Question 1

Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect

Accepted Answer

A)  most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. 
B)  most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. 
C)  the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government. 
D)  a large percentage of smokers to quit smoking in response to the tax. 
A)  most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. 
B)  most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. 
C)  the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government. 
D)  a large percentage of smokers to quit smoking in response to the tax.

Question 2

Figure 6-21  
-Refer to Figure 6-21. In the after-tax equilibrium, how much revenue does the government collect from the tax on this good?

Accepted Answer

A)  $210 
B)  $345 
C)  $420 
D)  $480 
A)  $210 
B)  $345 
C)  $420 
D)  $480

Question 3

If the demand curve is more price elastic than the supply curve, will the buyers or the sellers bear a greater burden of a tax? Draw a diagram to illustrate your answer.

Accepted Answer

When the demand curve is more elastic th

Question 4

The tax burden will fall most heavily on buyers of the good when the demand curve

Accepted Answer

A)  is relatively steep, and the supply curve is relatively flat. 
B)  is relatively flat, and the supply curve is relatively steep. 
C)  and the supply curve are both relatively flat. 
D)  and the supply curve are both relatively steep. 
A)  is relatively steep, and the supply curve is relatively flat. 
B)  is relatively flat, and the supply curve is relatively steep. 
C)  and the supply curve are both relatively flat. 
D)  and the supply curve are both relatively steep.

Question 5

A tax on sellers increases the quantity of the good sold in the market.

Accepted Answer

A) True 
 B)False

Question 6

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

Accepted Answer

A)  shift the supply curve upward by less than 50 cents. 
B)  raise the equilibrium price by 50 cents. 
C)  create a 50-cent tax burden each for buyers and sellers. 
D)  discourage market activity. 
A)  shift the supply curve upward by less than 50 cents. 
B)  raise the equilibrium price by 50 cents. 
C)  create a 50-cent tax burden each for buyers and sellers. 
D)  discourage market activity.

Question 7

When a tax is imposed on the buyers of a good, the demand 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

In a free, competitive market, what is the rationing mechanism?

Accepted Answer

A)  seller bias 
B)  buyer bias 
C)  government law 
D)  price 
A)  seller bias 
B)  buyer bias 
C)  government law 
D)  price

Question 9

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 10

Figure 6-34  
-Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how many units will be bought and sold in the market after the tax is imposed?

Accepted Answer

With a $6 tax per un

Question 11

Rent control policies tend to cause

Accepted Answer

A)  relatively smaller shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. 
B)  relatively larger shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. 
C)  relatively larger shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run. 
D)  relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run. 
A)  relatively smaller shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. 
B)  relatively larger shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. 
C)  relatively larger shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run. 
D)  relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run.

Question 12

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 13

Figure 6-24  
-Refer to Figure 6-24. Suppose sellers, rather than buyers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on buyers, the tax on sellers would result in

Accepted Answer

A)  buyers bearing the same share of the tax burden. 
B)  sellers bearing the same share of the tax burden. 
C)  the same amount of tax revenue for the government. 
D)  All of the above are correct. 
A)  buyers bearing the same share of the tax burden. 
B)  sellers bearing the same share of the tax burden. 
C)  the same amount of tax revenue for the government. 
D)  All of the above are correct.

Question 14

Table 6-2  
-Refer to Table 6-2. A price floor set at $20 will

Accepted Answer

A)  be binding and will result in a surplus of 75 units. 
B)  be binding and will result in a surplus of 125 units. 
C)  be binding and will result in a surplus of 200 units. 
D)  not be binding. 
A)  be binding and will result in a surplus of 75 units. 
B)  be binding and will result in a surplus of 125 units. 
C)  be binding and will result in a surplus of 200 units. 
D)  not be binding.

Question 15

A price ceiling set below the equilibrium price is binding.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not correct?

Accepted Answer

A)  Economists have two roles: scientist and policy adviser. 
B)  As scientists, economists develop and test theories to explain the world around them. 
C)  Economic policies rarely have effects that their architects did not intend or anticipate. 
D)  As policy advisers, economists use their theories to help change the world for the better. 
A)  Economists have two roles: scientist and policy adviser. 
B)  As scientists, economists develop and test theories to explain the world around them. 
C)  Economic policies rarely have effects that their architects did not intend or anticipate. 
D)  As policy advisers, economists use their theories to help change the world for the better.

Question 17

Figure 6-4  
-Refer to Figure 6-4. Which of the following statements is not correct?

Accepted Answer

A)  When the price is $10, quantity supplied equals quantity demanded. 
B)  When the price is $6, there is a surplus of 8 units. 
C)  When the price is $12, there is a surplus of 4 units. 
D)  When the price is $16, quantity supplied exceeds quantity demanded by 12 units. 
A)  When the price is $10, quantity supplied equals quantity demanded. 
B)  When the price is $6, there is a surplus of 8 units. 
C)  When the price is $12, there is a surplus of 4 units. 
D)  When the price is $16, quantity supplied exceeds quantity demanded by 12 units.

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

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

Accepted Answer

A)  demand curve for toothpaste shifts to the left. 
B)  supply curve for toothpaste shifts to the right. 
C)  quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases. 
D)  quantity supplied of toothpaste stays the same. 
A)  demand curve for toothpaste shifts to the left. 
B)  supply curve for toothpaste shifts to the right. 
C)  quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases. 
D)  quantity supplied of toothpaste stays the same.

Question 20

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

Exam 6: Supply, Demand, and Government Policies

Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect

Figure 6-21 -Refer to Figure 6-21. In the after-tax equilibrium, how much revenue does the government collect from the tax on this good?

If the demand curve is more price elastic than the supply curve, will the buyers or the sellers bear a greater burden of a tax? Draw a diagram to illustrate your answer.

The tax burden will fall most heavily on buyers of the good when the demand curve

A tax on sellers increases the quantity of the good sold in the market.

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

When a tax is imposed on the buyers of a good, the demand curve shifts

In a free, competitive market, what is the rationing mechanism?

The Earned Income Tax Credit is an example of a

Figure 6-34 -Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how many units will be bought and sold in the market after the tax is imposed?

Rent control policies tend to cause

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

Figure 6-24 -Refer to Figure 6-24. Suppose sellers, rather than buyers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on buyers, the tax on sellers would result in

Table 6-2 -Refer to Table 6-2. A price floor set at $20 will

A price ceiling set below the equilibrium price is binding.

Which of the following is not correct?

Figure 6-4 -Refer to Figure 6-4. Which of the following statements is not correct?

Most labor economists believe that the supply of labor is

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

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.

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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