Question 1

The presence of a price control in a market for a good or service usually is an indication that

Accepted Answer

A)  an insufficient quantity of the good or service was being produced in that market to meet the public's need. 
B)  the usual forces of supply and demand were not able to establish an equilibrium price in that market. 
C)  policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. 
D)  policymakers correctly believed that price controls would generate no inequities of their own once imposed. 
A)  an insufficient quantity of the good or service was being produced in that market to meet the public's need. 
B)  the usual forces of supply and demand were not able to establish an equilibrium price in that market. 
C)  policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. 
D)  policymakers correctly believed that price controls would generate no inequities of their own once imposed.

Question 2

Figure 6-21  
-Refer to Figure 6-21. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. Acme is left with how much money?

Accepted Answer

A)  $8.00 
B)  $9.00 
C)  $10.50 
D)  $12.00 
A)  $8.00 
B)  $9.00 
C)  $10.50 
D)  $12.00

Question 3

A binding minimum wage creates a surplus of labor.

Accepted Answer

A) True 
 B)False

Question 4

A tax on the buyers of cameras encourages

Accepted Answer

A)  sellers to supply a smaller quantity at every price. 
B)  buyers to demand a smaller quantity at every price. 
C)  sellers to supply a larger quantity at every price. 
D)  Both a) and b) are correct. 
A)  sellers to supply a smaller quantity at every price. 
B)  buyers to demand a smaller quantity at every price. 
C)  sellers to supply a larger quantity at every price. 
D)  Both a) and b) are correct.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

Accepted Answer

A) True 
 B)False

Question 7

If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax on buyers of gasoline, then the price paid by buyers will

Accepted Answer

A)  increase, and the price received by sellers will increase. 
B)  increase, and the price received by sellers will not change. 
C)  not change, and the price received by sellers will increase. 
D)  not change, and the price received by sellers will not change. 
A)  increase, and the price received by sellers will increase. 
B)  increase, and the price received by sellers will not change. 
C)  not change, and the price received by sellers will increase. 
D)  not change, and the price received by sellers will not change.

Question 8

If a price floor is not binding, then

Accepted Answer

A)  there will be a surplus in the market. 
B)  there will be a shortage in the market. 
C)  there will be no effect on the market price or quantity sold. 
D)  the market will be less efficient than it would be without the price floor. 
A)  there will be a surplus in the market. 
B)  there will be a shortage in the market. 
C)  there will be no effect on the market price or quantity sold. 
D)  the market will be less efficient than it would be without the price floor.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Table 6-5
  
-Refer to Table 6-5. Which of the following price ceilings would be binding in this market?

Accepted Answer

A)  $3 
B)  $6 
C)  $9 
D)  None of the above price ceilings would be binding. 
A)  $3 
B)  $6 
C)  $9 
D)  None of the above price ceilings would be binding.

Question 11

An outcome that can result from either a price ceiling or a price floor is

Accepted Answer

A)  an enhancement of efficiency. 
B)  undesirable rationing mechanisms. 
C)  a surplus. 
D)  a shortage. 
A)  an enhancement of efficiency. 
B)  undesirable rationing mechanisms. 
C)  a surplus. 
D)  a shortage.

Question 12

A nonbinding price floor i) causes a surplus.
Ii) causes a shortage.
Iii) is set at a price above the equilibrium price.
Iv) is set at a price below the equilibrium price.

Accepted Answer

A)  iii) only 
B)  iv) only 
C)  i) and iii) only 
D)  ii) and iv) only 
A)  iii) only 
B)  iv) only 
C)  i) and iii) only 
D)  ii) and iv) only

Question 13

Figure 6-5  
-Refer to Figure 6-5. If government imposes a price floor at $9, then the price floor causes

Accepted Answer

A)  quantity demanded to decrease by 40 units. 
B)  quantity supplied to increase by 20 units. 
C)  a surplus of 60 units. 
D)  All of the above are correct. 
A)  quantity demanded to decrease by 40 units. 
B)  quantity supplied to increase by 20 units. 
C)  a surplus of 60 units. 
D)  All of the above are correct.

Question 14

Figure 6-7  
-Refer to Figure 6-7. For a price floor to be binding in this market, it would have to be set at

Accepted Answer

A)  any price below $7. 
B)  any price below $3. 
C)  any price below $9. 
D)  any price above $7. 
A)  any price below $7. 
B)  any price below $3. 
C)  any price below $9. 
D)  any price above $7.

Question 15

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, the

Accepted Answer

A)  demand curve for toothpaste shifts to the left. 
B)  supply curve for toothpaste shifts to the right. 
C)  quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases. 
D)  quantity supplied of toothpaste stays the same. 
A)  demand curve for toothpaste shifts to the left. 
B)  supply curve for toothpaste shifts to the right. 
C)  quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases. 
D)  quantity supplied of toothpaste stays the same.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Table 6-6
  
-Refer to Table 6-6. If the government set a price floor at $2, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price floor set at $2 would

Question 18

Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the

Accepted Answer

A)  demand is more inelastic than the supply. 
B)  supply is more inelastic than the demand. 
C)  government has required that buyers remit the tax payments. 
D)  government has required that sellers remit the tax payments. 
A)  demand is more inelastic than the supply. 
B)  supply is more inelastic than the demand. 
C)  government has required that buyers remit the tax payments. 
D)  government has required that sellers remit the tax payments.

Question 19

The goal of rent control is to

Accepted Answer

A)  facilitate controlled economic experiments in urban areas. 
B)  help landlords by assuring them a low vacancy rate for their apartments. 
C)  help the poor by assuring them an adequate supply of apartments. 
D)  help the poor by making housing more affordable. 
A)  facilitate controlled economic experiments in urban areas. 
B)  help landlords by assuring them a low vacancy rate for their apartments. 
C)  help the poor by assuring them an adequate supply of apartments. 
D)  help the poor by making housing more affordable.

Question 20

Figure 6-25  
-Refer to Figure 6-25. The equilibrium price in the market before the tax is imposed is

Accepted Answer

A)  $1. 
B)  $2. 
C)  $5. 
D)  $6. 
A)  $1. 
B)  $2. 
C)  $5. 
D)  $6.

Exam 6: Supply, Demand, and Government Policies

The presence of a price control in a market for a good or service usually is an indication that

Figure 6-21 -Refer to Figure 6-21. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. Acme is left with how much money?

A binding minimum wage creates a surplus of labor.

A tax on the buyers of cameras encourages

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

Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax on buyers of gasoline, then the price paid by buyers will

If a price floor is not binding, then

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

Table 6-5 -Refer to Table 6-5. Which of the following price ceilings would be binding in this market?

An outcome that can result from either a price ceiling or a price floor is

A nonbinding price floor i) causes a surplus. Ii) causes a shortage. Iii) is set at a price above the equilibrium price. Iv) is set at a price below the equilibrium price.

Figure 6-5 -Refer to Figure 6-5. If government imposes a price floor at $9, then the price floor causes

Figure 6-7 -Refer to Figure 6-7. For a price floor to be binding in this market, it would have to be set at

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, the

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

Table 6-6 -Refer to Table 6-6. If the government set a price floor at $2, would there be a shortage or surplus, and how large would be the shortage/surplus?

Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the

The goal of rent control is to

Figure 6-25 -Refer to Figure 6-25. The equilibrium price in the market before the tax is imposed is

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

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

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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