Question 1

Most economists are in favor of price controls as a way of allocating resources in the economy.

Accepted Answer

A) True 
 B)False

Question 2

Minimum-wage laws dictate the

Accepted Answer

A) average price employers must pay for labor. 
B) highest price employers may pay for labor. 
C) lowest price employers may pay for labor. 
D) the highest and lowest prices employers may pay for labor. 
A) average price employers must pay for labor. 
B) highest price employers may pay for labor. 
C) lowest price employers may pay for labor. 
D) the highest and lowest prices employers may pay for labor.

Question 3

A tax on the sellers of coffee mugs

Accepted Answer

A) increases the size of the coffee mug market. 
B) decreases the size of the coffee mug market. 
C) has no effect on the size of the coffee mug market. 
D) may increase, decrease, or have no effect on the size of the coffee mug market. 
A) increases the size of the coffee mug market. 
B) decreases the size of the coffee mug market. 
C) has no effect on the size of the coffee mug market. 
D) may increase, decrease, or have no effect on the size of the coffee mug market.

Question 4

An outcome that can result from either a price ceiling or a price floor is

Accepted Answer

A) a surplus in the market. 
B) a shortage in the market. 
C) a nonbinding price control. 
D) long lines of frustrated buyers. 
A) a surplus in the market. 
B) a shortage in the market. 
C) a nonbinding price control. 
D) long lines of frustrated buyers.

Question 5

If a tax is levied on the buyers of dog food, then

Accepted Answer

A) buyers will bear the entire burden of the tax. 
B) sellers will bear the entire burden of the tax. 
C) buyers and sellers will share the burden of the tax. 
D) the government will bear the entire burden of the tax. 
A) buyers will bear the entire burden of the tax. 
B) sellers will bear the entire burden of the tax. 
C) buyers and sellers will share the burden of the tax. 
D) the government will bear the entire burden of the tax.

Question 6

You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct?

Accepted Answer

A) This type of tax is an example of a payback tax. 
B) Your employer is required by law to pay $400 to match the $400 deducted from your check. 
C) The $400 that you paid is the true burden of the tax that falls on you, the employee. 
D) All of the above are correct. 
A) This type of tax is an example of a payback tax. 
B) Your employer is required by law to pay $400 to match the $400 deducted from your check. 
C) The $400 that you paid is the true burden of the tax that falls on you, the employee. 
D) All of the above are correct.

Question 7

A tax burden falls more heavily on the side of the market that is less elastic.

Accepted Answer

A) True 
 B)False

Question 8

Figure 6-19  
-Refer to Figure 6-19. The effective price received by sellers after the tax is imposed is

Accepted Answer

A) $3. 
B) $4. 
C) $5. 
D) $7. 
A) $3. 
B) $4. 
C) $5. 
D) $7.

Question 9

How is the burden of a tax divided? (i)
When the tax is levied on the sellers, the sellers bear a higher proportion of the tax burden.(ii)
When the tax is levied on the buyers, the buyers bear a higher proportion of the tax burden.(iii)
Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear an equal proportion of the tax burden.(iv)
Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear some proportion of the tax burden.

Accepted Answer

A) (i) and (ii) only 
B) (iv) only 
C) (i), (ii), and (iii) only 
D) (i), (ii), and (iv) only 
A) (i) and (ii) only 
B) (iv) only 
C) (i), (ii), and (iii) only 
D) (i), (ii), and (iv) only

Question 10

Which of the following is not a short-run effect of rent control on the housing market?

Accepted Answer

A) reduced rents 
B) a large shortage 
C) a small increase in quantity demanded 
D) a small decrease in quantity supplied 
A) reduced rents 
B) a large shortage 
C) a small increase in quantity demanded 
D) a small decrease in quantity supplied

Question 11

Figure 6-4  
-Refer to Figure 6-4. A government-imposed price of $6 in this market could be an example of a (i)
Binding price ceiling.(ii)
Non-binding price ceiling.(iii)
Binding price floor.(iv)
Non-binding price floor.

Accepted Answer

A) (i) only 
B) (ii) only 
C) (i) and (iv) only 
D) (ii) and (iii) only 
A) (i) only 
B) (ii) only 
C) (i) and (iv) only 
D) (ii) and (iii) only

Question 12

A binding minimum wage creates a shortage of labor.

Accepted Answer

A) True 
 B)False

Question 13

The primary effect of rent control in the short run is to reduce rents.

Accepted Answer

A) True 
 B)False

Question 14

Figure 6-6  
-Refer to Figure 6-6. Which of the following price ceilings would be binding in this market?

Accepted Answer

A) $8 
B) $10 
C) $12 
D) $14 
A) $8 
B) $10 
C) $12 
D) $14

Question 15

The quantity sold in a market will decrease if the government decreases a

Accepted Answer

A) binding price floor in that market. 
B) binding price ceiling in that market. 
C) tax on the good sold in that market. 
D) All of the above are correct. 
A) binding price floor in that market. 
B) binding price ceiling in that market. 
C) tax on the good sold in that market. 
D) All of the above are correct.

Question 16

Figure 6-21  
-Refer to Figure 6-21. 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

Since half of the FICA tax is paid by firms and the other half is paid by workers, the burden of the tax must fall equally on firms and workers.

Accepted Answer

A) True 
 B)False

Question 18

If a tax is levied on the buyers of a product, then the demand curve will

Accepted Answer

A) not shift. 
B) shift down. 
C) shift up. 
D) become flatter. 
A) not shift. 
B) shift down. 
C) shift up. 
D) become flatter.

Question 19

Figure 6-13  
-Refer to Figure 6-13. In this market, a minimum wage of $7.25 is

Accepted Answer

A) binding and creates a labor shortage. 
B) binding and creates unemployment. 
C) nonbinding and creates a labor shortage. 
D) nonbinding and creates neither a labor shortage nor unemployment. 
A) binding and creates a labor shortage. 
B) binding and creates unemployment. 
C) nonbinding and creates a labor shortage. 
D) nonbinding and creates neither a labor shortage nor unemployment.

Question 20

Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

Accepted Answer

A) demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20. 
B) demand curve will shift upward by $20, and the price paid by buyers will decrease by $20. 
C) supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20. 
D) supply curve will shift downward by $20, and the effective price received by sellers will increase by $20. 
A) demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20. 
B) demand curve will shift upward by $20, and the price paid by buyers will decrease by $20. 
C) supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20. 
D) supply curve will shift downward by $20, and the effective price received by sellers will increase by $20.

Exam 6: Supply, Demand, and Government Policies

Most economists are in favor of price controls as a way of allocating resources in the economy.

Minimum-wage laws dictate the

A tax on the sellers of coffee mugs

An outcome that can result from either a price ceiling or a price floor is

If a tax is levied on the buyers of dog food, then

You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct?

A tax burden falls more heavily on the side of the market that is less elastic.

Figure 6-19 -Refer to Figure 6-19. The effective price received by sellers after the tax is imposed is

Which of the following is not a short-run effect of rent control on the housing market?

Figure 6-4 -Refer to Figure 6-4. A government-imposed price of $6 in this market could be an example of a (i) Binding price ceiling.(ii) Non-binding price ceiling.(iii) Binding price floor.(iv) Non-binding price floor.

A binding minimum wage creates a shortage of labor.

The primary effect of rent control in the short run is to reduce rents.

Figure 6-6 -Refer to Figure 6-6. Which of the following price ceilings would be binding in this market?

The quantity sold in a market will decrease if the government decreases a

Since half of the FICA tax is paid by firms and the other half is paid by workers, the burden of the tax must fall equally on firms and workers.

If a tax is levied on the buyers of a product, then the demand curve will

Figure 6-13 -Refer to Figure 6-13. In this market, a minimum wage of $7.25 is

Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then 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

Filters