Question 1

A tax on buyers shifts the demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the government imposes a $40 tax on the buyers of refrigerators. The tax would

Accepted Answer

A)  shift the demand curve downward by less than $40. 
B)  raise the equilibrium price by $40. 
C)  create a $20 tax burden each for buyers and sellers. 
D)  discourage market activity. 
A)  shift the demand curve downward by less than $40. 
B)  raise the equilibrium price by $40. 
C)  create a $20 tax burden each for buyers and sellers. 
D)  discourage market activity.

Question 3

Will a binding price floor result in a shortage or a surplus in the market?

Accepted Answer

A binding price floo

Question 4

If a price floor is not binding, then

Accepted Answer

A)  the equilibrium price is above the price floor. 
B)  the equilibrium price is below the price floor. 
C)  there will be a surplus in the market. 
D)  there will be a shortage in the market. 
A)  the equilibrium price is above the price floor. 
B)  the equilibrium price is below the price floor. 
C)  there will be a surplus in the market. 
D)  there will be a shortage in the market.

Question 5

The Federal Insurance Contribution Act (FICA) tax is an example of a(n)

Accepted Answer

A)  payroll tax. 
B)  sales tax. 
C)  farm subsidy. 
D)  income subsidy. 
A)  payroll tax. 
B)  sales tax. 
C)  farm subsidy. 
D)  income subsidy.

Question 6

Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is correct? A tax burden

Accepted Answer

A)  falls more heavily on the side of the market that is more elastic. 
B)  falls more heavily on the side of the market that is less elastic. 
C)  falls more heavily on the side of the market that is closest to unit elastic. 
D)  is distributed independently of the relative elasticities of supply and demand. 
A)  falls more heavily on the side of the market that is more elastic. 
B)  falls more heavily on the side of the market that is less elastic. 
C)  falls more heavily on the side of the market that is closest to unit elastic. 
D)  is distributed independently of the relative elasticities of supply and demand.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

A price floor will be binding only if it is set

Accepted Answer

A)  equal to the equilibrium price. 
B)  above the equilibrium price. 
C)  below the equilibrium price. 
D)  either above or below the equilibrium price. 
A)  equal to the equilibrium price. 
B)  above the equilibrium price. 
C)  below the equilibrium price. 
D)  either above or below the equilibrium price.

Question 10

Which of the following is not a function of prices in a market system?

Accepted Answer

A)  Prices have the crucial job of balancing supply and demand. 
B)  Prices send signals to buyers and sellers to help them make rational economic decisions. 
C)  Prices coordinate economic activity. 
D)  Prices ensure an equal distribution of goods and services among consumers. 
A)  Prices have the crucial job of balancing supply and demand. 
B)  Prices send signals to buyers and sellers to help them make rational economic decisions. 
C)  Prices coordinate economic activity. 
D)  Prices ensure an equal distribution of goods and services among consumers.

Question 11

Tax incidence

Accepted Answer

A)  depends on the legislated burden. 
B)  is entirely random. 
C)  depends on the elasticities of supply and demand. 
D)  falls entirely on buyers or entirely on sellers. 
A)  depends on the legislated burden. 
B)  is entirely random. 
C)  depends on the elasticities of supply and demand. 
D)  falls entirely on buyers or entirely on sellers.

Question 12

Suppose that the demand for digital cameras is elastic, and the supply of digital cameras is inelastic. A tax of $20 per camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by

Accepted Answer

A)  less than $10 
B)  $10. 
C)  between $10 and $20. 
D)  $20. 
A)  less than $10 
B)  $10. 
C)  between $10 and $20. 
D)  $20.

Question 13

Figure 6-27
This figure shows the market demand and market supply curves for good Z.  
-Refer to Figure 6-27. Suppose a tax of $6 per unit is imposed on this market. Which of the following is correct?

Accepted Answer

A)  Buyers and sellers will share the burden of the tax equally. 
B)  Buyers will bear more of the burden of the tax than sellers will. 
C)  Sellers will bear more of the burden of the tax than buyers will. 
D)  Any of the above is possible. 
A)  Buyers and sellers will share the burden of the tax equally. 
B)  Buyers will bear more of the burden of the tax than sellers will. 
C)  Sellers will bear more of the burden of the tax than buyers will. 
D)  Any of the above is possible.

Question 14

Figure 6-31  
-Refer to Figure 6-31. If the government set a price floor at $17, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price floor set at

Question 15

Figure 6-14  
-Refer to Figure 6-14. If the horizontal line on the graph represents a price floor, then the price floor is

Accepted Answer

A)  binding and creates a shortage of 20 units of the good. 
B)  binding and creates a shortage of 40 units of the good. 
C)  not binding but creates a shortage of 40 units of the good. 
D)  not binding, and there will be no surplus or shortage of the good. 
A)  binding and creates a shortage of 20 units of the good. 
B)  binding and creates a shortage of 40 units of the good. 
C)  not binding but creates a shortage of 40 units of the good. 
D)  not binding, and there will be no surplus or shortage of the good.

Question 16

A payroll tax is a

Accepted Answer

A)  fixed number of dollars that every firm must pay to the government for each worker that the firm hires. 
B)  tax that each firm must pay to the government before the firm can hire workers and operate its business. 
C)  tax on the wages that firms pay their workers. 
D)  tax on all wages above the minimum wage. 
A)  fixed number of dollars that every firm must pay to the government for each worker that the firm hires. 
B)  tax that each firm must pay to the government before the firm can hire workers and operate its business. 
C)  tax on the wages that firms pay their workers. 
D)  tax on all wages above the minimum wage.

Question 17

Table 6-1  
-Refer to Table 6-1. Suppose the government imposes a price floor of $70 on this market. What will be the size of the surplus in this market?

Accepted Answer

A)  0 units 
B)  400 units 
C)  600 units 
D)  1000 units 
A)  0 units 
B)  400 units 
C)  600 units 
D)  1000 units

Question 18

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 19

Rent subsidies and wage subsidies are better than price controls at helping the poor because they have no costs associated with them.

Accepted Answer

A) True 
 B)False

Question 20

Figure 6-11  
-Refer to Figure 6-11. Which of the following statements is not correct?

Accepted Answer

A)  A government-imposed price of $8 would be a binding price floor if market demand is Demand A and a binding price ceiling if market demand is Demand B. 
B)  A government-imposed price of $10 would be a binding price ceiling if market demand is either Demand A or Demand B. 
C)  A government-imposed price of $4 would be a binding price ceiling if market demand is either Demand A or Demand B. 
D)  A government-imposed price of $10 would be a binding price floor if market demand is Demand A and a non-binding price ceiling if market demand is Demand B. 
A)  A government-imposed price of $8 would be a binding price floor if market demand is Demand A and a binding price ceiling if market demand is Demand B. 
B)  A government-imposed price of $10 would be a binding price ceiling if market demand is either Demand A or Demand B. 
C)  A government-imposed price of $4 would be a binding price ceiling if market demand is either Demand A or Demand B. 
D)  A government-imposed price of $10 would be a binding price floor if market demand is Demand A and a non-binding price ceiling if market demand is Demand B.

Exam 6: Supply, Demand, and Government Policies

A tax on buyers shifts the demand curve to the right.

Suppose the government imposes a $40 tax on the buyers of refrigerators. The tax would

Will a binding price floor result in a shortage or a surplus in the market?

If a price floor is not binding, then

The Federal Insurance Contribution Act (FICA) tax is an example of a(n)

Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.

Which of the following is correct? A tax burden

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

A price floor will be binding only if it is set

Which of the following is not a function of prices in a market system?

Tax incidence

Suppose that the demand for digital cameras is elastic, and the supply of digital cameras is inelastic. A tax of $20 per camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by

Figure 6-27 This figure shows the market demand and market supply curves for good Z. -Refer to Figure 6-27. Suppose a tax of $6 per unit is imposed on this market. Which of the following is correct?

Figure 6-31 -Refer to Figure 6-31. If the government set a price floor at $17, would there be a shortage or surplus, and how large would be the shortage/surplus?

Figure 6-14 -Refer to Figure 6-14. If the horizontal line on the graph represents a price floor, then the price floor is

A payroll tax is a

Table 6-1 -Refer to Table 6-1. Suppose the government imposes a price floor of $70 on this market. What will be the size of the surplus in this market?

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

Rent subsidies and wage subsidies are better than price controls at helping the poor because they have no costs associated with them.

Figure 6-11 -Refer to Figure 6-11. Which of the following statements is not correct?

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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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