Question 1

Economists suggest that price controls should not be enacted because they believe that the market price of a good or service is efficient.

Accepted Answer

A) True 
 B)False

Question 2

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 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 living standards of the working poor without creating unemployment

Question 3

Using a supply-demand diagram, show a labour market with a binding minimum wage. Now use the diagram to show those who are helped by the minimum wage and those who are hurt by the minimum wage.

Accepted Answer

Those helped by the minimum wage are the

Question 4

Why are economists nearly always opposed to price controls?

Accepted Answer

Economists oppose price controls because

Question 5

Graph 6-2
  
-According to Graph 6-2, if the government imposes a binding price ceiling in this market at a price of $5.00, the result will be a:

Accepted Answer

A)  shortage of 20 units 
B)  shortage of 30 units 
C)  surplus of 20 units 
D)  surplus of 40 units 
A)  shortage of 20 units 
B)  shortage of 30 units 
C)  surplus of 20 units 
D)  surplus of 40 units

Question 6

Price controls are an effective way of allocating resources in an economy. For this reason there is widespread support for price controls among economists.

Accepted Answer

A) True 
 B)False

Question 7

Graph 6-8
  
-According to Graph 6-8, the amount of the tax that sellers would pay would be:

Accepted Answer

A)  $1.00 
B)  $1.50 
C)  $2.50 
D)  $3.00 
A)  $1.00 
B)  $1.50 
C)  $2.50 
D)  $3.00

Question 8

Suppose that the equilibrium wage rate in an industry is $10 per hour. The government then sets a minimum wage of $12 per hour. The result will be a surplus of labour supply.

Accepted Answer

A) True 
 B)False

Question 9

Graph 6-7
  
-According to Graph 6-7, the amount of the tax imposed in this market is:

Accepted Answer

A)  $1.00 
B)  $1.50 
C)  $2.50 
D)  $3.00 
A)  $1.00 
B)  $1.50 
C)  $2.50 
D)  $3.00

Question 10

The effect of a tax on a product is always to reduce the total size of its market.

Accepted Answer

A) True 
 B)False

Question 11

The incidence of a tax is determined by whether the tax is imposed on the seller or the buyer.

Accepted Answer

A) True 
 B)False

Question 12

When analysing government policies, supply and demand are not very useful tools.

Accepted Answer

A) True 
 B)False

Question 13

Price controls often help those in need.

Accepted Answer

A) True 
 B)False

Question 14

Lawmakers can decide whether the buyer or the seller must send a tax to the government but they cannot legislate the true burden of a tax.

Accepted Answer

A) True 
 B)False

Question 15

Using the graph below, analyse the effect a $70 price floor would have on the market for tennis shoes. Would this be a binding price floor? Why would policymakers choose to impose a price floor?

Accepted Answer

For this example, a $70 price floor woul

Question 16

What are common arguments offered for and against the minimum wage?

Accepted Answer

Advocates of the minimum wage often reco

Question 17

The minimum wage is an example of:

Accepted Answer

A)  a price ceiling 
B)  a free-market process 
C)  a price floor 
D)  an efficient labour allocation mechanism 
A)  a price ceiling 
B)  a free-market process 
C)  a price floor 
D)  an efficient labour allocation mechanism

Question 18

Taxes are employed by policy makers for two reasons. The first is to raise revenue. The second is to adjust market outcomes.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is the most correct statement about tax burdens?

Accepted Answer

A)  a tax burden falls most heavily on the side of the market that is elastic 
B)  a tax burden falls most heavily on the side of the market that is inelastic 
C)  a tax burden falls most heavily on the side of the market that is closer to unit elastic 
D)  a tax burden is distributed independently of relative elasticities of supply and demand 
A)  a tax burden falls most heavily on the side of the market that is elastic 
B)  a tax burden falls most heavily on the side of the market that is inelastic 
C)  a tax burden falls most heavily on the side of the market that is closer to unit elastic 
D)  a tax burden is distributed independently of relative elasticities of supply and demand

Question 20

If a tax is imposed on a market with inelastic demand and elastic supply, sellers will bear most of the burden of the tax.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand and Government Policies

Economists suggest that price controls should not be enacted because they believe that the market price of a good or service is efficient.

Unlike minimum wage laws, wage subsidies:

Using a supply-demand diagram, show a labour market with a binding minimum wage. Now use the diagram to show those who are helped by the minimum wage and those who are hurt by the minimum wage.

Why are economists nearly always opposed to price controls?

Graph 6-2 -According to Graph 6-2, if the government imposes a binding price ceiling in this market at a price of $5.00, the result will be a:

Price controls are an effective way of allocating resources in an economy. For this reason there is widespread support for price controls among economists.

Graph 6-8 -According to Graph 6-8, the amount of the tax that sellers would pay would be:

Suppose that the equilibrium wage rate in an industry is $10 per hour. The government then sets a minimum wage of $12 per hour. The result will be a surplus of labour supply.

Graph 6-7 -According to Graph 6-7, the amount of the tax imposed in this market is:

The effect of a tax on a product is always to reduce the total size of its market.

The incidence of a tax is determined by whether the tax is imposed on the seller or the buyer.

When analysing government policies, supply and demand are not very useful tools.

Price controls often help those in need.

Lawmakers can decide whether the buyer or the seller must send a tax to the government but they cannot legislate the true burden of a tax.

Using the graph below, analyse the effect a $70 price floor would have on the market for tennis shoes. Would this be a binding price floor? Why would policymakers choose to impose a price floor?

What are common arguments offered for and against the minimum wage?

The minimum wage is an example of:

Taxes are employed by policy makers for two reasons. The first is to raise revenue. The second is to adjust market outcomes.

Which of the following is the most correct statement about tax burdens?

If a tax is imposed on a market with inelastic demand and elastic supply, sellers will bear most of the burden of the tax.

Ten Lessons From 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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

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

Five Debates Over Macroeconomic Policy

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