Question 1

Price floors are typically imposed to benefit sellers.

Accepted Answer

A) True 
 B)False

Question 2

A binding price floor causes quantity supplied to be less than quantity demanded.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is correct?

Accepted Answer

A)  Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage raises the average wage of teenagers by 10 percent. 
B)  The drop in teenage employment caused by a 10 percent increase in the minimum wage is not significant. 
C)  The minimum wage is more often binding for teenagers than for other members of the labor force. 
D)  All firms consistently enforce minimum-wage laws. 
A)  Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage raises the average wage of teenagers by 10 percent. 
B)  The drop in teenage employment caused by a 10 percent increase in the minimum wage is not significant. 
C)  The minimum wage is more often binding for teenagers than for other members of the labor force. 
D)  All firms consistently enforce minimum-wage laws.

Question 4

A tax on sellers and an increase in input prices affect the supply curve in the same way.

Accepted Answer

A) True 
 B)False

Question 5

Figure 6-13
This figure shows the market demand and market supply curves for good X.  
-Refer to Figure 6-13. If the government imposes a price ceiling of $4 on this market, then there will be

Accepted Answer

A)  no shortage. 
B)  a shortage of 5 units. 
C)  a shortage of 10 units. 
D)  a shortage of 20 units. 
A)  no shortage. 
B)  a shortage of 5 units. 
C)  a shortage of 10 units. 
D)  a shortage of 20 units.

Question 6

Which of the following observations would be consistent with the imposition of a binding price floor on a market? After the price floor becomes effective,

Accepted Answer

A)  a smaller quantity of the good is bought and sold. 
B)  a larger quantity of the good is demanded. 
C)  a smaller quantity of the good is supplied. 
D)  the price falls below the equilibrium price. 
A)  a smaller quantity of the good is bought and sold. 
B)  a larger quantity of the good is demanded. 
C)  a smaller quantity of the good is supplied. 
D)  the price falls below the equilibrium price.

Question 7

The imposition of a binding price floor on a market

Accepted Answer

A)  causes quantity demanded to be greater than quantity supplied. 
B)  causes quantity demanded to be less than quantity supplied. 
C)  causes quantity demanded to be equal to quantity supplied. 
D)  causes a decrease in demand. 
A)  causes quantity demanded to be greater than quantity supplied. 
B)  causes quantity demanded to be less than quantity supplied. 
C)  causes quantity demanded to be equal to quantity supplied. 
D)  causes a decrease in demand.

Question 8

Not all sellers benefit from a binding price floor.

Accepted Answer

A) True 
 B)False

Question 9

Table 6-4
The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $3 above the equilibrium price in this market.
  
-Refer to Table 6-4. Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is

Accepted Answer

A)  $2. 
B)  $3. 
C)  $4. 
D)  $5. 
A)  $2. 
B)  $3. 
C)  $4. 
D)  $5.

Question 10

If the government removes a binding price floor from a market, then the price received by sellers will

Accepted Answer

A)  decrease, and the quantity sold in the market will decrease. 
B)  decrease, and the quantity sold in the market will increase. 
C)  increase, and the quantity sold in the market will decrease. 
D)  increase, and the quantity sold in the market will increase. 
A)  decrease, and the quantity sold in the market will decrease. 
B)  decrease, and the quantity sold in the market will increase. 
C)  increase, and the quantity sold in the market will decrease. 
D)  increase, and the quantity sold in the market will increase.

Question 11

Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price.

Accepted Answer

A) True 
 B)False

Question 12

Table 6-1
  
-Refer to Table 6-1. Suppose the government imposes a price ceiling of $40 on this market. What will be the size of the shortage in this market?

Accepted Answer

A)  0 units 
B)  400 units 
C)  1200 units 
D)  1600 units 
A)  0 units 
B)  400 units 
C)  1200 units 
D)  1600 units

Question 13

Figure 6-22  
-Refer to Figure 6-22. Buyers pay how much of the tax per unit?

Accepted Answer

A)  $0.50. 
B)  $1.50. 
C)  $3.00. 
D)  $5.00. 
A)  $0.50. 
B)  $1.50. 
C)  $3.00. 
D)  $5.00.

Question 14

One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

Accepted Answer

A)  He fears that low rents will cause low-income people to move into the city, reducing the quality of life for other people. 
B)  He fears that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. 
C)  He fears that rent controls will cause a construction boom, which will make the city crowded and more polluted. 
D)  He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city. 
A)  He fears that low rents will cause low-income people to move into the city, reducing the quality of life for other people. 
B)  He fears that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. 
C)  He fears that rent controls will cause a construction boom, which will make the city crowded and more polluted. 
D)  He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.

Question 15

Because the supply and demand of housing are inelastic in the short run, the initial shortage caused by rent control is large.

Accepted Answer

A) True 
 B)False

Question 16

A tax on sellers increases supply.

Accepted Answer

A) True 
 B)False

Question 17

A key lesson from the payroll tax is that the

Accepted Answer

A)  tax is a tax solely on workers. 
B)  tax is a tax solely on firms that hire workers. 
C)  tax eliminates any wedge that might exist between the wage that firms pay and the wage that workers receive. 
D)  true burden of a tax cannot be legislated. 
A)  tax is a tax solely on workers. 
B)  tax is a tax solely on firms that hire workers. 
C)  tax eliminates any wedge that might exist between the wage that firms pay and the wage that workers receive. 
D)  true burden of a tax cannot be legislated.

Question 18

Figure 6-7  
-Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?

Accepted Answer

A)  a price ceiling set at $6 
B)  a price ceiling set at $5 
C)  a price floor set at $9 
D)  a price floor set at $8 
A)  a price ceiling set at $6 
B)  a price ceiling set at $5 
C)  a price floor set at $9 
D)  a price floor set at $8

Question 19

Figure 6-23
  
-Refer to Figure 6-23. The price paid by buyers after the tax is imposed is

Accepted Answer

A)  $3. 
B)  $4. 
C)  $5. 
D)  $6. 
A)  $3. 
B)  $4. 
C)  $5. 
D)  $6.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

Price floors are typically imposed to benefit sellers.

A binding price floor causes quantity supplied to be less than quantity demanded.

Which of the following is correct?

A tax on sellers and an increase in input prices affect the supply curve in the same way.

Figure 6-13 This figure shows the market demand and market supply curves for good X. -Refer to Figure 6-13. If the government imposes a price ceiling of $4 on this market, then there will be

Which of the following observations would be consistent with the imposition of a binding price floor on a market? After the price floor becomes effective,

The imposition of a binding price floor on a market

Not all sellers benefit from a binding price floor.

If the government removes a binding price floor from a market, then the price received by sellers will

Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price.

Table 6-1 -Refer to Table 6-1. Suppose the government imposes a price ceiling of $40 on this market. What will be the size of the shortage in this market?

Figure 6-22 -Refer to Figure 6-22. Buyers pay how much of the tax per unit?

One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

Because the supply and demand of housing are inelastic in the short run, the initial shortage caused by rent control is large.

A tax on sellers increases supply.

A key lesson from the payroll tax is that the

Figure 6-7 -Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?

Figure 6-23 -Refer to Figure 6-23. The price paid by buyers after the tax is imposed is

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

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

Filters