Question 1

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Price } \
\text { (dollars per slice } \
\text { of pizza) }
\end{array} & \begin{array} { c } 
\text { Quantity supplied Quantity demanded } \
\text { (slices of pizza } \
\text { per week) }
\end{array} & \begin{array} { c } 
\text { (slices of pizza } \
\text { per week) }
\end{array} \
\hline 1 & 10 & 50 \
2 & 20 & 40 \
3 & 30 & 30 \
4 & 40 & 20 \
5 & 50 & 10 \
\hline
\end{array}$$
-The demand and supply schedules for pizza are in the table above. A price ceiling of $2 per slice results in

Accepted Answer

A) a surplus of 20 slices of pizza. 
B) a shortage of 20 slices of pizza. 
C) a shortage of 40 slices of pizza. 
D) a shortage of 60 slices of pizza. 
E) neither a shortage nor a surplus.

Question 2

Giving in to the demand of protestors, suppose the French government reduces the tax on gasoline by 15 percent. Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic. As a result of the tax cut, the price for a gallon of gasoline paid by buyers

Accepted Answer

A) falls by 15 percent. 
B) rises by 15 percent. 
C) falls by less than 15 percent. 
D) rises by less than 15 percent. 
E) falls by more than 15 percent.

Question 3

Suppose the current equilibrium wage rate for housekeepers is $8.60 per hour. An increase in the minimum wage to $7.50 per hour leads to

Accepted Answer

A) a surplus of housekeepers. 
B) a shortage of housekeepers. 
C) no change in the market for housekeepers. 
D) an increase in the quantity of housekeepers supplied. 
E) unemployment of housekeepers.

Question 4

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Price } \
\text { (dollars per slice } \
\text { of pizza) }
\end{array} & \begin{array} { c } 
\text { Quantity supplied Quantity demanded } \
\text { (slices of pizza } \
\text { per week) }
\end{array} & \begin{array} { c } 
\text { (slices of pizza } \
\text { per week) }
\end{array} \
\hline 1 & 10 & 50 \
2 & 20 & 40 \
3 & 30 & 30 \
4 & 40 & 20 \
5 & 50 & 10 \
\hline
\end{array}$$
-The demand and supply schedules for pizza are in the table above. A price ceiling of $4 per slice results in

Accepted Answer

A) a surplus of 20 slices of pizza. 
B) a shortage of 20 slices of pizza. 
C) a shortage of 40 slices of pizza. 
D) a shortage of 60 slices of pizza. 
E) neither a shortage nor a surplus.

Question 5

When a tax is imposed on a good or service, the

Accepted Answer

A) revenue gained by the government is the excess burden. 
B) deadweight loss that arises from a tax is the excess burden. 
C) share of the tax paid by the buyer is the excess burden. 
D) share of the tax paid by the seller is the excess burden. 
E) amount the government collects as tax revenue is the deadweight loss from the tax.

Question 6

The surplus for workers from a job is equal to the

Accepted Answer

A) marginal cost of work. 
B) wage rate. 
C) marginal cost of work minus the wage rate. 
D) wage rate minus the marginal cost of work. 
E) marginal benefit of hiring a worker minus the wage rate.

Question 7

-The above figure shows a labor market with a minimum wage of $8 an hour. The deadweight loss equals the

Accepted Answer

A) area abc. 
B) distance ab. 
C) distance ad. 
D) area bad. 
E) area acd.

Question 8

With a rent ceiling set below the equilibrium rent, i. all renters are able to rent apartments at a lower rent.
Ii. there is a shortage of apartments.
Iii. the quantity of apartments supplied does not change because buildings cannot be moved.

Accepted Answer

A) i only 
B) ii only 
C) iii only 
D) ii and iii 
E) i, ii, and iii

Question 9

-The above figure shows the market for biologists. The government decides to set a minimum wage for biologists of $18 per hour. After this minimum wage is in effect, the firms' surplus equals ________.

Accepted Answer

A) $800 
B) $900 
C) $1,800 
D) $400 
E) $200

Question 10

-In the figure above, if the minimum wage is $8 per hour, then

Accepted Answer

A) resources used in job-search activity increase compared to the situation before the minimum wage. 
B) it is legal to hire workers for a wage below the minimum wage because otherwise unemployment would result. 
C) the deadweight loss is minimized. 
D) Both answers A and B are correct. 
E) Both answers B and C are correct.

Question 11

Neither the supply of nor demand for a good is perfectly elastic or perfectly inelastic. So, imposing a tax on the good results in a ________ in the price received and kept by sellers and a ________ in the price paid by buyers.

Accepted Answer

A) rise; rise 
B) rise; fall 
C) fall; rise 
D) fall; fall 
E) no change; rise

Question 12

Who are minimum wages designed to help?
 Do they succeed?
 What is their effect on society?

Accepted Answer

The answer of Who are minimum wages designed to help?
...

Question 13

-The graph shows the market for ski chalets in Aspen. If a rent ceiling is set at $1,900 a week, then the maximum amount charged in the black market is ________ a week.

Accepted Answer

A) $1,900 
B) $2,050 
C) $2,125 
D) $225 
E) $150

Question 14

Tax incidence refers to

Accepted Answer

A) how government taxes are spent by the government. 
B) the incidences of tax revolts by the taxpayers. 
C) the amount of a tax minus its burden. 
D) the division of the burden of a tax between the buyer and the seller. 
E) tax revenue minus excess burden.

Question 15

In a housing market with a rent ceiling below the equilibrium rent, apartment seekers spend more time searching for an apartment than they would in a housing market without a rent ceiling. Why does this difference exist?

Accepted Answer

A) In the market with the rent ceiling, renters are searching for the best buy in apartments. 
B) In the market with the rent ceiling, there is a wide variety in the quality of apartments for rent. 
C) In the market with the rent ceiling, the quantity of housing demanded is greater than quantity supplied at the ceiling price. 
D) The premise of the question is incorrect because people spend less time searching with a rent ceiling since they no longer need to look for a low-priced apartment. 
E) The premise of the question is incorrect because there is no difference in the search time between a market with a rent ceiling and one without a ceiling.

Question 16

A price ceiling

Accepted Answer

A) creates market efficiency by making a good cheaper. 
B) helps all producers by increasing the price of the good. 
C) can create a black market for the good. 
D) reduces search activity. 
E) benefits all people who want to buy the good.

Question 17

7.5 Chapter Figures
  
The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax. The government imposes a $10 per unit tax on buyers of MP3 players.
-After the tax is imposed, the price received by the seller is ________ per MP3 player.

Accepted Answer

A) $105 
B) $100 
C) $95 
D) $110 
E) $90

Question 18

-The figure above shows the market for a life-saving drug. Suppose the government imposes a $150 tax per dose on the drug. Show and describe the impact on the market. Who pays this tax?

Accepted Answer

The answer of 
-The figure above shows the market for...

Question 19

Labor unions ________ increases in the minimum wage because an increase in the minimum wage ________ the demand for union labor.

Accepted Answer

A) support; increases 
B) support; decreases 
C) oppose; increases 
D) oppose; decreases 
E) support; has no effect on

Question 20

If the demand curve for a good is horizontal, a tax is levied on this product is

Accepted Answer

A) split between the buyers and the sellers but not evenly so that either the buyer or the seller pays more. 
B) split evenly between the buyers and the sellers. 
C) paid entirely by buyers. 
D) paid entirely by sellers. 
E) not paid by either the buyers or the sellers.

Exam 7: Government Actions in Markets