Question 1

Some countries in the developing world use price controls on rice to make it easier for poor people to afford.Demonstrate the effect of a binding and non-binding price ceiling on the rice market using supply-demand diagrams.

Accepted Answer

The answer of Some countries in the developing world use...

Question 2

In the aftermath of hurricane Sandy the price of portable electricity generators in New York dramatically increased, in some cases by three to four-hundred percent.Such increases in price are referred to as "price gouging" and often lead to calls for price ceilings to be placed on essential goods in the wake of natural disasters.What are the likely effects of such a policy?

Accepted Answer

The answer of In the aftermath of hurricane Sandy the...

Question 3

If a tax is imposed on the buyer of a product, the tax incidence will fall entirely on the buyer.

Accepted Answer

A) True 
 B)False

Question 4

The initial effect of a tax on the sellers of a good is on:

Accepted Answer

A) the supply of that good 
B) the demand for that good 
C) both the supply of the good and the demand for the good 
D) the price of the good

Question 5

Economists use the term tax incidence to refer to the proportion of tax paid by sellers relative to buyers.

Accepted Answer

A) True 
 B)False

Question 6

Graph 6-2 
-According to Graph 6-2, a binding price ceiling would exist at:

Accepted Answer

A) any price above $8.00 
B) any price below $6.00 
C) any price above $5.00 
D) any price below $8.00

Question 7

A tax on the sellers of popcorn will:

Accepted Answer

A) reduce the size of the popcorn market 
B) increase the size of the popcorn market 
C) affect the price of popcorn but not the size of the market 
D) not have a predictable effect on the size of the popcorn market

Question 8

Since July 1st 2000, Australian states and territories have paid a cash grant to first home buyers.Considering the supply of housing is less elastic than the demand for housing, the benefits of such a grant will:

Accepted Answer

A) be enjoyed mostly by those buying a house 
B) be enjoyed mostly by those selling a house 
C) be enjoyed entirely by those buying a house, as it is a cash grant 
D) be split equally by both buyers and sellers of housing

Question 9

If a price ceiling is non-binding, it will have no effect on the market.

Accepted Answer

A) True 
 B)False

Question 10

Graph 6-8 
-According to Graph 6-8, the amount of the tax that buyers would pay would be:

Accepted Answer

A) $1.00 
B) $1.50 
C) $2.50 
D) $3.00

Question 11

The main reason policymakers use price controls is because:

Accepted Answer

A) they are better at coordinating economic activity than the free market 
B) they believe that in some cases the market outcome is not fair 
C) they need a reason to justify their jobs 
D) all of the above is true

Question 12

A tax on the sellers of popcorn will cause the price the buyers pay:

Accepted Answer

A) and the effective price the sellers receive to rise 
B) and the effective price the sellers receive to fall 
C) to rise and the effective price the sellers receive to fall 
D) to fall and the price the sellers receive to rise

Question 13

A tax on sellers will cause the equilibrium market price to rise but the equilibrium quality sold will fall.

Accepted Answer

A) True 
 B)False

Question 14

A subsidy paid to the sellers of coffee will:

Accepted Answer

A) increase the equilibrium price of coffee and reduce the equilibrium quantity 
B) reduce the equilibrium price of coffee and increase the equilibrium quantity 
C) increase the equilibrium price of coffee and increase the equilibrium quantity 
D) reduce the equilibrium price of coffee and reduce the equilibrium quantity

Question 15

Graph 6-4 
-According to Graph 6-4, when the supply curve for gasoline shifts from S1 to S2:

Accepted Answer

A) the 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 due to the price ceiling 
D) a shortage will occur at the price ceiling of P₂

Question 16

Graph 6-10 
-In Graph 6-10, the equilibrium price before the tax is:

Accepted Answer

A) P₀ 
B) P₁ 
C) P₂ 
D) none of the above

Question 17

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 18

A subsidy on the sellers of coffee:

Accepted Answer

A) increases the size of the coffee market 
B) reduces the size of the coffee market 
C) has no effect on the size of the coffee market 
D) the benefit will accrue entirely to the sellers of coffee

Question 19

Minimum wage laws dictate the:

Accepted Answer

A) average price employers must pay for labour 
B) highest price employers may pay for labour 
C) lowest price employers may pay for labour 
D) quality of labour which must be supplied

Question 20

If a price ceiling is leading to a shortage then:

Accepted Answer

A) supply must be greater than demand 
B) the equilibrium price must be below the price ceiling 
C) the equilibrium price must be above the price ceiling 
D) market forces will restore the price to equilibrium

Exam 6: Supply, Demand and Government Policies

Some countries in the developing world use price controls on rice to make it easier for poor people to afford.Demonstrate the effect of a binding and non-binding price ceiling on the rice market using supply-demand diagrams.

If a tax is imposed on the buyer of a product, the tax incidence will fall entirely on the buyer.

The initial effect of a tax on the sellers of a good is on:

Economists use the term tax incidence to refer to the proportion of tax paid by sellers relative to buyers.

Graph 6-2 -According to Graph 6-2, a binding price ceiling would exist at:

A tax on the sellers of popcorn will:

Since July 1st 2000, Australian states and territories have paid a cash grant to first home buyers.Considering the supply of housing is less elastic than the demand for housing, the benefits of such a grant will:

If a price ceiling is non-binding, it will have no effect on the market.

Graph 6-8 -According to Graph 6-8, the amount of the tax that buyers would pay would be:

The main reason policymakers use price controls is because:

A tax on the sellers of popcorn will cause the price the buyers pay:

A tax on sellers will cause the equilibrium market price to rise but the equilibrium quality sold will fall.

A subsidy paid to the sellers of coffee will:

Graph 6-4 -According to Graph 6-4, when the supply curve for gasoline shifts from S1 to S₂:

Graph 6-10 -In Graph 6-10, the equilibrium price before the tax is:

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

A subsidy on the sellers of coffee:

Minimum wage laws dictate the:

If a price ceiling is leading to a shortage then:

Exam 6: Supply, Demand and Government Policies

Some countries in the developing world use price controls on rice to make it easier for poor people to afford.Demonstrate the effect of a binding and non-binding price ceiling on the rice market using supply-demand diagrams.

If a tax is imposed on the buyer of a product, the tax incidence will fall entirely on the buyer.

The initial effect of a tax on the sellers of a good is on:

Economists use the term tax incidence to refer to the proportion of tax paid by sellers relative to buyers.

Graph 6-2 -According to Graph 6-2, a binding price ceiling would exist at:

A tax on the sellers of popcorn will:

Since July 1st 2000, Australian states and territories have paid a cash grant to first home buyers.Considering the supply of housing is less elastic than the demand for housing, the benefits of such a grant will:

If a price ceiling is non-binding, it will have no effect on the market.

Graph 6-8 -According to Graph 6-8, the amount of the tax that buyers would pay would be:

The main reason policymakers use price controls is because:

A tax on the sellers of popcorn will cause the price the buyers pay:

A tax on sellers will cause the equilibrium market price to rise but the equilibrium quality sold will fall.

A subsidy paid to the sellers of coffee will:

Graph 6-4 -According to Graph 6-4, when the supply curve for gasoline shifts from S1 to S2:

Graph 6-10 -In Graph 6-10, the equilibrium price before the tax is:

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

A subsidy on the sellers of coffee:

Minimum wage laws dictate the:

If a price ceiling is leading to a shortage then:

Graph 6-4 -According to Graph 6-4, when the supply curve for gasoline shifts from S1 to S₂: