Question 1

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor,

Accepted Answer

A)  quantity demanded decreases. 
B)  quantity supplied increases. 
C)  there is a surplus. 
D)  All of the above are correct. 
A)  quantity demanded decreases. 
B)  quantity supplied increases. 
C)  there is a surplus. 
D)  All of the above are correct.

Question 2

Figure 6-30
Panel a) Panel b)
     Panel c)  
-Refer to Figure 6-30. In which market will the tax burden be most equally divided between buyers and sellers?

Accepted Answer

A)  the market shown in panel a). 
B)  the market shown in panel b). 
C)  the market shown in panel c). 
D)  All of the above are correct. 
A)  the market shown in panel a). 
B)  the market shown in panel b). 
C)  the market shown in panel c). 
D)  All of the above are correct.

Question 3

Figure 6-21  
-Refer to Figure 6-21. What is the amount of the tax per unit?

Accepted Answer

A)  $1 
B)  $2 
C)  $3 
D)  $4 
A)  $1 
B)  $2 
C)  $3 
D)  $4

Question 4

The following table shows the demand and supply schedules in a particular market.
   If the government sets a price floor $2 above the equilibrium price, how many units will be sold in this market?

Accepted Answer

The equilibrium price is $3, so the pric

Question 5

Workers, rather than firms, bear most of the burden of the payroll tax.

Accepted Answer

A) True 
 B)False

Question 6

Figure 6-34  
-Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much is the burden of the tax on the buyers in this market?

Accepted Answer

With a $6 tax per unit, the pr

Question 7

A tax on sellers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied.

Accepted Answer

A) True 
 B)False

Question 8

A price ceiling is binding when it is set

Accepted Answer

A)  above the equilibrium price, causing a shortage. 
B)  above the equilibrium price, causing a surplus. 
C)  below the equilibrium price, causing a shortage. 
D)  below the equilibrium price, causing a surplus. 
A)  above the equilibrium price, causing a shortage. 
B)  above the equilibrium price, causing a surplus. 
C)  below the equilibrium price, causing a shortage. 
D)  below the equilibrium price, causing a surplus.

Question 9

If a price floor is not binding, then

Accepted Answer

A)  the equilibrium price is above the price floor. 
B)  the equilibrium price is below the price floor. 
C)  there will be a surplus in the market. 
D)  there will be a shortage in the market. 
A)  the equilibrium price is above the price floor. 
B)  the equilibrium price is below the price floor. 
C)  there will be a surplus in the market. 
D)  there will be a shortage in the market.

Question 10

The burden of a luxury tax falls

Accepted Answer

A)  more on the rich than on the middle class. 
B)  more on the poor than on the rich. 
C)  more on the middle class than on the rich. 
D)  equally on the rich, the middle class, and the poor. 
A)  more on the rich than on the middle class. 
B)  more on the poor than on the rich. 
C)  more on the middle class than on the rich. 
D)  equally on the rich, the middle class, and the poor.

Question 11

If a price floor is a binding constraint on a market, then

Accepted Answer

A)  the equilibrium price must be above the price floor. 
B)  the quantity demanded must exceed the quantity supplied. 
C)  sellers cannot sell all they want to sell at the price floor. 
D)  buyers cannot buy all they want to buy at the price floor. 
A)  the equilibrium price must be above the price floor. 
B)  the quantity demanded must exceed the quantity supplied. 
C)  sellers cannot sell all they want to sell at the price floor. 
D)  buyers cannot buy all they want to buy at the price floor.

Question 12

Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.

Accepted Answer

A) True 
 B)False

Question 13

Figure 6-20  
-Refer to Figure 6-20. Suppose a tax of $5 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 will. 
C)  Sellers will bear more of the burden of the tax than buyers will. 
D)  Any of the above is possible. 
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 will. 
C)  Sellers will bear more of the burden of the tax than buyers will. 
D)  Any of the above is possible.

Question 14

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

Accepted Answer

A)  demand curve will shift upward by $20, and the effective price received by sellers will increase by $20. 
B)  demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20. 
C)  supply curve will shift downward by $20, and the price paid by buyers will decrease by $20. 
D)  supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20. 
A)  demand curve will shift upward by $20, and the effective price received by sellers will increase by $20. 
B)  demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20. 
C)  supply curve will shift downward by $20, and the price paid by buyers will decrease by $20. 
D)  supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20.

Question 15

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.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

When a binding price floor is imposed on a market for a good, some people who want to sell the good cannot do so.

Accepted Answer

A) True 
 B)False

Question 18

A $0.10 tax levied on the sellers of chocolate bars will cause the

Accepted Answer

A)  supply curve for chocolate bars to shift down by $0.10. 
B)  supply curve for chocolate bars to shift up by $0.10. 
C)  demand curve for chocolate bars to shift down by $0.10. 
D)  demand curve for chocolate bars to shift up by $0.10. 
A)  supply curve for chocolate bars to shift down by $0.10. 
B)  supply curve for chocolate bars to shift up by $0.10. 
C)  demand curve for chocolate bars to shift down by $0.10. 
D)  demand curve for chocolate bars to shift up by $0.10.

Question 19

The housing shortages caused by rent control are larger in the long run than in the short run because both the supply of housing and the demand for housing are more elastic in the long run.

Accepted Answer

A) True 
 B)False

Question 20

Most labor economists believe that the supply of labor is much more elastic than the demand.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor,

Figure 6-30 Panel a) Panel b) Panel c) -Refer to Figure 6-30. In which market will the tax burden be most equally divided between buyers and sellers?

Figure 6-21 -Refer to Figure 6-21. What is the amount of the tax per unit?

The following table shows the demand and supply schedules in a particular market. If the government sets a price floor $2 above the equilibrium price, how many units will be sold in this market?

Workers, rather than firms, bear most of the burden of the payroll tax.

Figure 6-34 -Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much is the burden of the tax on the buyers in this market?

A tax on sellers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied.

A price ceiling is binding when it is set

If a price floor is not binding, then

The burden of a luxury tax falls

If a price floor is a binding constraint on a market, then

Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.

Figure 6-20 -Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. Which of the following is correct?

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

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

When a binding price floor is imposed on a market for a good, some people who want to sell the good cannot do so.

A $0.10 tax levied on the sellers of chocolate bars will cause the

The housing shortages caused by rent control are larger in the long run than in the short run because both the supply of housing and the demand for housing are more elastic in the long run.

Most labor economists believe that the supply of labor is much more elastic than the demand.

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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