Question 1

One disadvantage of government subsidies over price controls is that subsidies

Accepted Answer

A)  prevent the attainment of equilibrium in the markets in which they are imposed. 
B)  make higher taxes necessary. 
C)  are always unfair to those with low incomes. 
D)  cause unemployment. 
A)  prevent the attainment of equilibrium in the markets in which they are imposed. 
B)  make higher taxes necessary. 
C)  are always unfair to those with low incomes. 
D)  cause unemployment.

Question 2

Figure 6-11  
-Refer to Figure 6-11. Which of the following statements is not correct?

Accepted Answer

A)  A government-imposed price of $8 would be a binding price floor if market demand is Demand A and a binding price ceiling if market demand is Demand B. 
B)  A government-imposed price of $10 would be a binding price ceiling if market demand is either Demand A or Demand B. 
C)  A government-imposed price of $4 would be a binding price ceiling if market demand is either Demand A or Demand c. 
D)  A government-imposed price of $10 would be a binding price floor if market demand is Demand A and a non-binding price ceiling if market demand is Demand B. 
A)  A government-imposed price of $8 would be a binding price floor if market demand is Demand A and a binding price ceiling if market demand is Demand B. 
B)  A government-imposed price of $10 would be a binding price ceiling if market demand is either Demand A or Demand B. 
C)  A government-imposed price of $4 would be a binding price ceiling if market demand is either Demand A or Demand c. 
D)  A government-imposed price of $10 would be a binding price floor if market demand is Demand A and a non-binding price ceiling if market demand is Demand B.

Question 3

Price controls often hurt those they are trying to help.

Accepted Answer

A) True 
 B)False

Question 4

Table 6-2
  
-Refer to Table 6-2. A price ceiling set at $5 results in

Accepted Answer

A)  50 units sold. 
B)  250 units sold. 
C)  300 units sold. 
D)  350 units sold. 
A)  50 units sold. 
B)  250 units sold. 
C)  300 units sold. 
D)  350 units sold.

Question 5

A tax on the buyers of personal computer external hard drives encourages

Accepted Answer

A)  sellers to supply a smaller quantity at every price. 
B)  buyers to demand a smaller quantity at every price. 
C)  buyers to demand a larger quantity at every price. 
D)  Both a) and b) are correct. 
A)  sellers to supply a smaller quantity at every price. 
B)  buyers to demand a smaller quantity at every price. 
C)  buyers to demand a larger quantity at every price. 
D)  Both a) and b) are correct.

Question 6

Which of the following would not interfere with market equilibria?

Accepted Answer

A)  a minimum wage 
B)  a rent control 
C)  a non-binding price floor 
D)  a binding price ceiling 
A)  a minimum wage 
B)  a rent control 
C)  a non-binding price floor 
D)  a binding price ceiling

Question 7

Figure 6-26  
-Refer to Figure 6-26. How much tax revenue does this tax produce for the government?

Accepted Answer

A)  $480 
B)  $640 
C)  $360 
D)  $120 
A)  $480 
B)  $640 
C)  $360 
D)  $120

Question 8

Suppose the government imposes a 25-cent tax on the buyers of incandescent light bulbs. Which of the following is not correct? The tax would

Accepted Answer

A)  shift the demand curve downward by 25 cents. 
B)  lower the equilibrium price by 25 cents. 
C)  reduce the equilibrium quantity. 
D)  discourage market activity. 
A)  shift the demand curve downward by 25 cents. 
B)  lower the equilibrium price by 25 cents. 
C)  reduce the equilibrium quantity. 
D)  discourage market activity.

Question 9

Figure 6-18
The vertical distance between points A and B represents the tax in the market.  
-Refer to Figure 6-18. The price that buyers pay after the tax is imposed is

Accepted Answer

A)  $10. 
B)  $8. 
C)  $16. 
D)  $24. 
A)  $10. 
B)  $8. 
C)  $16. 
D)  $24.

Question 10

Figure 6-25  
-Refer to Figure 6-25. 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.

Question 11

Figure 6-8  
-Refer to Figure 6-8. If the government imposes a price ceiling of $2 on this market, then there will be

Accepted Answer

A)  no shortage of the good. 
B)  a shortage of 10 units of the good. 
C)  a shortage of 20 units of the good. 
D)  a shortage of 30 units of the good. 
A)  no shortage of the good. 
B)  a shortage of 10 units of the good. 
C)  a shortage of 20 units of the good. 
D)  a shortage of 30 units of the good.

Question 12

Figure 6-9  
-Refer to Figure 6-9. At which price would a price floor be binding?

Accepted Answer

A)  $7 
B)  $6 
C)  $4 
D)  $5 
A)  $7 
B)  $6 
C)  $4 
D)  $5

Question 13

Figure 6-35  
-Refer to Figure 6-35. A price floor set at $40 would create a surplus of 20 units.

Accepted Answer

A) True 
 B)False

Question 14

Figure 6-29
Suppose the government imposes a $2 on this market.  
-Refer to Figure 6-29. Suppose D1 represents the demand curve for paperback novels, D2 represents the demand curve for gasoline, and S1 represents the supply curve for paperback novels and gasoline. After the imposition of the $2 on paperback novels and on gasoline, the

Accepted Answer

A)  buyers of gasoline bear a higher burden of the $2 tax than buyers of paperback novels. 
B)  sellers of gasoline bear a higher burden of the $2 tax than sellers of paperback novels. 
C)  buyers of gasoline bear an equal burden of the $2 tax as buyers of paperback novels. 
D)  Both a) and b) are correct. 
A)  buyers of gasoline bear a higher burden of the $2 tax than buyers of paperback novels. 
B)  sellers of gasoline bear a higher burden of the $2 tax than sellers of paperback novels. 
C)  buyers of gasoline bear an equal burden of the $2 tax as buyers of paperback novels. 
D)  Both a) and b) are correct.

Question 15

If a tax is imposed on a market with inelastic demand and elastic supply, then

Accepted Answer

A)  buyers will bear most of the burden of the tax. 
B)  sellers will bear most of the burden of the tax. 
C)  the burden of the tax will be shared equally between buyers and sellers. 
D)  it is impossible to determine how the burden of the tax will be shared. 
A)  buyers will bear most of the burden of the tax. 
B)  sellers will bear most of the burden of the tax. 
C)  the burden of the tax will be shared equally between buyers and sellers. 
D)  it is impossible to determine how the burden of the tax will be shared.

Question 16

There are several criticisms of the minimum wage. Which of the following is not one of those criticisms? The minimum wage

Accepted Answer

A)  often hurts those people who it is intended to help. 
B)  results in an excess supply of low-skilled labor. 
C)  prevents some unskilled workers from getting needed on-the-job training. 
D)  fails to raise the wage of any employed person. 
A)  often hurts those people who it is intended to help. 
B)  results in an excess supply of low-skilled labor. 
C)  prevents some unskilled workers from getting needed on-the-job training. 
D)  fails to raise the wage of any employed person.

Question 17

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 18

Which of the following is not correct?

Accepted Answer

A)  Some states in the U.S. mandate minimum wages above the federal level. 
B)  Most European nations have minimum-wage laws. 
C)  The U.S. minimum wage is significantly higher than the minimum wages in France and the United Kingdom. 
D)  The U.S. Congress first instituted a minimum wage with the Fair Labor Standards Act. 
A)  Some states in the U.S. mandate minimum wages above the federal level. 
B)  Most European nations have minimum-wage laws. 
C)  The U.S. minimum wage is significantly higher than the minimum wages in France and the United Kingdom. 
D)  The U.S. Congress first instituted a minimum wage with the Fair Labor Standards Act.

Question 19

When a tax is placed on the buyers of lemonade, the

Accepted Answer

A)  sellers bear the entire burden of the tax. 
B)  buyers bear the entire burden of the tax. 
C)  burden of the tax will be always be equally divided between the buyers and the sellers. 
D)  burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal. 
A)  sellers bear the entire burden of the tax. 
B)  buyers bear the entire burden of the tax. 
C)  burden of the tax will be always be equally divided between the buyers and the sellers. 
D)  burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

Question 20

A binding price floor (i) causes a surplus.
(ii) causes a shortage.
(iii) is set at a price above the equilibrium price.
(iv) is set at a price below the equilibrium price.

Accepted Answer

A)  (i) only 
B)  (iii) only 
C)  (i) and (iii) only 
D)  (ii) and (iv) only 
A)  (i) only 
B)  (iii) only 
C)  (i) and (iii) only 
D)  (ii) and (iv) only

Exam 6: Supply, Demand, and Government Policies

One disadvantage of government subsidies over price controls is that subsidies

Figure 6-11 -Refer to Figure 6-11. Which of the following statements is not correct?

Price controls often hurt those they are trying to help.

Table 6-2 -Refer to Table 6-2. A price ceiling set at $5 results in

A tax on the buyers of personal computer external hard drives encourages

Which of the following would not interfere with market equilibria?

Figure 6-26 -Refer to Figure 6-26. How much tax revenue does this tax produce for the government?

Suppose the government imposes a 25-cent tax on the buyers of incandescent light bulbs. Which of the following is not correct? The tax would

Figure 6-18 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-18. The price that buyers pay after the tax is imposed is

Figure 6-25 -Refer to Figure 6-25. The amount of the tax per unit is

Figure 6-8 -Refer to Figure 6-8. If the government imposes a price ceiling of $2 on this market, then there will be

Figure 6-9 -Refer to Figure 6-9. At which price would a price floor be binding?

Figure 6-35 -Refer to Figure 6-35. A price floor set at $40 would create a surplus of 20 units.

If a tax is imposed on a market with inelastic demand and elastic supply, then

There are several criticisms of the minimum wage. Which of the following is not one of those criticisms? The minimum wage

A key lesson from the payroll tax is that the

Which of the following is not correct?

When a tax is placed on the buyers of lemonade, the

A binding price floor (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price.

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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