Question 1

Define a price floor.

Accepted Answer

A price floor is a l

Question 2

Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

Accepted Answer

A) True 
 B)False

Question 3

A binding minimum wage tends to

Accepted Answer

A)  cause a labor surplus. 
B)  cause unemployment. 
C)  have the greatest impact in the market for teenage labor. 
D)  All of the above are correct. 
A)  cause a labor surplus. 
B)  cause unemployment. 
C)  have the greatest impact in the market for teenage labor. 
D)  All of the above are correct.

Question 4

Regardless of whether a tax is levied on sellers or buyers, taxes discourage market activity.

Accepted Answer

A) True 
 B)False

Question 5

Most of the burden of a luxury tax falls on the middle class workers who produce luxury goods rather than on the rich who buy them.

Accepted Answer

A) True 
 B)False

Question 6

Figure 6-1
Panel (a) Panel (b)    
-Refer to Figure 6-1. The price ceiling shown in panel (b)

Accepted Answer

A)  is not binding. 
B)  creates a surplus. 
C)  creates a shortage. 
D)  Both a) and b) are correct. 
A)  is not binding. 
B)  creates a surplus. 
C)  creates a shortage. 
D)  Both a) and b) are correct.

Question 7

Price controls are usually enacted

Accepted Answer

A)  as a means of raising revenue for public purposes. 
B)  when policymakers believe that the market price of a good or service is unfair to buyers or sellers. 
C)  when policymakers tax a good. 
D)  All of the above are correct. 
A)  as a means of raising revenue for public purposes. 
B)  when policymakers believe that the market price of a good or service is unfair to buyers or sellers. 
C)  when policymakers tax a good. 
D)  All of the above are correct.

Question 8

If a tax is levied on the buyers of a product, then the demand curve will

Accepted Answer

A)  not shift. 
B)  shift down. 
C)  shift up. 
D)  become flatter. 
A)  not shift. 
B)  shift down. 
C)  shift up. 
D)  become flatter.

Question 9

Scenario 6-2
Suppose demand for a product is given by the equation   and supply for the product is given by the equation  
-Refer to Scenario 6-2. Suppose the government sets a price floor at $13 for this product. Initially, is this price floor binding? Suppose that for some reason demand were to decrease to   Would the $13 price floor be binding after the shift in the demand curve? If so, what is the size of the resulting shortage/surplus?

Accepted Answer

Initially the price floor is not binding

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

Accepted Answer

A) True 
 B)False

Question 12

In "Venezuela Versus the Market," the long lines and shortages are caused by

Accepted Answer

A)  declining world energy prices. 
B)  unfettered capitalism. 
C)  price floors that are intended to make food more affordable for the poor. 
D)  price ceilings that are intended to make food more affordable for the poor. 
A)  declining world energy prices. 
B)  unfettered capitalism. 
C)  price floors that are intended to make food more affordable for the poor. 
D)  price ceilings that are intended to make food more affordable for the poor.

Question 13

In a competitive market free of government regulation,

Accepted Answer

A)  price adjusts until quantity demanded is greater than quantity supplied. 
B)  price adjusts until quantity demanded is less than quantity supplied. 
C)  price adjusts until quantity demanded equals quantity supplied. 
D)  supply adjusts to meet demand at every price. 
A)  price adjusts until quantity demanded is greater than quantity supplied. 
B)  price adjusts until quantity demanded is less than quantity supplied. 
C)  price adjusts until quantity demanded equals quantity supplied. 
D)  supply adjusts to meet demand at every price.

Question 14

Figure 6-18
The vertical distance between points A and B represents the tax in the market.  
-Refer to Figure 6-18. The amount of the tax per unit is

Accepted Answer

A)  $6. 
B)  $8. 
C)  $14. 
D)  $18. 
A)  $6. 
B)  $8. 
C)  $14. 
D)  $18.

Question 15

Figure 6-22  
-Refer to Figure 6-22. The equilibrium price in the market before the tax is imposed is

Accepted Answer

A)  $3.50. 
B)  $5.00. 
C)  $2.00. 
D)  $1.50. 
A)  $3.50. 
B)  $5.00. 
C)  $2.00. 
D)  $1.50.

Question 16

Figure 6-20  
-Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

Accepted Answer

A)  $5 
B)  between $5 and $10 
C)  between $10 and $14 
D) d. $14 
A)  $5 
B)  between $5 and $10 
C)  between $10 and $14 
D) d. $14

Question 17

Figure 6-36  
-Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer pays $4.

Accepted Answer

A) True 
 B)False

Question 18

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,

Accepted Answer

A)  the market price will increase to P3. 
B)  a surplus will occur at the new market price of P2. 
C)  the market price will stay at P1. 
D)  a shortage will occur at the new market price of P2. 
A)  the market price will increase to P3. 
B)  a surplus will occur at the new market price of P2. 
C)  the market price will stay at P1. 
D)  a shortage will occur at the new market price of P2.

Question 19

The price received by sellers in a market will decrease if the government

Accepted Answer

A)  imposes a binding price floor in that market. 
B)  decreases a binding price ceiling in that market. 
C)  decreases a tax on the good sold in that market. 
D)  increases a binding price floor in that market. 
A)  imposes a binding price floor in that market. 
B)  decreases a binding price ceiling in that market. 
C)  decreases a tax on the good sold in that market. 
D)  increases a binding price floor in that market.

Question 20

The imposition of a binding price ceiling on a market causes

Accepted Answer

A)  quantity demanded to be greater than quantity supplied. 
B)  quantity demanded to be less than quantity supplied. 
C)  quantity demanded to be equal to quantity supplied. 
D)  the price of the good to be greater than its equilibrium price. 
A)  quantity demanded to be greater than quantity supplied. 
B)  quantity demanded to be less than quantity supplied. 
C)  quantity demanded to be equal to quantity supplied. 
D)  the price of the good to be greater than its equilibrium price.

Exam 6: Supply, Demand, and Government Policies

Define a price floor.

Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

A binding minimum wage tends to

Regardless of whether a tax is levied on sellers or buyers, taxes discourage market activity.

Most of the burden of a luxury tax falls on the middle class workers who produce luxury goods rather than on the rich who buy them.

Figure 6-1 Panel (a) Panel (b) -Refer to Figure 6-1. The price ceiling shown in panel (b)

Price controls are usually enacted

If a tax is levied on the buyers of a product, then the demand curve will

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

If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

In "Venezuela Versus the Market," the long lines and shortages are caused by

In a competitive market free of government regulation,

Figure 6-18 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-18. The amount of the tax per unit is

Figure 6-22 -Refer to Figure 6-22. The equilibrium price in the market before the tax is imposed is

Figure 6-20 -Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

Figure 6-36 -Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer pays $4.

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 price received by sellers in a market will decrease if the government

The imposition of a binding price ceiling on a market causes

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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