Question 1

Price ceilings and price floors that are binding

Accepted Answer

A)  are desirable because they make markets more efficient and more fair. 
B)  cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price. 
C)  can have the effect of restoring a market to equilibrium. 
D)  are imposed because they can make the poor in the economy better off without causing adverse effects. 
A)  are desirable because they make markets more efficient and more fair. 
B)  cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price. 
C)  can have the effect of restoring a market to equilibrium. 
D)  are imposed because they can make the poor in the economy better off without causing adverse effects.

Question 2

Table 6-2
  
-Refer to Table 6-2. A price ceiling set at $5 results in

Accepted Answer

A)  50 units sold. 
B)  250 units sold. 
C)  300 units sold. 
D)  350 units sold. 
A)  50 units sold. 
B)  250 units sold. 
C)  300 units sold. 
D)  350 units sold.

Question 3

Price controls are usually enacted

Accepted Answer

A)  as a means of raising revenue for public purposes. 
B)  when policymakers believe that the market price of a good or service is unfair to buyers or sellers. 
C)  when policymakers tax a good. 
D)  All of the above are correct. 
A)  as a means of raising revenue for public purposes. 
B)  when policymakers believe that the market price of a good or service is unfair to buyers or sellers. 
C)  when policymakers tax a good. 
D)  All of the above are correct.

Question 4

Table 6-1
  
-Refer to Table 6-1. Which of the following price floors would be binding in this market?

Accepted Answer

A)  $70 
B)  $60 
C)  $5 
D)  $40 
A)  $70 
B)  $60 
C)  $5 
D)  $40

Question 5

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Accepted Answer

A) True 
 B)False

Question 6

Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

Accepted Answer

A) True 
 B)False

Question 7

Suppose the equilibrium price of a physical examination "physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

Accepted Answer

A)  demand curve for physicals shifts to the right. 
B)  supply curve for physicals shifts to the left. 
C)  quantity demanded of physicals increases, and the quantity supplied of physicals decreases. 
D)  number of physicals performed stays the same. 
A)  demand curve for physicals shifts to the right. 
B)  supply curve for physicals shifts to the left. 
C)  quantity demanded of physicals increases, and the quantity supplied of physicals decreases. 
D)  number of physicals performed stays the same.

Question 8

A tax of $1 on sellers shifts the supply curve upward by exactly $1.

Accepted Answer

A) True 
 B)False

Question 9

Table 6-6
  
-Refer to Table 6-6. If the government set a price floor at $4, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price floor set at

Question 10

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 11

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 12

A binding price ceiling causes a shortage in the market.

Accepted Answer

A) True 
 B)False

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  price paid by buyers and lower the equilibrium quantity. 
B)  price paid by buyers and raise the equilibrium quantity. 
C)  effective price received by sellers and lower the equilibrium quantity. 
D)  effective price received by sellers and raise the equilibrium quantity. 
A)  price paid by buyers and lower the equilibrium quantity. 
B)  price paid by buyers and raise the equilibrium quantity. 
C)  effective price received by sellers and lower the equilibrium quantity. 
D)  effective price received by sellers and raise the equilibrium quantity.

Question 15

Figure 6-22  
-Refer to Figure 6-22. The equilibrium price in the market before the tax is imposed is

Accepted Answer

A)  $3.50. 
B)  $5.00. 
C)  $2.00. 
D)  $1.50. 
A)  $3.50. 
B)  $5.00. 
C)  $2.00. 
D)  $1.50.

Question 16

If the government wants to reduce smoking, it should impose a tax on

Accepted Answer

A)  buyers of cigarettes. 
B)  sellers of cigarettes. 
C)  either buyers or sellers of cigarettes. 
D)  whichever side of the market is less elastic. 
A)  buyers of cigarettes. 
B)  sellers of cigarettes. 
C)  either buyers or sellers of cigarettes. 
D)  whichever side of the market is less elastic.

Question 17

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. Is this price floor binding, and what will be the size of the shortage/surplus in this market?

Accepted Answer

The price floor will not be bi

Question 18

A $5 tax levied on the buyers of pants will cause the

Accepted Answer

A)  supply curve for pants to shift down by $5. 
B)  supply curve for pants to shift up by $5. 
C)  demand curve for pants to shift down by $5. 
D)  demand curve for pants to shift up by $5. 
A)  supply curve for pants to shift down by $5. 
B)  supply curve for pants to shift up by $5. 
C)  demand curve for pants to shift down by $5. 
D)  demand curve for pants to shift up by $5.

Question 19

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

Accepted Answer

A)  every buyer in the market benefits. 
B)  every buyer and seller in the market benefits. 
C)  every buyer who wants to buy the good will be able to do so, but only if he waits in long lines. 
D)  some buyers will not be able to buy any amount of the good. 
A)  every buyer in the market benefits. 
B)  every buyer and seller in the market benefits. 
C)  every buyer who wants to buy the good will be able to do so, but only if he waits in long lines. 
D)  some buyers will not be able to buy any amount of the good.

Question 20

When OPEC raised the price of crude oil in the 1970s, it caused the

Accepted Answer

A)  demand for gasoline to increase. 
B)  demand for gasoline to decrease. 
C)  supply of gasoline to increase. 
D)  supply of gasoline to decrease. 
A)  demand for gasoline to increase. 
B)  demand for gasoline to decrease. 
C)  supply of gasoline to increase. 
D)  supply of gasoline to decrease.

Exam 6: Supply, Demand, and Government Policies

Price ceilings and price floors that are binding

Table 6-2 -Refer to Table 6-2. A price ceiling set at $5 results in

Price controls are usually enacted

Table 6-1 -Refer to Table 6-1. Which of the following price floors would be binding in this market?

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

Suppose the equilibrium price of a physical examination "physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

A tax of $1 on sellers shifts the supply curve upward by exactly $1.

Table 6-6 -Refer to Table 6-6. If the government set a price floor at $4, would there be a shortage or surplus, and how large would be the shortage/surplus?

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

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.

A binding price ceiling causes a shortage in 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 tax imposed on the buyers of a good will lower the

Figure 6-22 -Refer to Figure 6-22. The equilibrium price in the market before the tax is imposed is

If the government wants to reduce smoking, it should impose a tax on

A $5 tax levied on the buyers of pants will cause the

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

When OPEC raised the price of crude oil in the 1970s, it caused 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

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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