Question 1

If the government removes a binding price floor from a market, then the price received by sellers will

Accepted Answer

A)  decrease, and the quantity sold in the market will decrease. 
B)  decrease, and the quantity sold in the market will increase. 
C)  increase, and the quantity sold in the market will decrease. 
D)  increase, and the quantity sold in the market will increase. 
A)  decrease, and the quantity sold in the market will decrease. 
B)  decrease, and the quantity sold in the market will increase. 
C)  increase, and the quantity sold in the market will decrease. 
D)  increase, and the quantity sold in the market will increase.

Question 2

The mayor of Workerville proposes a local payroll tax to fund a new water park for the city. The mayor proposes to collect half the tax from workers and half the tax from firms. Workers will bear

Accepted Answer

A)  an equal share of the tax in comparison to firms. 
B)  a greater share of the tax in comparison to firms. 
C)  a smaller share of the tax in comparison to firms. 
D)  All of the above are possible. 
A)  an equal share of the tax in comparison to firms. 
B)  a greater share of the tax in comparison to firms. 
C)  a smaller share of the tax in comparison to firms. 
D)  All of the above are possible.

Question 3

Which of the following is correct?

Accepted Answer

A)  Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage raises the average wage of teenagers by 10 percent. 
B)  The drop in teenage employment caused by a 10 percent increase in the minimum wage is not significant. 
C)  The minimum wage is more often binding for teenagers than for other members of the labor force. 
D)  All firms consistently enforce minimum-wage laws. 
A)  Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage raises the average wage of teenagers by 10 percent. 
B)  The drop in teenage employment caused by a 10 percent increase in the minimum wage is not significant. 
C)  The minimum wage is more often binding for teenagers than for other members of the labor force. 
D)  All firms consistently enforce minimum-wage laws.

Question 4

How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.

Accepted Answer

@#IMG-DLM& The tax burden fall

Question 5

Figure 6-13
This figure shows the market demand and market supply curves for good X.  
-Refer to Figure 6-13. If the government imposes a price floor of $7 on this market, then there will be

Accepted Answer

A)  no surplus. 
B)  a surplus of 10 units. 
C)  a surplus of 15 units. 
D)  a surplus of 20 units. 
A)  no surplus. 
B)  a surplus of 10 units. 
C)  a surplus of 15 units. 
D)  a surplus of 20 units.

Question 6

A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied.

Accepted Answer

A) True 
 B)False

Question 7

Figure 6-12  
-Refer to Figure 6-12. Which of the following statements best relates the figure to the events that occurred in the United States in the 1970s?

Accepted Answer

A)  Buyers of gasoline paid a price of P1 before 1973; they paid a price of P2 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price. 
B)  Buyers of gasoline paid a price of P1 before 1973; they paid a price of P3 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price. 
C)  Buyers of gasoline paid a price of P2 before 1973; they paid a price of P3 after OPEC increased the price of crude oil in 1973, with no shortage of gasoline at that price. 
D)  The price ceiling was binding before 1973; the price ceiling was no longer binding after OPEC increased the price of crude oil in 1973. 
A)  Buyers of gasoline paid a price of P1 before 1973; they paid a price of P2 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price. 
B)  Buyers of gasoline paid a price of P1 before 1973; they paid a price of P3 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price. 
C)  Buyers of gasoline paid a price of P2 before 1973; they paid a price of P3 after OPEC increased the price of crude oil in 1973, with no shortage of gasoline at that price. 
D)  The price ceiling was binding before 1973; the price ceiling was no longer binding after OPEC increased the price of crude oil in 1973.

Question 8

When a binding price ceiling is imposed on a market,

Accepted Answer

A)  price no longer serves as a rationing device. 
B)  the quantity supplied at the price ceiling exceeds the quantity that would have been supplied without the price ceiling. 
C)  all buyers benefit. 
D)  All of the above are correct. 
A)  price no longer serves as a rationing device. 
B)  the quantity supplied at the price ceiling exceeds the quantity that would have been supplied without the price ceiling. 
C)  all buyers benefit. 
D)  All of the above are correct.

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)  both sellers and buyers of tea 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)  both sellers and buyers of tea are made worse off.

Question 10

Suppose buyers of vodka are required to send $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct?

Accepted Answer

A)  This tax causes the demand curve for vodka to shift downward by $5.00 at each quantity of vodka. 
B)  The price paid by buyers is $2.00 per bottle more than it was before the tax. 
C)  Sixty percent of the burden of the tax falls on sellers. 
D)  All of the above are correct. 
A)  This tax causes the demand curve for vodka to shift downward by $5.00 at each quantity of vodka. 
B)  The price paid by buyers is $2.00 per bottle more than it was before the tax. 
C)  Sixty percent of the burden of the tax falls on sellers. 
D)  All of the above are correct.

Question 11

The rationing mechanisms that develop under binding price floors are usually efficient.

Accepted Answer

A) True 
 B)False

Question 12

Figure 6-32  
-Refer to Figure 6-32. If the government set a price floor at $70, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price floor set at

Question 13

The Earned Income Tax Credit is an example of a

Accepted Answer

A)  minimum-wage law. 
B)  price ceiling. 
C)  wage subsidy. 
D)  rent subsidy. 
A)  minimum-wage law. 
B)  price ceiling. 
C)  wage subsidy. 
D)  rent subsidy.

Question 14

A price ceiling set above the equilibrium price is not binding.

Accepted Answer

A) True 
 B)False

Question 15

The term tax incidence refers to

Accepted Answer

A)  whether buyers or sellers of a good are required to send tax payments to the government. 
B)  whether the demand curve or the supply curve shifts when the tax is imposed. 
C)  the distribution of the tax burden between buyers and sellers. 
D)  widespread view that taxes (and death) are the only certainties in life. 
A)  whether buyers or sellers of a good are required to send tax payments to the government. 
B)  whether the demand curve or the supply curve shifts when the tax is imposed. 
C)  the distribution of the tax burden between buyers and sellers. 
D)  widespread view that taxes (and death) are the only certainties in life.

Question 16

If a tax is levied on the buyers of dog food, then

Accepted Answer

A)  buyers will bear the entire burden of the tax. 
B)  sellers will bear the entire burden of the tax. 
C)  buyers and sellers will share the burden of the tax. 
D)  the government will bear the entire burden of the tax. 
A)  buyers will bear the entire burden of the tax. 
B)  sellers will bear the entire burden of the tax. 
C)  buyers and sellers will share the burden of the tax. 
D)  the government will bear the entire burden of the tax.

Question 17

When a binding price floor is imposed on a market,

Accepted Answer

A)  price no longer serves as a rationing device. 
B)  the quantity demanded at the price floor exceeds the quantity that would have been demanded without the price floor. 
C)  all sellers benefit. 
D)  All of the above are correct. 
A)  price no longer serves as a rationing device. 
B)  the quantity demanded at the price floor exceeds the quantity that would have been demanded without the price floor. 
C)  all sellers benefit. 
D)  All of the above are correct.

Question 18

Figure 6-7  
-Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?

Accepted Answer

A)  a price ceiling set at $6 
B)  a price ceiling set at $5 
C)  a price floor set at $9 
D)  a price floor set at $8 
A)  a price ceiling set at $6 
B)  a price ceiling set at $5 
C)  a price floor set at $9 
D)  a price floor set at $8

Question 19

To be binding, a price floor must be set above the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 20

Consider the market for gasoline. Buyers

Accepted Answer

A)  and sellers would lobby for a price ceiling. 
B)  and sellers would lobby for a price floor. 
C)  would lobby for a price ceiling, whereas sellers would lobby for a price floor. 
D)  would lobby for a price floor, whereas sellers would lobby for a price ceiling. 
A)  and sellers would lobby for a price ceiling. 
B)  and sellers would lobby for a price floor. 
C)  would lobby for a price ceiling, whereas sellers would lobby for a price floor. 
D)  would lobby for a price floor, whereas sellers would lobby for a price ceiling.

Exam 6: Supply, Demand, and Government Policies

If the government removes a binding price floor from a market, then the price received by sellers will

The mayor of Workerville proposes a local payroll tax to fund a new water park for the city. The mayor proposes to collect half the tax from workers and half the tax from firms. Workers will bear

Which of the following is correct?

How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.

Figure 6-13 This figure shows the market demand and market supply curves for good X. -Refer to Figure 6-13. If the government imposes a price floor of $7 on this market, then there will be

A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied.

Figure 6-12 -Refer to Figure 6-12. Which of the following statements best relates the figure to the events that occurred in the United States in the 1970s?

When a binding price ceiling is imposed on a market,

When a tax is levied on sellers of tea,

Suppose buyers of vodka are required to send $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct?

The rationing mechanisms that develop under binding price floors are usually efficient.

Figure 6-32 -Refer to Figure 6-32. If the government set a price floor at $70, would there be a shortage or surplus, and how large would be the shortage/surplus?

The Earned Income Tax Credit is an example of a

A price ceiling set above the equilibrium price is not binding.

The term tax incidence refers to

If a tax is levied on the buyers of dog food, then

When a binding price floor is imposed on a market,

Figure 6-7 -Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?

To be binding, a price floor must be set above the equilibrium price.

Consider the market for gasoline. Buyers

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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