Question 1

The quantity sold in a market will increase if the government

Accepted Answer

A)  decreases a binding price floor in that market. 
B)  decreases a binding price ceiling in that market. 
C)  increases a tax on the good sold in that market. 
D)  More than one of the above is correct. 
A)  decreases a binding price floor in that market. 
B)  decreases a binding price ceiling in that market. 
C)  increases a tax on the good sold in that market. 
D)  More than one of the above is correct.

Question 2

If a price ceiling is not binding, then it will have no effect on the market.

Accepted Answer

A) True 
 B)False

Question 3

A price ceiling is binding when it is set

Accepted Answer

A)  above the equilibrium price, causing a shortage. 
B)  above the equilibrium price, causing a surplus. 
C)  below the equilibrium price, causing a shortage. 
D)  below the equilibrium price, causing a surplus. 
A)  above the equilibrium price, causing a shortage. 
B)  above the equilibrium price, causing a surplus. 
C)  below the equilibrium price, causing a shortage. 
D)  below the equilibrium price, causing a surplus.

Question 4

A price floor is binding when it is set

Accepted Answer

A)  above the equilibrium price, causing a shortage. 
B)  above the equilibrium price, causing a surplus. 
C)  below the equilibrium price, causing a shortage. 
D)  below the equilibrium price, causing a surplus. 
A)  above the equilibrium price, causing a shortage. 
B)  above the equilibrium price, causing a surplus. 
C)  below the equilibrium price, causing a shortage. 
D)  below the equilibrium price, causing a surplus.

Question 5

Over time, housing shortages caused by rent control

Accepted Answer

A)  increase, because the demand for and supply of housing are less elastic in the long run. 
B)  increase, because the demand for and supply of housing are more elastic in the long run. 
C)  decrease, because the demand for and supply of housing are less elastic in the long run. 
D)  decrease, because the demand for and supply of housing are more elastic in the long run. 
A)  increase, because the demand for and supply of housing are less elastic in the long run. 
B)  increase, because the demand for and supply of housing are more elastic in the long run. 
C)  decrease, because the demand for and supply of housing are less elastic in the long run. 
D)  decrease, because the demand for and supply of housing are more elastic in the long run.

Question 6

A tax on sellers shifts the supply curve but not the demand curve.

Accepted Answer

A) True 
 B)False

Question 7

Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

Accepted Answer

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

Question 8

Figure 6-34  
-Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much will sellers receive per unit after the tax is imposed?

Accepted Answer

With a $6 tax per un

Question 9

The presence of a price control in a market for a good or service usually is an indication that

Accepted Answer

A)  an insufficient quantity of the good or service was being produced in that market to meet the public's need. 
B)  the usual forces of supply and demand were not able to establish an equilibrium price in that market. 
C)  policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. 
D)  policymakers correctly believed that price controls would generate no inequities of their own once imposed. 
A)  an insufficient quantity of the good or service was being produced in that market to meet the public's need. 
B)  the usual forces of supply and demand were not able to establish an equilibrium price in that market. 
C)  policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. 
D)  policymakers correctly believed that price controls would generate no inequities of their own once imposed.

Question 10

In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

Accepted Answer

A) True 
 B)False

Question 11

If the government passes a law requiring buyers of college textbooks to send $5 to the government for every textbook they buy, then

Accepted Answer

A)  the demand curve for textbooks shifts downward by $5. 
B)  buyers of textbooks pay $5 more per textbook than they were paying before the tax. 
C)  sellers of textbooks are unaffected by the tax. 
D)  All of the above are correct. 
A)  the demand curve for textbooks shifts downward by $5. 
B)  buyers of textbooks pay $5 more per textbook than they were paying before the tax. 
C)  sellers of textbooks are unaffected by the tax. 
D)  All of the above are correct.

Question 12

When policymakers set prices by legal decree, they

Accepted Answer

A)  are usually following the advice of mainstream economists. 
B)  improve the organization of economic activity. 
C)  obscure the signals that normally guide the allocation of society's resources. 
D)  are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency. 
A)  are usually following the advice of mainstream economists. 
B)  improve the organization of economic activity. 
C)  obscure the signals that normally guide the allocation of society's resources. 
D)  are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency.

Question 13

When OPEC raised the price of crude oil in the 1970s, it caused the United States'

Accepted Answer

A)  nonbinding price floor on gasoline to become binding. 
B)  binding price floor on gasoline to become nonbinding. 
C)  nonbinding price ceiling on gasoline to become binding. 
D)  binding price ceiling on gasoline to become nonbinding. 
A)  nonbinding price floor on gasoline to become binding. 
B)  binding price floor on gasoline to become nonbinding. 
C)  nonbinding price ceiling on gasoline to become binding. 
D)  binding price ceiling on gasoline to become nonbinding.

Question 14

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

Accepted Answer

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

Question 15

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 16

Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct?

Accepted Answer

A)  This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity. 
B)  The price paid by buyers is $0.30 per drink more than it was before the tax. 
C)  Forty percent of the burden of the tax falls on sellers. 
D)  All of the above are correct. 
A)  This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity. 
B)  The price paid by buyers is $0.30 per drink more than it was before the tax. 
C)  Forty percent of the burden of the tax falls on sellers. 
D)  All of the above are correct.

Question 17

If the government removes a binding price ceiling from a market, then the price paid by buyers will

Accepted Answer

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

Question 18

If the government removes a binding price floor from a market, then the price paid by buyers will

Accepted Answer

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

Question 19

Which of the following is not an example of a public policy?

Accepted Answer

A)  rent-control laws 
B)  minimum-wage laws 
C)  taxes 
D)  equilibrium laws 
A)  rent-control laws 
B)  minimum-wage laws 
C)  taxes 
D)  equilibrium laws

Question 20

Figure 6-6  
-Refer to Figure 6-6. Which of the following statements is correct?

Accepted Answer

A)  A price ceiling set at $12 would be binding, but a price ceiling set at $8 would not be binding. 
B)  A price floor set at $8 would be binding, but a price ceiling set at $8 would not be binding. 
C)  A price ceiling set at $9 would result in a surplus. 
D)  A price floor set at $11 would result in a surplus. 
A)  A price ceiling set at $12 would be binding, but a price ceiling set at $8 would not be binding. 
B)  A price floor set at $8 would be binding, but a price ceiling set at $8 would not be binding. 
C)  A price ceiling set at $9 would result in a surplus. 
D)  A price floor set at $11 would result in a surplus.

Exam 6: Supply, Demand, and Government Policies

The quantity sold in a market will increase if the government

If a price ceiling is not binding, then it will have no effect on the market.

A price ceiling is binding when it is set

A price floor is binding when it is set

Over time, housing shortages caused by rent control

A tax on sellers shifts the supply curve but not the demand curve.

Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

Figure 6-34 -Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much will sellers receive per unit after the tax is imposed?

The presence of a price control in a market for a good or service usually is an indication that

In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

If the government passes a law requiring buyers of college textbooks to send $5 to the government for every textbook they buy, then

When policymakers set prices by legal decree, they

When OPEC raised the price of crude oil in the 1970s, it caused the United States'

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

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

Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct?

If the government removes a binding price ceiling from a market, then the price paid by buyers will

If the government removes a binding price floor from a market, then the price paid by buyers will

Which of the following is not an example of a public policy?

Figure 6-6 -Refer to Figure 6-6. Which of the following statements is 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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