Question 1

One common example of a price ceiling is rent control.

Accepted Answer

A) True 
 B)False

Question 2

In the United States,before OPEC increased the price of crude oil in 1973,there was

Accepted Answer

A)  no price ceiling on gasoline. 
B)  a nonbinding price ceiling on gasoline. 
C)  a binding price ceiling on gasoline. 
D)  a nonbinding price floor on gasoline. 
A)  no price ceiling on gasoline. 
B)  a nonbinding price ceiling on gasoline. 
C)  a binding price ceiling on gasoline. 
D)  a nonbinding price floor on gasoline.

Question 3

Which of the following was not a result of the luxury tax imposed by Congress in 1990?

Accepted Answer

A)  The larger part of the tax burden fell on sellers. 
B)  A larger part of the tax burden fell on the middle class than on the rich. 
C)  Even the wealthy demanded fewer luxury goods. 
D)  The tax was never repealed or even modified. 
A)  The larger part of the tax burden fell on sellers. 
B)  A larger part of the tax burden fell on the middle class than on the rich. 
C)  Even the wealthy demanded fewer luxury goods. 
D)  The tax was never repealed or even modified.

Question 4

Figure 6-1
Panel (a)Panel (b)    
-Refer to Figure 6-1.The situation in panel (a)may be described as one in which

Accepted Answer

A)  the price ceiling is not binding. 
B)  the price ceiling really functions as a price floor. 
C)  a surplus of the good will be observed. 
D)  Both (b)and (c)are correct. 
A)  the price ceiling is not binding. 
B)  the price ceiling really functions as a price floor. 
C)  a surplus of the good will be observed. 
D)  Both (b)and (c)are correct.

Question 5

A tax on sellers shifts the supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 6

A price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded.

Accepted Answer

A) True 
 B)False

Question 7

When policymakers set prices by legal decree,they

Accepted Answer

A)  are usually following the advice of mainstream economists. 
B)  improve the organization of economic activity. 
C)  obscure the signals that normally guide the allocation of society's resources. 
D)  are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency. 
A)  are usually following the advice of mainstream economists. 
B)  improve the organization of economic activity. 
C)  obscure the signals that normally guide the allocation of society's resources. 
D)  are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency.

Question 8

You have responsibility for economic policy in the country of Freedonia.Recently,the neighboring country of Sylvania has cut off all exports of oranges to Freedonia.Harpo,who is one of your advisors,suggests that you should impose a binding price ceiling in order to avoid a shortage of oranges.Chico,another one of your advisors,argues that without a binding price floor,a shortage will certainly develop.Zeppo,a third advisor,says that the best way to avoid a shortage of oranges is to take no action at all.Which of your three advisors is most likely to have studied economics?

Accepted Answer

A)  Harpo 
B)  Chico 
C)  Zeppo 
D)  Apparently,all three advisors have studied economics,but their views on positive economics are different. 
A)  Harpo 
B)  Chico 
C)  Zeppo 
D)  Apparently,all three advisors have studied economics,but their views on positive economics are different.

Question 9

A binding minimum wage

Accepted Answer

A)  alters both the quantity demanded and quantity supplied of labor. 
B)  affects only the quantity of labor demanded;it does not affect the quantity of labor supplied. 
C)  has no effect on the quantity of labor demanded or the quantity of labor supplied. 
D)  causes only temporary unemployment,since the market will adjust and eliminate any temporary surplus of workers. 
A)  alters both the quantity demanded and quantity supplied of labor. 
B)  affects only the quantity of labor demanded;it does not affect the quantity of labor supplied. 
C)  has no effect on the quantity of labor demanded or the quantity of labor supplied. 
D)  causes only temporary unemployment,since the market will adjust and eliminate any temporary surplus of workers.

Question 10

Figure 6-5  
-Refer to Figure 6-5.The price of the good would continue to serve as the rationing mechanism if

Accepted Answer

A)  a price ceiling of $4 is imposed. 
B)  a price ceiling of $5 is imposed. 
C)  a price floor of $3 is imposed. 
D)  All of the above are correct. 
A)  a price ceiling of $4 is imposed. 
B)  a price ceiling of $5 is imposed. 
C)  a price floor of $3 is imposed. 
D)  All of the above are correct.

Question 11

Figure 6-5  
-Refer to Figure 6-5.If the government imposes a price floor of $5 on this market,then the result is a

Accepted Answer

A)  surplus of 0 units of the good. 
B)  surplus of 20 units of the good. 
C)  surplus of 30 units of the good. 
D)  surplus of 55 units of the good. 
A)  surplus of 0 units of the good. 
B)  surplus of 20 units of the good. 
C)  surplus of 30 units of the good. 
D)  surplus of 55 units of the good.

Question 12

Figure 6-15  
-Refer to Figure 6-15.Suppose a tax of $5 per unit is imposed on this market.How much will buyers pay per unit after the tax is imposed?

Accepted Answer

A)  $5 
B)  between $5 and $10 
C)  between $10 and $14 
D)  $14 
A)  $5 
B)  between $5 and $10 
C)  between $10 and $14 
D)  $14

Question 13

All buyers benefit from a binding price ceiling.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that in a particular market,the demand curve is highly elastic and the supply curve is highly inelastic.If a tax is imposed in this market,then

Accepted Answer

A)  the buyers will bear a greater burden of the tax than the sellers. 
B)  the sellers will bear a greater burden of the tax than the buyers. 
C)  the buyers and sellers are likely to share the burden of the tax equally. 
D)  the buyers and sellers will not share the burden equally,but it is impossible to determine who will bear the greater burden of the tax without more information. 
A)  the buyers will bear a greater burden of the tax than the sellers. 
B)  the sellers will bear a greater burden of the tax than the buyers. 
C)  the buyers and sellers are likely to share the burden of the tax equally. 
D)  the buyers and sellers will not share the burden equally,but it is impossible to determine who will bear the greater burden of the tax without more information.

Question 15

Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Price ceilings are typically imposed to benefit buyers.

Accepted Answer

A) True 
 B)False

Question 18

Figure 6-12  
-Refer to Figure 6-12.For every unit of the good that is sold,

Accepted Answer

A)  sellers are required to send one dollar to the government and buyers are required to send two dollars to the government. 
B)  sellers are required to send two dollars to the government and buyers are required to send one dollar to the government. 
C)  sellers are required to send three dollars to the government and buyers are required to send nothing to the government. 
D)  sellers are required to send nothing to the government and buyers are required to send two dollars to the government. 
A)  sellers are required to send one dollar to the government and buyers are required to send two dollars to the government. 
B)  sellers are required to send two dollars to the government and buyers are required to send one dollar to the government. 
C)  sellers are required to send three dollars to the government and buyers are required to send nothing to the government. 
D)  sellers are required to send nothing to the government and buyers are required to send two dollars to the government.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Table 6-1
  
-Refer to Table 6-1.Suppose the government imposes a price floor of $1 on this market.What will be the size of the surplus 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

Exam 6: Supply, Demand, and Government Policies

One common example of a price ceiling is rent control.

In the United States,before OPEC increased the price of crude oil in 1973,there was

Which of the following was not a result of the luxury tax imposed by Congress in 1990?

Figure 6-1 Panel (a)Panel (b) -Refer to Figure 6-1.The situation in panel (a)may be described as one in which

A tax on sellers shifts the supply curve to the left.

A price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded.

When policymakers set prices by legal decree,they

A binding minimum wage

Figure 6-5 -Refer to Figure 6-5.The price of the good would continue to serve as the rationing mechanism if

Figure 6-5 -Refer to Figure 6-5.If the government imposes a price floor of $5 on this market,then the result is a

Figure 6-15 -Refer to Figure 6-15.Suppose a tax of $5 per unit is imposed on this market.How much will buyers pay per unit after the tax is imposed?

All buyers benefit from a binding price ceiling.

Suppose that in a particular market,the demand curve is highly elastic and the supply curve is highly inelastic.If a tax is imposed in this market,then

Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price.

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

Price ceilings are typically imposed to benefit buyers.

Figure 6-12 -Refer to Figure 6-12.For every unit of the good that is sold,

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

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

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

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