Question 1

The imposition of a binding price floor on a market causes quantity demanded to be

Accepted Answer

A)  greater than quantity supplied. 
B)  less than quantity supplied. 
C)  equal to quantity supplied. 
D)  Both (a)and (b)are possible. 
A)  greater than quantity supplied. 
B)  less than quantity supplied. 
C)  equal to quantity supplied. 
D)  Both (a)and (b)are possible.

Question 2

When a tax is placed on the buyers of cell phones,

Accepted Answer

A)  the size of the cell phone market and the price paid by buyers both decrease. 
B)  the size of the cell phone market decreases,but the price paid by buyers increases. 
C)  the size of the cell phone market increases,but the price paid by buyers decreases. 
D)  the size of the cell phone market and the price paid by buyers both increase. 
A)  the size of the cell phone market and the price paid by buyers both decrease. 
B)  the size of the cell phone market decreases,but the price paid by buyers increases. 
C)  the size of the cell phone market increases,but the price paid by buyers decreases. 
D)  the size of the cell phone market and the price paid by buyers both increase.

Question 3

A tax of $1 on sellers always increases the equilibrium price by $1.

Accepted Answer

A) True 
 B)False

Question 4

Figure 6-12  
-Refer to Figure 6-12.Which of the following is correct?

Accepted Answer

A)  One-fourth of the burden of the tax falls on buyers and three-fourths of the burden of the tax falls on sellers. 
B)  One-third of the burden of the tax falls on buyers and two-thirds of the burden of the tax falls on sellers. 
C)  One-half of the burden of the tax falls on buyers and one-half of the burden of the tax falls on sellers. 
D)  Two-thirds of the burden of the tax falls on buyers and one-third of the burden of the tax falls on sellers. 
A)  One-fourth of the burden of the tax falls on buyers and three-fourths of the burden of the tax falls on sellers. 
B)  One-third of the burden of the tax falls on buyers and two-thirds of the burden of the tax falls on sellers. 
C)  One-half of the burden of the tax falls on buyers and one-half of the burden of the tax falls on sellers. 
D)  Two-thirds of the burden of the tax falls on buyers and one-third of the burden of the tax falls on sellers.

Question 5

Buyers of a good bear the larger share of the tax burden when a tax is placed on a product for which

Accepted Answer

A)  the supply is more elastic than the demand. 
B)  the demand in more elastic than the supply. 
C)  the tax is placed on the sellers of the product. 
D)  the tax is placed on the buyers of the product. 
A)  the supply is more elastic than the demand. 
B)  the demand in more elastic than the supply. 
C)  the tax is placed on the sellers of the product. 
D)  the tax is placed on the buyers of the product.

Question 6

Suppose that the demand for picture frames is elastic and the supply of picture frames is inelastic.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

A large majority of economists favor eliminating the minimum wage.

Accepted Answer

A) True 
 B)False

Question 8

Rent subsidies and wage subsidies are better than price controls at helping the poor because they have no costs associated with them.

Accepted Answer

A) True 
 B)False

Question 9

When a tax is levied on sellers of tea,

Accepted Answer

A)  the well-being of both sellers and buyers of tea is unaffected. 
B)  sellers of tea are made worse off and the well-being of buyers is unaffected. 
C)  sellers of tea are made worse off and buyers of tea are made better off. 
D)  sellers and buyers of tea both are made worse off. 
A)  the well-being of both sellers and buyers of tea is unaffected. 
B)  sellers of tea are made worse off and the well-being of buyers is unaffected. 
C)  sellers of tea are made worse off and buyers of tea are made better off. 
D)  sellers and buyers of tea both are made worse off.

Question 10

Which of the following is not correct?

Accepted Answer

A)  Taxes levied on sellers and taxes levied on buyers are not equivalent. 
B)  A tax places a wedge between the price that buyers pay and the price that sellers receive. 
C)  The wedge between the buyers' price and the sellers' price is the same,regardless of whether the tax is levied on buyers or sellers. 
D)  In the new after-tax equilibrium,buyers and sellers share the burden of the tax. 
A)  Taxes levied on sellers and taxes levied on buyers are not equivalent. 
B)  A tax places a wedge between the price that buyers pay and the price that sellers receive. 
C)  The wedge between the buyers' price and the sellers' price is the same,regardless of whether the tax is levied on buyers or sellers. 
D)  In the new after-tax equilibrium,buyers and sellers share the burden of the tax.

Question 11

Whether a tax is levied on sellers or buyers,taxes discourage market activity.

Accepted Answer

A) True 
 B)False

Question 12

Suppose there is currently a tax of $50 per ticket on airline tickets.Buyers of airline tickets are required to pay the tax to the government.If the tax is reduced from $50 per ticket to $30 per ticket,then

Accepted Answer

A)  the demand curve will shift upward by $20,and the price paid by buyers will decrease by less than $20. 
B)  the demand curve will shift upward by $20,and the price paid by buyers will decrease by $20. 
C)  the supply curve will shift downward by $20,and the effective price received by sellers will increase by less than $20. 
D)  the supply curve will shift downward by $20,and the effective price received by sellers will increase by $20. 
A)  the demand curve will shift upward by $20,and the price paid by buyers will decrease by less than $20. 
B)  the demand curve will shift upward by $20,and the price paid by buyers will decrease by $20. 
C)  the supply curve will shift downward by $20,and the effective price received by sellers will increase by less than $20. 
D)  the supply curve will shift downward by $20,and the effective price received by sellers will increase by $20.

Question 13

Figure 6-13
The vertical distance between points A and B represents the tax in the market.  
-Refer to Figure 6-13.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 14

The economy contains many labor markets for different types of workers.

Accepted Answer

A) True 
 B)False

Question 15

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.
  
-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 16

An outcome that can result from either a price ceiling or a price floor is

Accepted Answer

A)  a surplus in the market. 
B)  a shortage in the market. 
C)  a nonbinding price control. 
D)  long lines of frustrated buyers. 
A)  a surplus in the market. 
B)  a shortage in the market. 
C)  a nonbinding price control. 
D)  long lines of frustrated buyers.

Question 17

The United States is the only country in the world with minimum-wage laws.

Accepted Answer

A) True 
 B)False

Question 18

A tax on sellers will

Accepted Answer

A)  shift the demand curve upwards by the amount of the tax. 
B)  shift the demand curve downwards by the amount of the tax. 
C)  shift the supply curve upwards by the amount of the tax. 
D)  shift the supply curve downwards by the amount of the tax. 
A)  shift the demand curve upwards by the amount of the tax. 
B)  shift the demand curve downwards by the amount of the tax. 
C)  shift the supply curve upwards by the amount of the tax. 
D)  shift the supply curve downwards by the amount of the tax.

Question 19

Prices are inefficient rationing devices.

Accepted Answer

A) True 
 B)False

Question 20

If the government removes a tax on a good,then the quantity of the good sold will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  All of the above are possible. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  All of the above are possible.

Exam 6: Supply, Demand, and Government Policies

The imposition of a binding price floor on a market causes quantity demanded to be

When a tax is placed on the buyers of cell phones,

A tax of $1 on sellers always increases the equilibrium price by $1.

Figure 6-12 -Refer to Figure 6-12.Which of the following is correct?

Buyers of a good bear the larger share of the tax burden when a tax is placed on a product for which

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

A large majority of economists favor eliminating the minimum wage.

Rent subsidies and wage subsidies are better than price controls at helping the poor because they have no costs associated with them.

When a tax is levied on sellers of tea,

Which of the following is not correct?

Whether a tax is levied on sellers or buyers,taxes discourage market activity.

Suppose there is currently a tax of $50 per ticket on airline tickets.Buyers of airline tickets are required to pay the tax to the government.If the tax is reduced from $50 per ticket to $30 per ticket,then

Figure 6-13 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-13.The per-unit burden of the tax on buyers is

The economy contains many labor markets for different types of workers.

An outcome that can result from either a price ceiling or a price floor is

The United States is the only country in the world with minimum-wage laws.

A tax on sellers will

Prices are inefficient rationing devices.

If the government removes a tax on a good,then the quantity of the good sold will

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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