Question 1

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

Accepted Answer

A) shortage of 2,250 workers. 
B) shortage of 4,500 workers. 
C) surplus of 2,250 workers. 
D) surplus of 4,500 workers. 
A) shortage of 2,250 workers. 
B) shortage of 4,500 workers. 
C) surplus of 2,250 workers. 
D) surplus of 4,500 workers.

Question 2

If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

Accepted Answer

A) True 
 B)False

Question 3

A key lesson from the payroll tax is that the

Accepted Answer

A) tax is a tax solely on workers. 
B) tax is a tax solely on firms that hire workers. 
C) tax eliminates any wedge that might exist between the wage that firms pay and the wage that workers receive. 
D) true burden of a tax cannot be legislated. 
A) tax is a tax solely on workers. 
B) tax is a tax solely on firms that hire workers. 
C) tax eliminates any wedge that might exist between the wage that firms pay and the wage that workers receive. 
D) true burden of a tax cannot be legislated.

Question 4

A binding minimum wage creates a surplus of labor.

Accepted Answer

A) True 
 B)False

Question 5

When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

Accepted Answer

A) less than $0.50. 
B) $0.50. 
C) between $0.50 and $1. 
D) $1. 
A) less than $0.50. 
B) $0.50. 
C) between $0.50 and $1. 
D) $1.

Question 7

In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

Accepted Answer

A) True 
 B)False

Question 8

Figure 6-9  
-Refer to Figure 6-9. At which price would a price floor be nonbinding?

Accepted Answer

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

Question 9

Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy. Further, suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle. Which of the following statements is correct?

Accepted Answer

A) This tax causes the demand curve for tequila to shift downward by $1.00 at each quantity of tequila. 
B) The price paid by buyers is $0.20 per bottle more than it was before the tax. 
C) Eighty percent of the burden of the tax falls on sellers. 
D) All of the above are correct. 
A) This tax causes the demand curve for tequila to shift downward by $1.00 at each quantity of tequila. 
B) The price paid by buyers is $0.20 per bottle more than it was before the tax. 
C) Eighty percent of the burden of the tax falls on sellers. 
D) All of the above are correct.

Question 10

Figure 6-11  
-Refer to Figure 6-11. If the government imposes a price ceiling at $3, it would be

Accepted Answer

A) binding if market demand is Demand A or Demand B. 
B) non-binding if market demand is Demand A or Demand B. 
C) binding if market demand is Demand A and non-binding if market demand is Demand B. 
D) non-binding if market demand is Demand A and binding if market demand is Demand B. 
A) binding if market demand is Demand A or Demand B. 
B) non-binding if market demand is Demand A or Demand B. 
C) binding if market demand is Demand A and non-binding if market demand is Demand B. 
D) non-binding if market demand is Demand A and binding if market demand is Demand B.

Question 11

A tax on sellers and an increase in input prices affect the supply curve in the same way.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) $6 
B) $8 
C) $10 
D) $12 
A) $6 
B) $8 
C) $10 
D) $12

Question 13

The price received by sellers in a market will decrease if the government

Accepted Answer

A) increases a binding price floor in that market. 
B) increases a binding price ceiling in that market. 
C) decreases a tax on the good sold in that market. 
D) None of the above is correct. 
A) increases a binding price floor in that market. 
B) increases a binding price ceiling in that market. 
C) decreases a tax on the good sold in that market. 
D) None of the above is correct.

Question 14

Figure 6-9  
-Refer to Figure 6-9. A price ceiling set at

Accepted Answer

A) $4 will be binding and will result in a shortage of 3 units. 
B) $4 will be binding and will result in a shortage of 6 units. 
C) $7 will be binding and will result in a surplus of 6 units. 
D) $7 will be binding and will result in a surplus of 12 units. 
A) $4 will be binding and will result in a shortage of 3 units. 
B) $4 will be binding and will result in a shortage of 6 units. 
C) $7 will be binding and will result in a surplus of 6 units. 
D) $7 will be binding and will result in a surplus of 12 units.

Question 15

A $0.10 tax levied on the sellers of chocolate bars will cause the

Accepted Answer

A) supply curve for chocolate bars to shift down by $0.10. 
B) supply curve for chocolate bars to shift up by $0.10. 
C) demand curve for chocolate bars to shift down by $0.10. 
D) demand curve for chocolate bars to shift up by $0.10. 
A) supply curve for chocolate bars to shift down by $0.10. 
B) supply curve for chocolate bars to shift up by $0.10. 
C) demand curve for chocolate bars to shift down by $0.10. 
D) demand curve for chocolate bars to shift up by $0.10.

Question 16

Buyers and sellers always share the burden of a tax equally.

Accepted Answer

A) True 
 B)False

Question 17

Unlike minimum wage laws, wage subsidies

Accepted Answer

A) discourage firms from hiring the working poor. 
B) cause unemployment. 
C) help only wealthy workers. 
D) raise the living standards of the working poor without creating unemployment. 
A) discourage firms from hiring the working poor. 
B) cause unemployment. 
C) help only wealthy workers. 
D) raise the living standards of the working poor without creating unemployment.

Question 18

Figure 6-14
The vertical distance between points A and B represents the tax in the market.  
-Refer to Figure 6-14. The per-unit burden of the tax on buyers is

Accepted Answer

A) $6. 
B) $8. 
C) $14. 
D) $24. 
A) $6. 
B) $8. 
C) $14. 
D) $24.

Question 19

If a tax is levied on the sellers of a product, then the supply curve will

Accepted Answer

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

Question 20

The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

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

If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

A key lesson from the payroll tax is that the

A binding minimum wage creates a surplus of labor.

When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

Figure 6-9 -Refer to Figure 6-9. At which price would a price floor be nonbinding?

Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy. Further, suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle. Which of the following statements is correct?

Figure 6-11 -Refer to Figure 6-11. If the government imposes a price ceiling at $3, it would be

A tax on sellers and an increase in input prices affect the supply curve in the same way.

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

The price received by sellers in a market will decrease if the government

Figure 6-9 -Refer to Figure 6-9. A price ceiling set at

A $0.10 tax levied on the sellers of chocolate bars will cause the

Buyers and sellers always share the burden of a tax equally.

Unlike minimum wage laws, wage subsidies

Figure 6-14 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-14. The per-unit burden of the tax on buyers is

If a tax is levied on the sellers of a product, then the supply curve will

The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.

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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