Question 1

Figure 6-22  
-Refer to Figure 6-22. As the figure is drawn, who sends the tax payment to the government?

Accepted Answer

A)  The buyers send the tax payment. 
B)  The sellers send the tax payment. 
C)  A portion of the tax payment is sent by the buyers, and the remaining portion is sent by the sellers. 
D)  The question of who sends the tax payment cannot be determined from the graph. 
A)  The buyers send the tax payment. 
B)  The sellers send the tax payment. 
C)  A portion of the tax payment is sent by the buyers, and the remaining portion is sent by the sellers. 
D)  The question of who sends the tax payment cannot be determined from the graph.

Question 2

A tax on sellers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied.

Accepted Answer

A) True 
 B)False

Question 3

When OPEC raised the price of crude oil in the 1970s, it caused the

Accepted Answer

A)  demand for gasoline to increase. 
B)  demand for gasoline to decrease. 
C)  supply of gasoline to increase. 
D)  supply of gasoline to decrease. 
A)  demand for gasoline to increase. 
B)  demand for gasoline to decrease. 
C)  supply of gasoline to increase. 
D)  supply of gasoline to decrease.

Question 4

At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers want to sell.

Accepted Answer

A) True 
 B)False

Question 5

A binding price floor causes quantity supplied to be less than quantity demanded.

Accepted Answer

A) True 
 B)False

Question 6

A binding minimum wage may not help all workers, but it does not hurt any workers.

Accepted Answer

A) True 
 B)False

Question 7

Figure 6-21  
-Refer to Figure 6-21. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. Acme is left with how much money?

Accepted Answer

A)  $8.00 
B)  $9.00 
C)  $10.50 
D)  $12.00 
A)  $8.00 
B)  $9.00 
C)  $10.50 
D)  $12.00

Question 8

A tax imposed on the buyers of a good will raise the

Accepted Answer

A)  price paid by buyers and lower the equilibrium quantity. 
B)  price paid by buyers and raise the equilibrium quantity. 
C)  effective price received by sellers and lower the equilibrium quantity. 
D)  effective price received by sellers and raise the equilibrium quantity. 
A)  price paid by buyers and lower the equilibrium quantity. 
B)  price paid by buyers and raise the equilibrium quantity. 
C)  effective price received by sellers and lower the equilibrium quantity. 
D)  effective price received by sellers and raise the equilibrium quantity.

Question 9

If the government passes a law requiring buyers of college textbooks to send $5 to the government for every textbook they buy, then

Accepted Answer

A)  the demand curve for textbooks shifts downward by $5. 
B)  buyers of textbooks pay $5 more per textbook than they were paying before the tax. 
C)  sellers of textbooks are unaffected by the tax. 
D)  All of the above are correct. 
A)  the demand curve for textbooks shifts downward by $5. 
B)  buyers of textbooks pay $5 more per textbook than they were paying before the tax. 
C)  sellers of textbooks are unaffected by the tax. 
D)  All of the above are correct.

Question 10

If a price floor is not binding, then

Accepted Answer

A)  there will be a surplus in the market. 
B)  there will be a shortage in the market. 
C)  there will be no effect on the market price or quantity sold. 
D)  the market will be less efficient than it would be without the price floor. 
A)  there will be a surplus in the market. 
B)  there will be a shortage in the market. 
C)  there will be no effect on the market price or quantity sold. 
D)  the market will be less efficient than it would be without the price floor.

Question 11

Scenario 6-2
Suppose demand for a product is given by the equation   and supply for the product is given by the equation  
-Refer to Scenario 6-2. Suppose the government sets a price floor at $13 for this product. Initially, is this price floor binding? Suppose that for some reason demand were to decrease to   Would the $13 price floor be binding after the shift in the demand curve? If so, what is the size of the resulting shortage/surplus?

Accepted Answer

Initially the price floor is not binding

Question 12

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 13

Because the supply and demand of housing are inelastic in the short run, the initial shortage caused by rent control is large.

Accepted Answer

A) True 
 B)False

Question 14

Figure 6-6  
-Refer to Figure 6-6. Which of the following statements is not correct?

Accepted Answer

A)  A price ceiling set at $6 would be binding, but a price ceiling set at $12 would not be binding. 
B)  A price floor set at $14 would be binding, but a price floor set at $8 would not be binding. 
C)  A price ceiling set at $9 would result in a shortage. 
D)  A price floor set at $6 would result in a shortage. 
A)  A price ceiling set at $6 would be binding, but a price ceiling set at $12 would not be binding. 
B)  A price floor set at $14 would be binding, but a price floor set at $8 would not be binding. 
C)  A price ceiling set at $9 would result in a shortage. 
D)  A price floor set at $6 would result in a shortage.

Question 15

The federal government uses the revenue from the FICA (Federal Insurance Contribution Act) tax to pay for

Accepted Answer

A)  unemployment compensation. 
B)  the salaries of members of Congress. 
C)  Social Security and Medicare. 
D)  housing subsidies for low-income people. 
A)  unemployment compensation. 
B)  the salaries of members of Congress. 
C)  Social Security and Medicare. 
D)  housing subsidies for low-income people.

Question 16

In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that

Accepted Answer

A)  OPEC raised the price of crude oil in world markets. 
B)  U.S. gasoline producers raised the price of gasoline. 
C)  the U.S. government maintained a price ceiling on gasoline. 
D)  Americans typically commuted long distances. 
A)  OPEC raised the price of crude oil in world markets. 
B)  U.S. gasoline producers raised the price of gasoline. 
C)  the U.S. government maintained a price ceiling on gasoline. 
D)  Americans typically commuted long distances.

Question 17

Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

Accepted Answer

A) True 
 B)False

Question 18

A tax on sellers will shift the

Accepted Answer

A)  demand curve upward by the amount of the tax. 
B)  demand curve downward by the amount of the tax. 
C)  supply curve upward by the amount of the tax. 
D)  supply curve downward by the amount of the tax. 
A)  demand curve upward by the amount of the tax. 
B)  demand curve downward by the amount of the tax. 
C)  supply curve upward by the amount of the tax. 
D)  supply curve downward by the amount of the tax.

Question 19

Figure 6-21  
-Refer to Figure 6-21. Suppose buyers, rather than sellers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in

Accepted Answer

A)  buyers bearing a larger share of the tax burden. 
B)  sellers bearing a smaller share of the tax burden. 
C)  the same amount of tax revenue for the government. 
D)  Both a) and b) are correct. 
A)  buyers bearing a larger share of the tax burden. 
B)  sellers bearing a smaller share of the tax burden. 
C)  the same amount of tax revenue for the government. 
D)  Both a) and b) are correct.

Question 20

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

Accepted Answer

A)  A price ceiling set at $12 would be binding, but a price ceiling set at $8 would not be binding. 
B)  A price floor set at $8 would be binding, but a price ceiling set at $8 would not be binding. 
C)  A price ceiling set at $9 would result in a surplus. 
D)  A price floor set at $11 would result in a surplus. 
A)  A price ceiling set at $12 would be binding, but a price ceiling set at $8 would not be binding. 
B)  A price floor set at $8 would be binding, but a price ceiling set at $8 would not be binding. 
C)  A price ceiling set at $9 would result in a surplus. 
D)  A price floor set at $11 would result in a surplus.

Exam 6: Supply, Demand, and Government Policies

Figure 6-22 -Refer to Figure 6-22. As the figure is drawn, who sends the tax payment to the government?

A tax on sellers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied.

When OPEC raised the price of crude oil in the 1970s, it caused the

At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers want to sell.

A binding price floor causes quantity supplied to be less than quantity demanded.

A binding minimum wage may not help all workers, but it does not hurt any workers.

Figure 6-21 -Refer to Figure 6-21. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. Acme is left with how much money?

A tax imposed on the buyers of a good will raise the

If the government passes a law requiring buyers of college textbooks to send $5 to the government for every textbook they buy, then

If a price floor is not binding, then

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

Because the supply and demand of housing are inelastic in the short run, the initial shortage caused by rent control is large.

Figure 6-6 -Refer to Figure 6-6. Which of the following statements is not correct?

The federal government uses the revenue from the FICA (Federal Insurance Contribution Act) tax to pay for

In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that

Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

A tax on sellers will shift the

Figure 6-21 -Refer to Figure 6-21. Suppose buyers, rather than sellers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in

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

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

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