Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA Social Security/Medicare) tax. Which of the following statements is correct?

Accepted Answer

A)  This type of tax is an example of a payback tax. 
B)  Your employer is required by law to pay $400 to match the $400 deducted from your check. 
C)  The $400 that you paid is the true burden of the tax that falls on you, the employee. 
D)  All of the above are correct. 
A)  This type of tax is an example of a payback tax. 
B)  Your employer is required by law to pay $400 to match the $400 deducted from your check. 
C)  The $400 that you paid is the true burden of the tax that falls on you, the employee. 
D)  All of the above are correct.

Question 3

Figure 6-24  
-Refer to Figure 6-24. What is the amount of the tax per unit?

Accepted Answer

A)  $8 
B)  $6 
C)  $4 
D)  $2 
A)  $8 
B)  $6 
C)  $4 
D)  $2

Question 4

The quantity sold in a market will increase if the government

Accepted Answer

A)  decreases a binding price floor in that market. 
B)  decreases a binding price ceiling in that market. 
C)  increases a tax on the good sold in that market. 
D)  More than one of the above is correct. 
A)  decreases a binding price floor in that market. 
B)  decreases a binding price ceiling in that market. 
C)  increases a tax on the good sold in that market. 
D)  More than one of the above is correct.

Question 5

In the housing market, supply and demand are

Accepted Answer

A)  more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
B)  more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
C)  more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
D)  more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
A)  more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
B)  more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. 
C)  more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 
D)  more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.

Question 6

A tax on the buyers of sofas

Accepted Answer

A)  increases the size of the sofa market. 
B)  decreases the size of the sofa market. 
C)  has no effect on the size of the sofa market. 
D)  may increase, decrease, or have no effect on the size of the sofa market. 
A)  increases the size of the sofa market. 
B)  decreases the size of the sofa market. 
C)  has no effect on the size of the sofa market. 
D)  may increase, decrease, or have no effect on the size of the sofa market.

Question 7

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 8

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the

Accepted Answer

A)  buyers will bear a greater burden of the tax than the sellers. 
B)  sellers will bear a greater burden of the tax than the buyers. 
C)  buyers and sellers are likely to share the burden of the tax equally. 
D)  buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information. 
A)  buyers will bear a greater burden of the tax than the sellers. 
B)  sellers will bear a greater burden of the tax than the buyers. 
C)  buyers and sellers are likely to share the burden of the tax equally. 
D)  buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information.

Question 9

A tax burden falls more heavily on the side of the market that

Accepted Answer

A)  has a fewer number of participants. 
B)  is more inelastic. 
C)  is closer to unit elastic. 
D)  is less inelastic. 
A)  has a fewer number of participants. 
B)  is more inelastic. 
C)  is closer to unit elastic. 
D)  is less inelastic.

Question 10

Figure 6-27
This figure shows the market demand and market supply curves for good Z.  
-Refer to Figure 6-27. Suppose a tax of $3 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

Accepted Answer

A)  $16 
B)  between $16 and $20 
C)  between $20 and $22 
D)  $22 
A)  $16 
B)  between $16 and $20 
C)  between $20 and $22 
D)  $22

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

If a tax is levied on the sellers of a product, then the demand curve will

Accepted Answer

A)  shift down. 
B)  shift up. 
C)  become flatter. 
D)  not shift. 
A)  shift down. 
B)  shift up. 
C)  become flatter. 
D)  not shift.

Question 13

Figure 6-18
The vertical distance between points A and B represents the tax in the market.  
-Refer to Figure 6-18. The per-unit burden of the tax on sellers is

Accepted Answer

A)  $6. 
B)  $8. 
C)  $10. 
D)  $14. 
A)  $6. 
B)  $8. 
C)  $10. 
D)  $14.

Question 14

Which of the following is correct? Price controls

Accepted Answer

A)  always help those they are designed to help. 
B)  never help those they are designed to help. 
C)  often hurt those they are designed to help. 
D)  always hurt those they are designed to help. 
A)  always help those they are designed to help. 
B)  never help those they are designed to help. 
C)  often hurt those they are designed to help. 
D)  always hurt those they are designed to help.

Question 15

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 16

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

Question 17

A tax on sellers shifts the supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 18

Figure 6-3
Panel a) Panel b)
    
-Refer to Figure 6-3. In panel b), there will be

Accepted Answer

A)  a shortage. 
B)  equilibrium in the market. 
C)  a surplus. 
D)  lines of people waiting to buy the good. 
A)  a shortage. 
B)  equilibrium in the market. 
C)  a surplus. 
D)  lines of people waiting to buy the good.

Question 19

Minimum-wage laws dictate

Accepted Answer

A)  the exact wage that firms must pay workers. 
B)  a maximum wage that firms may pay workers. 
C)  a minimum wage that firms may pay workers. 
D)  both a minimum wage and a maximum wage that firms may pay workers. 
A)  the exact wage that firms must pay workers. 
B)  a maximum wage that firms may pay workers. 
C)  a minimum wage that firms may pay workers. 
D)  both a minimum wage and a maximum wage that firms may pay workers.

Question 20

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.

Exam 6: Supply, Demand, and Government Policies

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.

You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA Social Security/Medicare) tax. Which of the following statements is correct?

Figure 6-24 -Refer to Figure 6-24. What is the amount of the tax per unit?

The quantity sold in a market will increase if the government

In the housing market, supply and demand are

A tax on the buyers of sofas

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?

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the

A tax burden falls more heavily on the side of the market that

Figure 6-27 This figure shows the market demand and market supply curves for good Z. -Refer to Figure 6-27. Suppose a tax of $3 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

If a tax is levied on the sellers of a product, then the demand curve will

Figure 6-18 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-18. The per-unit burden of the tax on sellers is

Which of the following is correct? Price controls

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

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

A tax on sellers shifts the supply curve to the left.

Figure 6-3 Panel a) Panel b) -Refer to Figure 6-3. In panel b), there will be

Minimum-wage laws dictate

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

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 Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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