Question 1

Figure 6-14
The vertical distance between points A and B represents the tax in the market. 
-Refer to Figure 6-14. The effective price that sellers receive after the tax is imposed is

Accepted Answer

A) $6. 
B) $10. 
C) $16. 
D) $24.

Question 2

Most labor economists believe that the supply of labor is much more elastic than the demand.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

If a price floor is not binding, then

Accepted Answer

A) the equilibrium price is above the price floor. 
B) the equilibrium price is below the price floor. 
C) there will be a surplus in the market. 
D) Both a) and c) are correct.

Question 5

Figure 6-6 
-Refer to Figure 6-6. In which of the following cases would sellers have to develop a rationing mechanism?

Accepted Answer

A) a price ceiling set at $8 
B) a price ceiling set at $12 
C) a price floor set at $8 
D) a price floor set at $12

Question 6

Figure 6-8 
-Refer to Figure 6-8. If the government imposes a price ceiling of $2 on this market, then there will be

Accepted Answer

A) no shortage of the good. 
B) a shortage of 40 units of the good. 
C) a shortage of 60 units of the good. 
D) a shortage of 85 units of the good.

Question 7

If a tax is imposed on the buyers of a product, then the tax burden will fall entirely on the buyers.

Accepted Answer

A) True 
 B)False

Question 8

Table 6-2
 $$\begin{array} { | c | c | c | } 
\hline \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { Denanded }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Sugplied }
\end{array} \
\hline \$ 10 & 250 & 0\
\hline \$ 5 & 200 & 75 \
\hline \$ 10 & 150 & 150 \
\hline \$ 15 & 100 & 225 \
\hline \$ 20 & 50 & 300 \
\hline \$ 25 & 0 & 375 \
\hline
\end{array}$$
-Refer to Table 6-2. A price ceiling set at $15 will

Accepted Answer

A) be binding and will result in a shortage of 50 units. 
B) be binding and will result in a shortage of 100 units. 
C) be binding and will result in a shortage of 125 units. 
D) not be binding.

Question 9

Advocates of the minimum wage

Accepted Answer

A) deny that the minimum wage produces any adverse effects. 
B) emphasize the benefits to teenagers of increases in the minimum wage. 
C) emphasize the low annual incomes of those who work for the minimum wage. 
D) All of the above are correct.

Question 10

A tax on buyers decreases the quantity of the good sold in the market.

Accepted Answer

A) True 
 B)False

Question 11

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.

Question 12

Figure 6-9 
-Refer to Figure 6-9. A price floor set at

Accepted Answer

A) $4 will be binding and will result in a shortage of 3 units. 
B) $4 will be binding and will result in a shortage of 6 units. 
C) $7 will be binding and will result in a surplus of 6 units. 
D) $7 will be binding and will result in a surplus of 12 units.

Question 13

A binding minimum wage may not help all workers, but it does not hurt any workers.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not a result of rent control?

Accepted Answer

A) fewer new apartments offered for rent 
B) less maintenance provided by landlords 
C) bribery 
D) higher quality housing

Question 15

If a tax is imposed on a market with inelastic supply and elastic demand, then

Accepted Answer

A) buyers will bear most of the burden of the tax. 
B) sellers will bear most of the burden of the tax. 
C) the burden of the tax will be shared equally between buyers and sellers. 
D) it is impossible to determine how the burden of the tax will be shared.

Question 16

Rent-control laws dictate a minimum rent that landlords may charge tenants.

Accepted Answer

A) True 
 B)False

Question 17

Figure 6-27 
-Refer to Figure 6-27. If the government places a $2 tax in the market, the buyer bears $1 of the tax burden.

Accepted Answer

A) True 
 B)False

Question 18

Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

Accepted Answer

A) demand curve will shift upward by $20, and the effective price received by sellers will increase by $20. 
B) demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20. 
C) supply curve will shift downward by $20, and the price paid by buyers will decrease by $20. 
D) supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20.

Question 19

Which of the following was not a result of the luxury tax imposed by Congress in 1990?

Accepted Answer

A) The larger part of the tax burden fell on sellers. 
B) A larger part of the tax burden fell on the middle class than on the rich. 
C) Even the wealthy demanded fewer luxury goods. 
D) The tax was never repealed or even modified.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

Figure 6-14 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-14. The effective price that sellers receive after the tax is imposed is

Most labor economists believe that the supply of labor is much more elastic than the demand.

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

If a price floor is not binding, then

Figure 6-6 -Refer to Figure 6-6. In which of the following cases would sellers have to develop a rationing mechanism?

Figure 6-8 -Refer to Figure 6-8. If the government imposes a price ceiling of $2 on this market, then there will be

If a tax is imposed on the buyers of a product, then the tax burden will fall entirely on the buyers.

Advocates of the minimum wage

A tax on buyers decreases the quantity of the good sold in the market.

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

Figure 6-9 -Refer to Figure 6-9. A price floor set at

A binding minimum wage may not help all workers, but it does not hurt any workers.

Which of the following is not a result of rent control?

If a tax is imposed on a market with inelastic supply and elastic demand, then

Rent-control laws dictate a minimum rent that landlords may charge tenants.

Figure 6-27 -Refer to Figure 6-27. If the government places a $2 tax in the market, the buyer bears $1 of the tax burden.

Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

Which of the following was not a result of the luxury tax imposed by Congress in 1990?

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