Question 1

Figure 6-21  
-Refer to Figure 6-21. The price that buyers pay after the tax is imposed is

Accepted Answer

A) $5. 
B) $6. 
C) $7. 
D) $8. 
A) $5. 
B) $6. 
C) $7. 
D) $8.

Question 2

To be binding, a price ceiling must be set above the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 3

Figure 6-3
  
-Refer to Figure 6-3. In panel (b), 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 4

The burden of a luxury tax falls

Accepted Answer

A) more on the rich than on the middle class. 
B) more on the poor than on the rich. 
C) more on the middle class than on the rich. 
D) equally on the rich, the middle class, and the poor. 
A) more on the rich than on the middle class. 
B) more on the poor than on the rich. 
C) more on the middle class than on the rich. 
D) equally on the rich, the middle class, and the poor.

Question 5

If a price ceiling is not binding, then

Accepted Answer

A) the equilibrium price is above the price ceiling. 
B) the equilibrium price is below the price ceiling. 
C) it has no legal enforcement mechanism. 
D) None of the above is correct because all price ceilings must be binding. 
A) the equilibrium price is above the price ceiling. 
B) the equilibrium price is below the price ceiling. 
C) it has no legal enforcement mechanism. 
D) None of the above is correct because all price ceilings must be binding.

Question 6

Although lawmakers legislated a fifty-fifty division of the payment of the FICA tax,

Accepted Answer

A) the actual tax incidence is unaffected by the legislated tax incidence. 
B) the employer now is required by law to pay more than 50 percent of the tax. 
C) the employee now is required by law to pay more than 50 percent of the tax. 
D) employers are no longer required by law to pay any portion of the tax. 
A) the actual tax incidence is unaffected by the legislated tax incidence. 
B) the employer now is required by law to pay more than 50 percent of the tax. 
C) the employee now is required by law to pay more than 50 percent of the tax. 
D) employers are no longer required by law to pay any portion of the tax.

Question 7

Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

Accepted Answer

A) True 
 B)False

Question 8

Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of

Accepted Answer

A) both taxes would fall more heavily on the buyers than on the sellers. 
B) the macaroni tax would fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax would fall more heavily on the buyers than on the sellers. 
C) the macaroni tax would fall more heavily on the buyers than on the sellers, and the burden of the cigarette tax would fall more heavily on the sellers than on the buyers. 
D) both taxes would fall more heavily on the sellers than on the buyers. 
A) both taxes would fall more heavily on the buyers than on the sellers. 
B) the macaroni tax would fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax would fall more heavily on the buyers than on the sellers. 
C) the macaroni tax would fall more heavily on the buyers than on the sellers, and the burden of the cigarette tax would fall more heavily on the sellers than on the buyers. 
D) both taxes would fall more heavily on the sellers than on the buyers.

Question 9

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

Accepted Answer

A) surplus of 40 units. 
B) surplus of 85 units. 
C) shortage of 45 units. 
D) shortage of 85 units. 
A) surplus of 40 units. 
B) surplus of 85 units. 
C) shortage of 45 units. 
D) shortage of 85 units.

Question 10

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Accepted Answer

A) True 
 B)False

Question 11

When a tax is imposed on the sellers of a good, the supply curve shifts

Accepted Answer

A) upward by the amount of the tax. 
B) downward by the amount of the tax. 
C) upward by less than the amount of the tax. 
D) downward by less than the amount of the tax. 
A) upward by the amount of the tax. 
B) downward by the amount of the tax. 
C) upward by less than the amount of the tax. 
D) downward by less than the amount of the tax.

Question 12

Which of the following is correct?

Accepted Answer

A) Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage raises the average wage of teenagers by 10 percent. 
B) The drop in teenage employment caused by a 10 percent increase in the minimum wage is not significant. 
C) The minimum wage is more often binding for teenagers than for other members of the labor force. 
D) All firms consistently enforce minimum-wage laws. 
A) Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage raises the average wage of teenagers by 10 percent. 
B) The drop in teenage employment caused by a 10 percent increase in the minimum wage is not significant. 
C) The minimum wage is more often binding for teenagers than for other members of the labor force. 
D) All firms consistently enforce minimum-wage laws.

Question 13

Table 6-3
The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $2 above the equilibrium price in this market. $$\begin{array} { | c | c | c } 
\hline \text { price } & \begin{array} { c } 
\text { Quantity } \
\text { Denanded }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Suppplied }
\end{array} \
\hline \$ 0 & 15 & 0 \
\hline \$ 1 & 13 & 3 \
\hline \$ 2 & 11 & 6 \
\hline \$ 3 & 9 & 9 \
\hline \$ 4 & 7 & 12 \
\hline \$ 5 & 5 & 15 \
\hline \$ 6 & 3 & 18 \
\hline
\end{array}$$
-Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is

Accepted Answer

A) $2. 
B) $3. 
C) $4. 
D) $5. 
A) $2. 
B) $3. 
C) $4. 
D) $5.

Question 14

A price ceiling set above the equilibrium price is not binding.

Accepted Answer

A) True 
 B)False

Question 15

Figure 6-7  
-Refer to Figure 6-7. Which of the following price controls would cause a shortage of 20 units of the good?

Accepted Answer

A) a price ceiling set at $4 
B) a price ceiling set at $5 
C) a price floor set at $7 
D) a price floor set at $8 
A) a price ceiling set at $4 
B) a price ceiling set at $5 
C) a price floor set at $7 
D) a price floor set at $8

Question 16

If a binding price floor is imposed on the video game market, then

Accepted Answer

A) the demand for video games will decrease. 
B) the supply of video games will increase. 
C) a surplus of video games will develop. 
D) All of the above are correct. 
A) the demand for video games will decrease. 
B) the supply of video games will increase. 
C) a surplus of video games will develop. 
D) All of the above are correct.

Question 17

In the housing market, supply and demand are

Accepted Answer

A) more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
B) more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
C) more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
D) more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
A) more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
B) more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
C) more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
D) more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.

Question 18

Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

Accepted Answer

A) True 
 B)False

Question 19

The Earned Income Tax Credit is an example of a

Accepted Answer

A) minimum-wage law. 
B) price ceiling. 
C) wage subsidy. 
D) rent subsidy. 
A) minimum-wage law. 
B) price ceiling. 
C) wage subsidy. 
D) rent subsidy.

Question 20

Figure 6-27  
-Refer to Figure 6-27. If the government places a $2 tax in the market, the buyer pays $6.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

Figure 6-21 -Refer to Figure 6-21. The price that buyers pay after the tax is imposed is

To be binding, a price ceiling must be set above the equilibrium price.

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

The burden of a luxury tax falls

If a price ceiling is not binding, then

Although lawmakers legislated a fifty-fifty division of the payment of the FICA tax,

Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of

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

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

When a tax is imposed on the sellers of a good, the supply curve shifts

Which of the following is correct?

A price ceiling set above the equilibrium price is not binding.

Figure 6-7 -Refer to Figure 6-7. Which of the following price controls would cause a shortage of 20 units of the good?

If a binding price floor is imposed on the video game market, then

In the housing market, supply and demand are

Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

The Earned Income Tax Credit is an example of a

Figure 6-27 -Refer to Figure 6-27. If the government places a $2 tax in the market, the buyer pays $6.

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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