Question 1

When a binding price floor is imposed on a market,

Accepted Answer

A) price no longer serves as a rationing device. 
B) the quantity supplied at the price floor exceeds the quantity that would have been supplied without the price floor. 
C) only some sellers benefit. 
D) All of the above are correct. 
A) price no longer serves as a rationing device. 
B) the quantity supplied at the price floor exceeds the quantity that would have been supplied without the price floor. 
C) only some sellers benefit. 
D) All of the above are correct.

Question 2

A tax on sellers shifts the supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 3

The long-run effects of rent controls are a good illustration of the principle that

Accepted Answer

A) society faces a short-run tradeoff between unemployment and inflation. 
B) the cost of something is what you give up to get it. 
C) people respond to incentives. 
D) government can sometimes improve on market outcomes. 
A) society faces a short-run tradeoff between unemployment and inflation. 
B) the cost of something is what you give up to get it. 
C) people respond to incentives. 
D) government can sometimes improve on market outcomes.

Question 4

Figure 6-26  
-Refer to Figure 6-26. A price ceiling set at $70 would create a shortage of 40 units.

Accepted Answer

A) True 
 B)False

Question 5

Figure 6-2  
-Refer to Figure 6-2. The price ceiling

Accepted Answer

A) causes a shortage of 45 units of the good. 
B) makes it necessary for sellers to ration the good. 
C) is not binding because it is set below the equilibrium price. 
D) Both a) and b) are correct. 
A) causes a shortage of 45 units of the good. 
B) makes it necessary for sellers to ration the good. 
C) is not binding because it is set below the equilibrium price. 
D) Both a) and b) are correct.

Question 6

When a binding price ceiling is imposed on a market to benefit buyers,

Accepted Answer

A) every buyer in the market benefits. 
B) every buyer and seller in the market benefits. 
C) every buyer who wants to buy the good will be able to do so, but only if he waits in long lines. 
D) some buyers will not be able to buy any amount of the good. 
A) every buyer in the market benefits. 
B) every buyer and seller in the market benefits. 
C) every buyer who wants to buy the good will be able to do so, but only if he waits in long lines. 
D) some buyers will not be able to buy any amount of the good.

Question 7

If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

Accepted Answer

A) True 
 B)False

Question 8

In a free, competitive market, what is the rationing mechanism?

Accepted Answer

A) seller bias 
B) buyer bias 
C) government law 
D) price 
A) seller bias 
B) buyer bias 
C) government law 
D) price

Question 9

Figure 6-17  
-Refer to Figure 6-17. What is the amount of the tax per unit?

Accepted Answer

A) $1 
B) $2 
C) $3 
D) $4 
A) $1 
B) $2 
C) $3 
D) $4

Question 10

Rent control may lead to lower rents for those who find housing, but the quality of the housing may also be lower.

Accepted Answer

A) True 
 B)False

Question 11

A price ceiling is always a binding price control, whereas a price floor may be either binding or not binding.

Accepted Answer

A) True 
 B)False

Question 12

Figure 6-2  
-Refer to Figure 6-2. The price ceiling causes quantity

Accepted Answer

A) supplied to exceed quantity demanded by 45 units. 
B) supplied to exceed quantity demanded by 85 units. 
C) demanded to exceed quantity supplied by 45 units. 
D) demanded to exceed quantity supplied by 85 units. 
A) supplied to exceed quantity demanded by 45 units. 
B) supplied to exceed quantity demanded by 85 units. 
C) demanded to exceed quantity supplied by 45 units. 
D) demanded to exceed quantity supplied by 85 units.

Question 13

Not all sellers benefit from a binding price floor.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Figure 6-18  
-Refer to Figure 6-18. The equilibrium price in the market before the tax is imposed is

Accepted Answer

A) $3.50. 
B) $5. 
C) $6. 
D) $7. 
A) $3.50. 
B) $5. 
C) $6. 
D) $7.

Question 16

Figure 6-3
  
-Refer to Figure 6-3. In panel (a), there will be

Accepted Answer

A) a shortage of wheat. 
B) equilibrium in the market. 
C) a surplus of wheat. 
D) lines of people waiting to buy wheat. 
A) a shortage of wheat. 
B) equilibrium in the market. 
C) a surplus of wheat. 
D) lines of people waiting to buy wheat.

Question 17

Figure 6-18  
-Refer to Figure 6-18. The effective price sellers receive after the tax is imposed is

Accepted Answer

A) $2.50. 
B) $3.50. 
C) $5.00. 
D) $6.00. 
A) $2.50. 
B) $3.50. 
C) $5.00. 
D) $6.00.

Question 18

Suppose the government imposes a 25-cent tax on the buyers of incandescent light bulbs. Which of the following is not correct? The tax would

Accepted Answer

A) shift the demand curve downward by 25 cents. 
B) lower the equilibrium price by 25 cents. 
C) reduce the equilibrium quantity. 
D) discourage market activity. 
A) shift the demand curve downward by 25 cents. 
B) lower the equilibrium price by 25 cents. 
C) reduce the equilibrium quantity. 
D) discourage market activity.

Question 19

Suppose the government imposes a 20-cent tax on the sellers of iced tea. Which of the following is not correct? The tax would

Accepted Answer

A) shift the supply curve upward by 20 cents. 
B) raise the equilibrium price by 20 cents. 
C) reduce the equilibrium quantity. 
D) discourage market activity. 
A) shift the supply curve upward by 20 cents. 
B) raise the equilibrium price by 20 cents. 
C) reduce the equilibrium quantity. 
D) discourage market activity.

Question 20

When a tax is placed on the sellers of energy drinks, the

Accepted Answer

A) sellers bear the entire burden of the tax. 
B) buyers bear the entire burden of the tax. 
C) burden of the tax will be always be equally divided between the buyers and the sellers. 
D) burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal. 
A) sellers bear the entire burden of the tax. 
B) buyers bear the entire burden of the tax. 
C) burden of the tax will be always be equally divided between the buyers and the sellers. 
D) burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

Exam 6: Supply, Demand, and Government Policies

When a binding price floor is imposed on a market,

A tax on sellers shifts the supply curve to the left.

The long-run effects of rent controls are a good illustration of the principle that

Figure 6-26 -Refer to Figure 6-26. A price ceiling set at $70 would create a shortage of 40 units.

Figure 6-2 -Refer to Figure 6-2. The price ceiling

When a binding price ceiling is imposed on a market to benefit buyers,

If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

In a free, competitive market, what is the rationing mechanism?

Figure 6-17 -Refer to Figure 6-17. What is the amount of the tax per unit?

Rent control may lead to lower rents for those who find housing, but the quality of the housing may also be lower.

A price ceiling is always a binding price control, whereas a price floor may be either binding or not binding.

Figure 6-2 -Refer to Figure 6-2. The price ceiling causes quantity

Not all sellers benefit from a binding price floor.

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.

Figure 6-18 -Refer to Figure 6-18. The equilibrium price in the market before the tax is imposed is

Figure 6-3 -Refer to Figure 6-3. In panel (a), there will be

Figure 6-18 -Refer to Figure 6-18. The effective price sellers receive after the tax is imposed is

Suppose the government imposes a 25-cent tax on the buyers of incandescent light bulbs. Which of the following is not correct? The tax would

Suppose the government imposes a 20-cent tax on the sellers of iced tea. Which of the following is not correct? The tax would

When a tax is placed on the sellers of energy drinks, the

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

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 Macroeconomic Models

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

Six Debates Over Macroeconomic Policy

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