Exam 6: Supply Demand and Government Policies: Part B

Figure 6-36 -Refer to Figure 6-36.If the government places a $2 tax in the market,the seller bears $2 of the tax burden.

A tax on buyers increases the size of a market.

A tax on buyers decreases the quantity of the good sold in the market.

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

A price floor set above the equilibrium price causes a surplus in the market.

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

The true burden of a payroll tax has nothing to do with the percentage of the tax that employers are required to pay.

When policymakers set prices by legal decree,they obscure the signals that normally guide the allocation of society's resources.

A price ceiling set below the equilibrium price causes a shortage in the market.

If a price ceiling is not binding,then it will have no effect on the market.

A binding price floor may not help all sellers,but it does not hurt any sellers.

Figure 6-35 -Refer to Figure 6-35.A price ceiling set at $30 would create a shortage of 20 units.

If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets,then fewer airline tickets will be sold than at the market equilibrium.

A binding price ceiling may not help all consumers,but it does not hurt any consumers.

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

If a price ceiling of $1.50 per gallon is imposed on gasoline,and the market equilibrium price is $2,then the price ceiling is a binding constraint on the market.

Even though federal law mandates that workers and firms each pay half of the total FICA tax,the tax burden may not fall equally on workers and firms.

A price ceiling set below the equilibrium price is binding.

A tax of $1 on buyers always decreases the equilibrium price by $1.

Figure 6-36 -Refer to Figure 6-36.If the government places a $2 tax in the market,the seller receives $6.