Question 1

An effective rent ceiling

Accepted Answer

A) increases consumer surplus. 
B) increases producer surplus. 
C) creates a deadweight loss. 
D) decreases the supply of housing. 
E) increases the supply of housing. 
A) increases consumer surplus. 
B) increases producer surplus. 
C) creates a deadweight loss. 
D) decreases the supply of housing. 
E) increases the supply of housing.

Question 2

If a rent ceiling imposed by the government is greater than the equilibrium rent for housing, then

Accepted Answer

A) the supply of rental housing will increase. 
B) a shortage of housing will occur. 
C) a surplus of housing will occur. 
D) the equilibrium rent will prevail as long as all else remains constant. 
E) the equilibrium rent will rise. 
A) the supply of rental housing will increase. 
B) a shortage of housing will occur. 
C) a surplus of housing will occur. 
D) the equilibrium rent will prevail as long as all else remains constant. 
E) the equilibrium rent will rise.

Question 3

Use the information below to answer the following questions.
Fact 6.5.1 Hollywood: Organized Crime Hits the Movies
The Mexican army seized 1,180 disc burners and 3.14 million copies of movies and TV shows from 23 warehouses in a move to fight piracy that costs Hollywood about $590 million a year.
Source: Bloomberg, Businessweek, April 7, 2011
Assume that the marginal cost of producing a DVD (legal or illegal)is a constant $3 and that legal DVDs bear an additional marginal cost of $5 each in royalty payments to film studios.
-Refer to Fact 6.5.1.If a penalty is imposed on either the buyer or the seller, and the penalty is the same, then the marginal benefit

Accepted Answer

A) is higher when the penalty is imposes on the seller. 
B) cannot be measured regardless of who pays the penalty. 
C) is the same regardless of who pays the penalty. 
D) is higher when the penalty is imposed on the buyer. 
E) is zero. 
A) is higher when the penalty is imposes on the seller. 
B) cannot be measured regardless of who pays the penalty. 
C) is the same regardless of who pays the penalty. 
D) is higher when the penalty is imposed on the buyer. 
E) is zero.

Question 4

In a market with an effective production quota,

Accepted Answer

A) marginal social benefit exceeds marginal social cost. 
B) marginal social benefit equals marginal social cost. 
C) marginal social cost exceeds marginal social benefit. 
D) marginal social cost is greater than the equilibrium price. 
E) marginal social benefit is less than the equilibrium price. 
A) marginal social benefit exceeds marginal social cost. 
B) marginal social benefit equals marginal social cost. 
C) marginal social cost exceeds marginal social benefit. 
D) marginal social cost is greater than the equilibrium price. 
E) marginal social benefit is less than the equilibrium price.

Question 5

Use the figure below to answer the following questions.
   
Figure 6.3.1
-Refer to Figure 6.3.1 showing the market for frisbees before and after a tax is imposed.On each frisbee, the buyers' share of the tax is

Accepted Answer

A) $0.40. 
B) $0.60. 
C) $1.00. 
D) $5.60. 
E) $6.60. 
A) $0.40. 
B) $0.60. 
C) $1.00. 
D) $5.60. 
E) $6.60.

Question 6

Daisy and Donald live in a community with rent ceilings.Both are looking for an apartment to rent.Daisy has a job paying $10 per hour and Donald has a job paying $8 per hour.Both value an apartment equally.What is the most likely outcome?

Accepted Answer

A) Daisy will spend more time than Donald searching for an apartment. 
B) Donald will spend more time than Daisy searching for an apartment. 
C) Both of them will spend the same amount of time searching for an apartment. 
D) Daisy will find the apartment. 
E) Donald will find the apartment. 
A) Daisy will spend more time than Donald searching for an apartment. 
B) Donald will spend more time than Daisy searching for an apartment. 
C) Both of them will spend the same amount of time searching for an apartment. 
D) Daisy will find the apartment. 
E) Donald will find the apartment.

Question 7

Use the information below to answer the following questions.
Fact 6.5.1 Hollywood: Organized Crime Hits the Movies
The Mexican army seized 1,180 disc burners and 3.14 million copies of movies and TV shows from 23 warehouses in a move to fight piracy that costs Hollywood about $590 million a year.
Source: Bloomberg, Businessweek, April 7, 2011
Assume that the marginal cost of producing a DVD (legal or illegal)is a constant $3 and that legal DVDs bear an additional marginal cost of $5 each in royalty payments to film studios.
-Refer to Fact 6.5.1.With no penalty on buyers, if a penalty for breaking the law is imposed on sellers at more than $5 a disc, the equilibrium price of an illegal disc

Accepted Answer

A) rises and the quantity sold decreases. 
B) rises and the quantity sold increases. 
C) falls below $3 and the quantity sold decreases. 
D) rises to a price between $3 and $8 and the equilibrium quantity does not change. 
E) falls below $3 and the quantity sold increases. 
A) rises and the quantity sold decreases. 
B) rises and the quantity sold increases. 
C) falls below $3 and the quantity sold decreases. 
D) rises to a price between $3 and $8 and the equilibrium quantity does not change. 
E) falls below $3 and the quantity sold increases.

Question 8

A production quota

Accepted Answer

A) is a lower limit to the quantity of a good that can be produced in a specified period. 
B) is an upper limit to the quantity of a good that can be produced in a specified period. 
C) is a payment made by a consumer to a producer. 
D) is a payment made by a producer to a consumer. 
E) is a payment made by the government to a producer. 
A) is a lower limit to the quantity of a good that can be produced in a specified period. 
B) is an upper limit to the quantity of a good that can be produced in a specified period. 
C) is a payment made by a consumer to a producer. 
D) is a payment made by a producer to a consumer. 
E) is a payment made by the government to a producer.

Question 9

The time spent looking for someone with whom to do business is called

Accepted Answer

A) elasticity of time. 
B) market time. 
C) search activity. 
D) opportunity time. 
E) development time. 
A) elasticity of time. 
B) market time. 
C) search activity. 
D) opportunity time. 
E) development time.

Question 10

The seller pays most of a tax if demand is relatively elastic because

Accepted Answer

A) the buyer can easily substitute to other markets. 
B) the seller can easily substitute to other markets. 
C) the government forces the seller to bear the burden of the tax. 
D) there is a black market for this good. 
E) the seller cannot easily substitute to other goods. 
A) the buyer can easily substitute to other markets. 
B) the seller can easily substitute to other markets. 
C) the government forces the seller to bear the burden of the tax. 
D) there is a black market for this good. 
E) the seller cannot easily substitute to other goods.

Question 11

Consider the effect of a minimum wage imposed in an unregulated labour market.Which of the following statements is correct? i. A minimum wage set above the equilibrium wage increases the quantity of labour supplied.
Ii. A minimum wage set above the equilibrium wage increases the supply of labour.
Iii. A minimum wage set above the equilibrium wage decreases the demand for labour.

Accepted Answer

A) i only 
B) ii only 
C) iii only 
D) ii and iii only 
E) i, ii, and iii 
A) i only 
B) ii only 
C) iii only 
D) ii and iii only 
E) i, ii, and iii

Question 12

Use the figure below to answer the following question.
   
Figure 6.4.1
-Refer to Figure 6.4.1.The graph shows the market for tomatoes.When the government introduces a subsidy for tomatoes at $4 a kilogram, the quantity produced is ________ because ________.

Accepted Answer

A) efficient; marginal social cost is less than marginal social benefit 
B) efficient; marginal social benefit equals marginal social cost 
C) inefficient; marginal social cost is less than marginal social benefit 
D) inefficient; marginal social benefit is less than marginal social cost 
E) inefficient; marginal social cost is zero 
A) efficient; marginal social cost is less than marginal social benefit 
B) efficient; marginal social benefit equals marginal social cost 
C) inefficient; marginal social cost is less than marginal social benefit 
D) inefficient; marginal social benefit is less than marginal social cost 
E) inefficient; marginal social cost is zero

Question 13

Use the figure below to answer the following questions.
   
Figure 6.1.1
-Refer to Figure 6.1.1.Suppose the demand for rental housing is shown by demand curve D₁, and there is a rent ceiling of $150 per room.What is the highest rent that would be charged in a black market?

Accepted Answer

A) $150 a month 
B) $175 a month 
C) $200 a month 
D) $100 a month 
E) cannot be determined from the graph, but we know it is greater than $200 
A) $150 a month 
B) $175 a month 
C) $200 a month 
D) $100 a month 
E) cannot be determined from the graph, but we know it is greater than $200

Question 14

Consider a market for an illegal good.If the government imposes the cost of breaking the law on the buyer of the good, then price will be

Accepted Answer

A) higher and quantity lower compared to imposing the same cost on the seller. 
B) higher and quantity higher compared to imposing the same cost on the seller. 
C) lower and quantity lower compared to imposing the same cost on the seller. 
D) lower and quantity the same compared to imposing the same cost on the seller. 
E) higher and quantity the same compared to imposing the same cost on the seller. 
A) higher and quantity lower compared to imposing the same cost on the seller. 
B) higher and quantity higher compared to imposing the same cost on the seller. 
C) lower and quantity lower compared to imposing the same cost on the seller. 
D) lower and quantity the same compared to imposing the same cost on the seller. 
E) higher and quantity the same compared to imposing the same cost on the seller.

Question 15

Suppose the equilibrium wage is $10 an hour.A minimum wage is a price ________ that will change the quantity of employment if it is set at ________ an hour.

Accepted Answer

A) floor; $12 
B) ceiling; $12 
C) floor; $8 
D) ceiling; $8 
E) floor; $10 
A) floor; $12 
B) ceiling; $12 
C) floor; $8 
D) ceiling; $8 
E) floor; $10

Question 16

Use the figure below to answer the following questions.
   
Figure 6.3.3
-Refer to Figure 6.3.3.Suppose a tax of $1 is imposed.In which market would the seller pay the highest portion of the tax?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) all markets equally 
A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) all markets equally

Question 17

A rent ceiling

Accepted Answer

A) results in a shortage of housing if the rent ceiling is below the equilibrium rent. 
B) results in a surplus of housing if the rent ceiling is above the equilibrium rent. 
C) always results in a shortage of housing. 
D) always results in a surplus of housing. 
E) Both A and B are correct. 
A) results in a shortage of housing if the rent ceiling is below the equilibrium rent. 
B) results in a surplus of housing if the rent ceiling is above the equilibrium rent. 
C) always results in a shortage of housing. 
D) always results in a surplus of housing. 
E) Both A and B are correct.

Question 18

The burden of the tax on buyers is greater the more (1) elastic is demand.
(2) inelastic is demand.
(3) elastic is supply.
(4) inelastic is supply.

Accepted Answer

A) (2)only 
B) (1)and (3) 
C) (1)and (4) 
D) (2)and (3) 
E) (2)and (4) 
A) (2)only 
B) (1)and (3) 
C) (1)and (4) 
D) (2)and (3) 
E) (2)and (4)

Question 19

Use the table below to answer the following questions.
Table 6.5.1
The Market for a Prohibited Good
  
-Refer to Table 6.5.1.If a $2-per-unit cost of breaking the law is imposed on both the buyers and the sellers, the new price is ________ and the new equilibrium quantity is ________ units.

Accepted Answer

A) $8; 400 
B) $8; 300 
C) $7; 300 
D) $9; 300 
E) $8; 200 
A) $8; 400 
B) $8; 300 
C) $7; 300 
D) $9; 300 
E) $8; 200

Question 20

Suppose your province raises the provincial sales tax by 1 percent.You predict that the prices of taxed goods (including the tax)will

Accepted Answer

A) rise by 1 percent. 
B) rise by more than 1 percent. 
C) rise by an amount between zero and 1 percent. 
D) not change at all. 
E) fall by an amount between zero and 1 percent. 
A) rise by 1 percent. 
B) rise by more than 1 percent. 
C) rise by an amount between zero and 1 percent. 
D) not change at all. 
E) fall by an amount between zero and 1 percent.

An effective rent ceiling

If a rent ceiling imposed by the government is greater than the equilibrium rent for housing, then

In a market with an effective production quota,

Use the figure below to answer the following questions. Figure 6.3.1 -Refer to Figure 6.3.1 showing the market for frisbees before and after a tax is imposed.On each frisbee, the buyers' share of the tax is

Daisy and Donald live in a community with rent ceilings.Both are looking for an apartment to rent.Daisy has a job paying $10 per hour and Donald has a job paying $8 per hour.Both value an apartment equally.What is the most likely outcome?

A production quota

The time spent looking for someone with whom to do business is called

The seller pays most of a tax if demand is relatively elastic because

Use the figure below to answer the following question. Figure 6.4.1 -Refer to Figure 6.4.1.The graph shows the market for tomatoes.When the government introduces a subsidy for tomatoes at $4 a kilogram, the quantity produced is because .

Use the figure below to answer the following questions. Figure 6.1.1 -Refer to Figure 6.1.1.Suppose the demand for rental housing is shown by demand curve D₁, and there is a rent ceiling of $150 per room.What is the highest rent that would be charged in a black market?

Consider a market for an illegal good.If the government imposes the cost of breaking the law on the buyer of the good, then price will be

Suppose the equilibrium wage is $10 an hour.A minimum wage is a price that will change the quantity of employment if it is set at an hour.

Use the figure below to answer the following questions. Figure 6.3.3 -Refer to Figure 6.3.3.Suppose a tax of $1 is imposed.In which market would the seller pay the highest portion of the tax?

A rent ceiling

The burden of the tax on buyers is greater the more (1) elastic is demand. (2) inelastic is demand. (3) elastic is supply. (4) inelastic is supply.

Use the table below to answer the following questions. Table 6.5.1 The Market for a Prohibited Good -Refer to Table 6.5.1.If a $2-per-unit cost of breaking the law is imposed on both the buyers and the sellers, the new price is and the new equilibrium quantity is units.

Suppose your province raises the provincial sales tax by 1 percent.You predict that the prices of taxed goods (including the tax)will

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Filters

Exam 6: Government Actions in Markets

An effective rent ceiling

If a rent ceiling imposed by the government is greater than the equilibrium rent for housing, then

In a market with an effective production quota,

Use the figure below to answer the following questions. Figure 6.3.1 -Refer to Figure 6.3.1 showing the market for frisbees before and after a tax is imposed.On each frisbee, the buyers' share of the tax is

Daisy and Donald live in a community with rent ceilings.Both are looking for an apartment to rent.Daisy has a job paying $10 per hour and Donald has a job paying $8 per hour.Both value an apartment equally.What is the most likely outcome?

A production quota

The time spent looking for someone with whom to do business is called

The seller pays most of a tax if demand is relatively elastic because

Use the figure below to answer the following question. Figure 6.4.1 -Refer to Figure 6.4.1.The graph shows the market for tomatoes.When the government introduces a subsidy for tomatoes at $4 a kilogram, the quantity produced is ________ because ________.

Use the figure below to answer the following questions. Figure 6.1.1 -Refer to Figure 6.1.1.Suppose the demand for rental housing is shown by demand curve D₁, and there is a rent ceiling of $150 per room.What is the highest rent that would be charged in a black market?

Consider a market for an illegal good.If the government imposes the cost of breaking the law on the buyer of the good, then price will be

Suppose the equilibrium wage is $10 an hour.A minimum wage is a price ________ that will change the quantity of employment if it is set at ________ an hour.

Use the figure below to answer the following questions. Figure 6.3.3 -Refer to Figure 6.3.3.Suppose a tax of $1 is imposed.In which market would the seller pay the highest portion of the tax?

A rent ceiling

The burden of the tax on buyers is greater the more (1) elastic is demand. (2) inelastic is demand. (3) elastic is supply. (4) inelastic is supply.

Use the table below to answer the following questions. Table 6.5.1 The Market for a Prohibited Good -Refer to Table 6.5.1.If a $2-per-unit cost of breaking the law is imposed on both the buyers and the sellers, the new price is ________ and the new equilibrium quantity is ________ units.

Suppose your province raises the provincial sales tax by 1 percent.You predict that the prices of taxed goods (including the tax)will

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Filters

Use the figure below to answer the following question. Figure 6.4.1 -Refer to Figure 6.4.1.The graph shows the market for tomatoes.When the government introduces a subsidy for tomatoes at $4 a kilogram, the quantity produced is because .

Suppose the equilibrium wage is $10 an hour.A minimum wage is a price that will change the quantity of employment if it is set at an hour.

Use the table below to answer the following questions. Table 6.5.1 The Market for a Prohibited Good -Refer to Table 6.5.1.If a $2-per-unit cost of breaking the law is imposed on both the buyers and the sellers, the new price is and the new equilibrium quantity is units.