing shortages caused by rent control

Who bears the majority of a tax burden when a product is taxed depends on whether the tax is placed on the buyers or the sellers.

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

A tax on the sellers of cell phones will

Figure 6-13 -Refer to Figure 6-13.The equilibrium price before the tax is imposed is

Figure 6-2 -Refer to Figure 6-2.Which of the following statements is correct?

A tax on golf clubs will cause buyers of golf clubs to pay a higher price,and the equilibrium quantity will decrease.

Which of the following observations would be consistent with a binding price ceiling in a market?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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