Question 1

The tax incidence depends on whether the tax is levied on buyers or sellers.

Accepted Answer

A) True 
 B)False

Question 2

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. Is this price floor binding, and what will be the size of the shortage/surplus in this market?

Accepted Answer

The price floor will not be bi

Question 3

If the minimum wage exceeds the equilibrium wage, then

Accepted Answer

A)  the quantity demanded of labor will exceed the quantity supplied. 
B)  the quantity supplied of labor will exceed the quantity demanded. 
C)  the minimum wage will not be binding. 
D)  there will be no unemployment. 
A)  the quantity demanded of labor will exceed the quantity supplied. 
B)  the quantity supplied of labor will exceed the quantity demanded. 
C)  the minimum wage will not be binding. 
D)  there will be no unemployment.

Question 4

Workers determine the supply of labor, and firms determine the demand for labor.

Accepted Answer

A) True 
 B)False

Question 5

Figure 6-13
This figure shows the market demand and market supply curves for good X.  
-Refer to Figure 6-13. Which of the following price floors would be binding in this market?

Accepted Answer

A)  $3 
B)  $4 
C)  $5 
D)  $6 
A)  $3 
B)  $4 
C)  $5 
D)  $6

Question 6

If a nonbinding price floor is imposed on a market, then the

Accepted Answer

A)  quantity sold in the market will decrease. 
B)  quantity sold in the market will stay the same. 
C)  price in the market will increase. 
D)  price in the market will decrease. 
A)  quantity sold in the market will decrease. 
B)  quantity sold in the market will stay the same. 
C)  price in the market will increase. 
D)  price in the market will decrease.

Question 7

Figure 6-14  
-Refer to Figure 6-14. If the horizontal line on the graph represents a price ceiling, then the price ceiling is

Accepted Answer

A)  binding and creates a shortage of 20 units of the good. 
B)  binding and creates a shortage of 40 units of the good. 
C)  not binding but creates a shortage of 40 units of the good. 
D)  not binding, and there will be no surplus or shortage of the good. 
A)  binding and creates a shortage of 20 units of the good. 
B)  binding and creates a shortage of 40 units of the good. 
C)  not binding but creates a shortage of 40 units of the good. 
D)  not binding, and there will be no surplus or shortage of the good.

Question 8

A price ceiling is

Accepted Answer

A)  often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. 
B)  a legal maximum on the price at which a good can be sold. 
C)  often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. 
D)  All of the above are correct. 
A)  often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. 
B)  a legal maximum on the price at which a good can be sold. 
C)  often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. 
D)  All of the above are correct.

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 because 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 because the market will adjust and eliminate any temporary surplus of workers.

Question 10

Figure 6-9  
-Refer to Figure 6-9. At which price would a price ceiling be nonbinding?

Accepted Answer

A)  $4 
B)  $5 
C)  $3 
D)  $7 
A)  $4 
B)  $5 
C)  $3 
D)  $7

Question 11

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 12

Figure 6-15  
-Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at

Accepted Answer

A)  any price below $3. 
B)  a price between $2 and $3. 
C)  a price between $3 and $4. 
D)  any price above $3. 
A)  any price below $3. 
B)  a price between $2 and $3. 
C)  a price between $3 and $4. 
D)  any price above $3.

Question 13

Figure 6-1
Panel (a) Panel (b)
    
-Refer to Figure 6-1. The price ceiling shown in panel (a)

Accepted Answer

A)  is not binding. 
B)  creates a surplus. 
C)  creates a shortage. 
D)  Both a) and b) are correct. 
A)  is not binding. 
B)  creates a surplus. 
C)  creates a shortage. 
D)  Both a) and b) are correct.

Question 14

Figure 6-15  
-Refer to Figure 6-15. Suppose a price floor of $4 is imposed on this market. As a result,

Accepted Answer

A)  buyers' total expenditure on the good decreases by $15. 
B)  the supply curve shifts to the left so as to now pass through the point (quantity = 30, price = $4). 
C)  the quantity demanded of the good decreases by 30 units. 
D)  the number of units sold in the market will increase by 15 units. 
A)  buyers' total expenditure on the good decreases by $15. 
B)  the supply curve shifts to the left so as to now pass through the point (quantity = 30, price = $4). 
C)  the quantity demanded of the good decreases by 30 units. 
D)  the number of units sold in the market will increase by 15 units.

Question 15

Figure 6-15  
-Refer to Figure 6-15. For a price ceiling to be binding in this market, it would have to be set at

Accepted Answer

A)  any price below $3. 
B)  a price between $2 and $3. 
C)  a price between $3 and $4. 
D)  any price above $3. 
A)  any price below $3. 
B)  a price between $2 and $3. 
C)  a price between $3 and $4. 
D)  any price above $3.

Question 16

Figure 6-28  
-Refer to Figure 6-28. Suppose a tax of $4 per unit is imposed on this market. Which of the following is correct?

Accepted Answer

A)  Buyers and sellers will share the burden of the tax equally. 
B)  Buyers will bear more of the burden of the tax than sellers. 
C)  Sellers will bear more of the burden of the tax than buyers. 
D)  Any of the above is possible in this market. 
A)  Buyers and sellers will share the burden of the tax equally. 
B)  Buyers will bear more of the burden of the tax than sellers. 
C)  Sellers will bear more of the burden of the tax than buyers. 
D)  Any of the above is possible in this market.

Question 17

A tax on the buyers of cameras encourages

Accepted Answer

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

Question 18

Figure 6-7  
-Refer to Figure 6-7. 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; quantity sold is now 30 units and the price is $5. 
C)  buyers' total expenditure on the good decreases by $80. 
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; quantity sold is now 30 units and the price is $5. 
C)  buyers' total expenditure on the good decreases by $80. 
D)  the price of the good continues to serve as the rationing mechanism.

Question 19

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 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 levied on buyers or sellers. 
D)  In the new after-tax equilibrium, buyers and sellers share the burden of the tax.

Question 20

Unlike minimum wage laws, wage subsidies

Accepted Answer

A)  discourage firms from hiring the working poor. 
B)  cause unemployment. 
C)  help only wealthy workers. 
D)  raise the living standards of the working poor without creating unemployment. 
A)  discourage firms from hiring the working poor. 
B)  cause unemployment. 
C)  help only wealthy workers. 
D)  raise the living standards of the working poor without creating unemployment.

Exam 6: Supply, Demand, and Government Policies

The tax incidence depends on whether the tax is levied on buyers or sellers.

If the minimum wage exceeds the equilibrium wage, then

Workers determine the supply of labor, and firms determine the demand for labor.

Figure 6-13 This figure shows the market demand and market supply curves for good X. -Refer to Figure 6-13. Which of the following price floors would be binding in this market?

If a nonbinding price floor is imposed on a market, then the

Figure 6-14 -Refer to Figure 6-14. If the horizontal line on the graph represents a price ceiling, then the price ceiling is

A price ceiling is

A binding minimum wage

Figure 6-9 -Refer to Figure 6-9. At which price would a price ceiling be nonbinding?

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

Figure 6-15 -Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at

Figure 6-1 Panel (a) Panel (b) -Refer to Figure 6-1. The price ceiling shown in panel (a)

Figure 6-15 -Refer to Figure 6-15. Suppose a price floor of $4 is imposed on this market. As a result,

Figure 6-15 -Refer to Figure 6-15. For a price ceiling to be binding in this market, it would have to be set at

Figure 6-28 -Refer to Figure 6-28. Suppose a tax of $4 per unit is imposed on this market. Which of the following is correct?

A tax on the buyers of cameras encourages

Figure 6-7 -Refer to Figure 6-7. Suppose a price ceiling of $5 is imposed on this market. As a result,

Which of the following is not correct?

Unlike minimum wage laws, wage subsidies

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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