Question 1

A tax on sellers reduces the size of a market.

Accepted Answer

A) True 
 B)False

Question 2

Advocates of the minimum wage

Accepted Answer

A)  deny that the minimum wage produces any adverse effects. 
B)  emphasize the benefits to teenagers of increases in the minimum wage. 
C)  emphasize the low annual incomes of those who work for the minimum wage. 
D)  All of the above are correct. 
A)  deny that the minimum wage produces any adverse effects. 
B)  emphasize the benefits to teenagers of increases in the minimum wage. 
C)  emphasize the low annual incomes of those who work for the minimum wage. 
D)  All of the above are correct.

Question 3

A tax on the buyers of cereal will increase the price of cereal paid by buyers,

Accepted Answer

A)  decrease the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal. 
B)  decrease the effective price of cereal received by sellers, and increase the equilibrium quantity of cereal. 
C)  increase the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal. 
D)  increase the effective price of cereal received by sellers, and increase the equilibrium quantity of cereal. 
A)  decrease the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal. 
B)  decrease the effective price of cereal received by sellers, and increase the equilibrium quantity of cereal. 
C)  increase the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal. 
D)  increase the effective price of cereal received by sellers, and increase the equilibrium quantity of cereal.

Question 4

Figure 6-6  
-Refer to Figure 6-6. If the government imposes a price ceiling of $6 on this market, then there will be

Accepted Answer

A)  no shortage. 
B)  a shortage of 10 units. 
C)  a shortage of 20 units. 
D)  a shortage of 30 units. 
A)  no shortage. 
B)  a shortage of 10 units. 
C)  a shortage of 20 units. 
D)  a shortage of 30 units.

Question 5

In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to

Accepted Answer

A)  raise revenue from the wealthy. 
B)  prevent wealthy people from buying luxuries. 
C)  force producers of luxury goods to reduce employment. 
D)  limit exports of luxury goods to other countries. 
A)  raise revenue from the wealthy. 
B)  prevent wealthy people from buying luxuries. 
C)  force producers of luxury goods to reduce employment. 
D)  limit exports of luxury goods to other countries.

Question 6

Figure 6-29
Suppose the government imposes a $2 on this market.  
-Refer to Figure 6-29. The buyers will bear a higher share of the tax burden than sellers if the demand is

Accepted Answer

A)  D1, and the supply is S1. 
B)  D2, and the supply is S1. 
C)  D1, and the supply is S2. 
D)  D2, and the supply is S2. 
A)  D1, and the supply is S1. 
B)  D2, and the supply is S1. 
C)  D1, and the supply is S2. 
D)  D2, and the supply is S2.

Question 7

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 8

Figure 6-23    
-Refer to Figure 6-23. How much tax revenue does this tax produce for the government?

Accepted Answer

A)  $18. 
B)  $30. 
C)  $6. 
D)  $36. 
A)  $18. 
B)  $30. 
C)  $6. 
D)  $36.

Question 9

If a binding price floor is imposed on the video game market, then

Accepted Answer

A)  the demand for video games will decrease. 
B)  the supply of video games will increase. 
C)  a surplus of video games will develop. 
D)  All of the above are correct. 
A)  the demand for video games will decrease. 
B)  the supply of video games will increase. 
C)  a surplus of video games will develop. 
D)  All of the above are correct.

Question 10

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 11

Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the

Accepted Answer

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

Question 12

Figure 6-13
This figure shows the market demand and market supply curves for good X.  
-Refer to Figure 6-13. Which of the following statements is not correct?

Accepted Answer

A)  A price ceiling set at $4 would be binding, but a price ceiling set at $6 would not be binding. 
B)  A price floor set at $7 would be binding, but a price floor set at $4 would not be binding. 
C)  A price ceiling set at $3.50 would result in a surplus. 
D)  A price floor set at $6.50 would result in a surplus. 
A)  A price ceiling set at $4 would be binding, but a price ceiling set at $6 would not be binding. 
B)  A price floor set at $7 would be binding, but a price floor set at $4 would not be binding. 
C)  A price ceiling set at $3.50 would result in a surplus. 
D)  A price floor set at $6.50 would result in a surplus.

Question 13

When a tax is placed on the buyers of tennis racquets, the size of the tennis racquet market

Accepted Answer

A)  and the price paid by buyers both decrease. 
B)  decreases, but the price paid by buyers increases. 
C)  increases, but the price paid by buyers decreases. 
D)  and the price paid by buyers both increase. 
A)  and the price paid by buyers both decrease. 
B)  decreases, but the price paid by buyers increases. 
C)  increases, but the price paid by buyers decreases. 
D)  and the price paid by buyers both increase.

Question 14

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

Accepted Answer

A)  no buyers actually benefit. 
B)  some buyers benefit, but no buyers are harmed. 
C)  some buyers benefit, and some buyers are harmed. 
D)  all buyers benefit. 
A)  no buyers actually benefit. 
B)  some buyers benefit, but no buyers are harmed. 
C)  some buyers benefit, and some buyers are harmed. 
D)  all buyers benefit.

Question 15

Price controls

Accepted Answer

A)  always produce a fair outcome. 
B)  always produce an efficient outcome. 
C)  can generate inequities of their own. 
D)  All of the above are correct. 
A)  always produce a fair outcome. 
B)  always produce an efficient outcome. 
C)  can generate inequities of their own. 
D)  All of the above are correct.

Question 16

When a tax is levied on buyers of tea,

Accepted Answer

A)  buyers of tea and sellers of tea both are made worse off. 
B)  buyers of tea are made worse off, and the well-being of sellers is unaffected. 
C)  buyers of tea are made worse off, and sellers of tea are made better off. 
D)  the well-being of both buyers of tea and sellers of tea is unaffected. 
A)  buyers of tea and sellers of tea both are made worse off. 
B)  buyers of tea are made worse off, and the well-being of sellers is unaffected. 
C)  buyers of tea are made worse off, and sellers of tea are made better off. 
D)  the well-being of both buyers of tea and sellers of tea is unaffected.

Question 17

Which of the following causes a shortage of a good?

Accepted Answer

A)  a binding price floor 
B)  a binding price ceiling 
C)  a tax on the good 
D)  None of the above is correct. 
A)  a binding price floor 
B)  a binding price ceiling 
C)  a tax on the good 
D)  None of the above is correct.

Question 18

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 19

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

Accepted Answer

A price ceiling set at $4 woul

Question 20

Figure 6-5  
-Refer to Figure 6-5. If the horizontal line on the graph represents a price ceiling, then the price ceiling is

Accepted Answer

A)  binding and creates a surplus of 60 units of the good. 
B)  binding and creates a surplus of 20 units of the good. 
C)  not binding but creates a surplus 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 surplus of 60 units of the good. 
B)  binding and creates a surplus of 20 units of the good. 
C)  not binding but creates a surplus of 40 units of the good. 
D)  not binding, and there will be no surplus or shortage of the good.

Exam 6: Supply, Demand, and Government Policies

A tax on sellers reduces the size of a market.

Advocates of the minimum wage

A tax on the buyers of cereal will increase the price of cereal paid by buyers,

Figure 6-6 -Refer to Figure 6-6. If the government imposes a price ceiling of $6 on this market, then there will be

In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to

Figure 6-29 Suppose the government imposes a $2 on this market. -Refer to Figure 6-29. The buyers will bear a higher share of the tax burden than sellers if the demand is

Figure 6-23 -Refer to Figure 6-23. How much tax revenue does this tax produce for the government?

If a binding price floor is imposed on the video game market, then

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

Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the

Figure 6-13 This figure shows the market demand and market supply curves for good X. -Refer to Figure 6-13. Which of the following statements is not correct?

When a tax is placed on the buyers of tennis racquets, the size of the tennis racquet market

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

Price controls

When a tax is levied on buyers of tea,

Which of the following causes a shortage of a good?

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

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

Figure 6-5 -Refer to Figure 6-5. If the horizontal line on the graph represents a price ceiling, then the price ceiling 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

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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