Question 1

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

Accepted Answer

A)  floor. 
B)  subsidy. 
C)  support. 
D)  ceiling. 
A)  floor. 
B)  subsidy. 
C)  support. 
D)  ceiling.

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

When a tax is imposed on a good, the result is always a shortage of the good.

Accepted Answer

A) True 
 B)False

Question 4

The Earned Income Tax Credit is an example of a

Accepted Answer

A)  minimum-wage law. 
B)  price ceiling. 
C)  wage subsidy. 
D)  rent subsidy. 
A)  minimum-wage law. 
B)  price ceiling. 
C)  wage subsidy. 
D)  rent subsidy.

Question 5

Figure 6-26  
-Refer to Figure 6-26. The price paid by buyers after the tax is imposed is

Accepted Answer

A)  $8. 
B)  $16. 
C)  $14. 
D)  $12. 
A)  $8. 
B)  $16. 
C)  $14. 
D)  $12.

Question 6

A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.

Accepted Answer

A) True 
 B)False

Question 7

When a tax is imposed on the sellers of a good, the supply curve shifts

Accepted Answer

A)  upward by the amount of the tax. 
B)  downward by the amount of the tax. 
C)  upward by less than the amount of the tax. 
D)  downward by less than the amount of the tax. 
A)  upward by the amount of the tax. 
B)  downward by the amount of the tax. 
C)  upward by less than the amount of the tax. 
D)  downward by less than the amount of the tax.

Question 8

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

Accepted Answer

A)  nonbinding price floor on gasoline to become binding. 
B)  binding price floor on gasoline to become nonbinding. 
C)  nonbinding price ceiling on gasoline to become binding. 
D)  binding price ceiling on gasoline to become nonbinding. 
A)  nonbinding price floor on gasoline to become binding. 
B)  binding price floor on gasoline to become nonbinding. 
C)  nonbinding price ceiling on gasoline to become binding. 
D)  binding price ceiling on gasoline to become nonbinding.

Question 9

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

Accepted Answer

A)  less than $0.50 
B)  $0.50. 
C)  between $0.50 and $1. 
D)  $1. 
A)  less than $0.50 
B)  $0.50. 
C)  between $0.50 and $1. 
D)  $1.

Question 10

Figure 6-34  
-Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, what price will buyers pay per unit after the tax is imposed?

Accepted Answer

With a $6 tax per un

Question 11

A tax imposed on the buyers of a good will raise 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 12

As rationing mechanisms, prices

Accepted Answer

A)  and long lines are efficient. 
B)  are efficient, but long lines are inefficient. 
C)  are inefficient, but long lines are efficient. 
D)  and long lines are inefficient. 
A)  and long lines are efficient. 
B)  are efficient, but long lines are inefficient. 
C)  are inefficient, but long lines are efficient. 
D)  and long lines are inefficient.

Question 13

A surplus results when a

Accepted Answer

A)  nonbinding price floor is imposed on a market. 
B)  nonbinding price floor is removed from a market. 
C)  binding price floor is imposed on a market. 
D)  binding price floor is removed from a market. 
A)  nonbinding price floor is imposed on a market. 
B)  nonbinding price floor is removed from a market. 
C)  binding price floor is imposed on a market. 
D)  binding price floor is removed from a market.

Question 14

Suppose sellers of liquor are required to send $5.00 to the government for every bottle of liquor they sell. Further, suppose this tax causes the price paid by buyers of liquor to rise by $3.00 per bottle. Which of the following statements is correct?

Accepted Answer

A)  This tax causes the supply curve for liquor to shift upward by $5.00 at each quantity of liquor. 
B)  The effective price received by sellers is $5.00 per bottle less than it was before the tax. 
C)  Forty percent of the burden of the tax falls on buyers. 
D)  All of the above are correct. 
A)  This tax causes the supply curve for liquor to shift upward by $5.00 at each quantity of liquor. 
B)  The effective price received by sellers is $5.00 per bottle less than it was before the tax. 
C)  Forty percent of the burden of the tax falls on buyers. 
D)  All of the above are correct.

Question 15

States in the U.S. may mandate minimum wages above the federal level.

Accepted Answer

A) True 
 B)False

Question 16

Figure 6-12  
-Refer to Figure 6-12. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is

Accepted Answer

A)  less than Q3. 
B)  Q3. 
C)  between Q1 and Q3. 
D)  at least Q1. 
A)  less than Q3. 
B)  Q3. 
C)  between Q1 and Q3. 
D)  at least Q1.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Most labor economists believe that the supply of labor is

Accepted Answer

A)  less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. 
B)  less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. 
C)  more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. 
D)  more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. 
A)  less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. 
B)  less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. 
C)  more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. 
D)  more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

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

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?

When a tax is imposed on a good, the result is always a shortage of the good.

The Earned Income Tax Credit is an example of a

Figure 6-26 -Refer to Figure 6-26. The price paid by buyers after the tax is imposed is

A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.

When a tax is imposed on the sellers of a good, the supply curve shifts

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

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

Figure 6-34 -Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, what price will buyers pay per unit after the tax is imposed?

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

As rationing mechanisms, prices

A surplus results when a

Suppose sellers of liquor are required to send $5.00 to the government for every bottle of liquor they sell. Further, suppose this tax causes the price paid by buyers of liquor to rise by $3.00 per bottle. Which of the following statements is correct?

States in the U.S. may mandate minimum wages above the federal level.

Figure 6-12 -Refer to Figure 6-12. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is

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

Most labor economists believe that the supply of labor is

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

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

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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