Exam 6: Supply, Demand, and Government Policies

Scenario 6-1 Suppose that demand in the market for good X is given by the equation and that supply in the market for good X is given by the equation -Refer to Scenario 6-1. If the government set a price floor at $7, would there be a shortage or surplus, and how large would be the shortage/surplus?

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

A tax imposed on the buyers of a good will raise the

Figure 6-5 -Refer to Figure 6-5. If the horizontal line on the graph represents a price floor, then the price floor is

The burden of a luxury tax most likely falls more heavily on sellers because demand is more elastic and supply is more inelastic.

Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $20 per ticket, then the

If a tax is imposed on the buyers of a product, then the tax burden will fall entirely on the buyers.

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

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

Figure 6-4 -Refer to Figure 6-4. A government-imposed price floor of $12 in this market results in

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

Scenario 6-1 Suppose that demand in the market for good X is given by the equation and that supply in the market for good X is given by the equation -Refer to Scenario 6-1. If the government set a price ceiling at $8, would there be a shortage or surplus, and how large would be the shortage/surplus?

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 sellers in this market?

If the government removes a binding price floor from a market, then the price paid by buyers will

A legal minimum on the price at which a good can be sold is called a

When a binding price ceiling is imposed on a market to benefit buyers,

A tax of $1 on buyers shifts the demand curve downward by exactly $1.

A tax imposed on the buyers of a good will

A tax on buyers increases the size of a market.

If the government removes a binding price ceiling from a market, then the price paid by buyers will