Question 1

Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.

Accepted Answer

A) True 
 B)False

Question 2

A tax of $1 on buyers shifts the demand curve downward by exactly $1.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Not all sellers benefit from a binding price floor.

Accepted Answer

A) True 
 B)False

Question 5

Price floors are typically imposed to benefit buyers.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that the demand for picture frames is inelastic and the supply of picture frames is elastic.A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers 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

Figure 6-17  
-Refer to Figure 6-17.A price floor set at $60 would result in a surplus of 20 units.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  the quantity of video games demanded will decrease. 
B)  the quantity of video games supplied will increase. 
C)  a surplus of video games will develop. 
D)  All of the above are correct. 
A)  the quantity of video games demanded will decrease. 
B)  the quantity of video games supplied will increase. 
C)  a surplus of video games will develop. 
D)  All of the above are correct.

Question 9

Suppose the government has imposed a price ceiling on televisions.Which of the following events could transform the price ceiling from one that is not binding into one that is binding?

Accepted Answer

A)  Firms expect the price of televisions to fall in the future. 
B)  The number of firms selling televisions decreases. 
C)  Consumers' income decreases,and televisions are a normal good. 
D)  The number of consumers buying televisions decreases. 
A)  Firms expect the price of televisions to fall in the future. 
B)  The number of firms selling televisions decreases. 
C)  Consumers' income decreases,and televisions are a normal good. 
D)  The number of consumers buying televisions decreases.

Question 10

Rent control

Accepted Answer

A)  serves as an example of how a social problem can be alleviated or even solved by government policies. 
B)  serves as an example of a price ceiling. 
C)  is regarded by most economists as an efficient way of helping the poor. 
D)  is the most efficient way to allocate scarce housing resources. 
A)  serves as an example of how a social problem can be alleviated or even solved by government policies. 
B)  serves as an example of a price ceiling. 
C)  is regarded by most economists as an efficient way of helping the poor. 
D)  is the most efficient way to allocate scarce housing resources.

Question 11

A tax of $1 on sellers shifts the supply curve upward by exactly $1.

Accepted Answer

A) True 
 B)False

Question 12

Table 6-1
  
-Refer to Table 6-1.Suppose the government imposes a price ceiling of $1 on this market.What will be the size of the shortage in this market?

Accepted Answer

A)  0 units 
B)  2 units 
C)  8 units 
D)  10 units 
A)  0 units 
B)  2 units 
C)  8 units 
D)  10 units

Question 13

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 14

Figure 6-8  
-Refer to Figure 6-8.When the price ceiling applies in this market and the supply curve for gasoline shifts from S1 to S2,the resulting quantity of gasoline that is bought and sold is

Accepted Answer

A)  less than Q3. 
B)  Q3. 
C)  between Q1 and Q3. 
D)  at least Q1. 
A)  less than Q3. 
B)  Q3. 
C)  between Q1 and Q3. 
D)  at least Q1.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Figure 6-4  
-Refer to Figure 6-4.Suppose a price ceiling of $5 is imposed on this market.As a result,

Accepted Answer

A)  the quantity of the good supplied decreases by 20 units. 
B)  the demand curve shifts to the left so as to now pass through the point (quantity = 40,price = $5). 
C)  buyers' total expenditure on the good decreases by $100. 
D)  the price of the good continues to serve as the rationing mechanism. 
A)  the quantity of the good supplied decreases by 20 units. 
B)  the demand curve shifts to the left so as to now pass through the point (quantity = 40,price = $5). 
C)  buyers' total expenditure on the good decreases by $100. 
D)  the price of the good continues to serve as the rationing mechanism.

Question 17

In the labor markets,workers determine the supply of labor and firms determine the demand.

Accepted Answer

A) True 
 B)False

Question 18

Using the graph shown,answer the following questions.
4.Using the graph shown,answer the following questions.
a.What was the equilibrium price in this market before the tax?
b.What is the amount of the tax?
c.How much of the tax will the buyers pay?
d.How much of the tax will the sellers pay?
e.How much will the buyer pay for the product after the tax is imposed?
f.How much will the seller receive after the tax is imposed?
g.As a result of the tax,what has happened to the level of market activity?

Accepted Answer

a.
$5
b.
$3
c.
$2
d.
$1
e.
$7

Question 19

Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

Accepted Answer

A) True 
 B)False

Question 20

Figure 6-9  
-Refer to Figure 6-9.The amount of the tax per unit is

Accepted Answer

A)  $1. 
B)  $1.50. 
C)  $2. 
D)  $3. 
A)  $1. 
B)  $1.50. 
C)  $2. 
D)  $3.

Exam 6: Supply, Demand, and Government Policies

Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.

A tax of $1 on buyers shifts the demand curve downward by exactly $1.

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

Not all sellers benefit from a binding price floor.

Price floors are typically imposed to benefit buyers.

Suppose that the demand for picture frames is inelastic and the supply of picture frames is elastic.A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by

Figure 6-17 -Refer to Figure 6-17.A price floor set at $60 would result in a surplus of 20 units.

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

Suppose the government has imposed a price ceiling on televisions.Which of the following events could transform the price ceiling from one that is not binding into one that is binding?

Rent control

A tax of $1 on sellers shifts the supply curve upward by exactly $1.

Table 6-1 -Refer to Table 6-1.Suppose the government imposes a price ceiling of $1 on this market.What will be the size of the shortage in this market?

A key lesson from the payroll tax is that the

Figure 6-8 -Refer to Figure 6-8.When the price ceiling applies in this market and the supply curve for gasoline shifts from S1 to S2,the resulting quantity of gasoline that is bought and sold is

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

Figure 6-4 -Refer to Figure 6-4.Suppose a price ceiling of $5 is imposed on this market.As a result,

In the labor markets,workers determine the supply of labor and firms determine the demand.

Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

Figure 6-9 -Refer to Figure 6-9.The amount of the tax per unit is

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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

Filters

Figure 6-8 -Refer to Figure 6-8.When the price ceiling applies in this market and the supply curve for gasoline shifts from S₁ to S₂,the resulting quantity of gasoline that is bought and sold is