Question 1

If the equilibrium price of an airline ticket is $500 and the government imposes a price floor of $400 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

Accepted Answer

A) True 
 B)False

Question 2

In the United States, before OPEC increased the price of crude oil in 1973, there was

Accepted Answer

A)  no price ceiling on gasoline. 
B)  a nonbinding price ceiling on gasoline. 
C)  a binding price ceiling on gasoline. 
D)  a nonbinding price floor on gasoline.

Question 3

Figure 6-24 
-Refer to Figure 6-24. Which of the following statements is correct?

Accepted Answer

A)  The amount of the tax per unit is $6. 
B)  The tax leaves the size of the market unchanged. 
C)  The tax is levied on buyers of the good, rather than on sellers. 
D)  All of the above are correct.

Question 4

The minimum wage, if it is binding, lowers the incomes of

Accepted Answer

A)  no workers. 
B)  only those workers who become unemployed. 
C)  only those workers who have jobs. 
D)  all workers.

Question 5

To be binding, a price ceiling must be set above the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 6

The mayor of Workerville proposes a local payroll tax to fund a new water park for the city. The mayor proposes to collect half the tax from workers and half the tax from firms. The mayor will be able to successfully divide the burden of the tax equally if the

Accepted Answer

A)  demand for labor is more elastic than the supply of labor. 
B)  supply of labor is more elastic than the demand for labor. 
C)  demand for labor and supply of labor are equally elastic. 
D)  It is not possible for the tax burden to fall equally on firms and workers.

Question 7

Figure 6-2 
-Refer to Figure 6-2. The price ceiling

Accepted Answer

A)  is binding. 
B)  causes a shortage. 
C)  causes the quantity demanded to exceed the quantity supplied. 
D)  All of the above are correct.

Question 8

When a free market for a good reaches equilibrium, anyone who is willing and able to sell at the market price can sell the good.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the

Accepted Answer

A)  demand is more inelastic than the supply. 
B)  supply is more inelastic than the demand. 
C)  government has required that buyers remit the tax payments. 
D)  government has required that sellers remit the tax payments.

Question 10

A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.

Accepted Answer

A) True 
 B)False

Question 11

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 $20 per ticket, then the

Accepted Answer

A)  demand curve will shift upward by $30, and the price paid by buyers will decrease by less than $30. 
B)  demand curve will shift upward by $30, and the price paid by buyers will decrease by $30. 
C)  supply curve will shift downward by $30, and the effective price received by sellers will increase by less than $30. 
D)  supply curve will shift downward by $30, and the effective price received by sellers will increase by $30.

Question 12

One common example of a price ceiling is rent control.

Accepted Answer

A) True 
 B)False

Question 13

The quantity sold in a market will decrease if the government

Accepted Answer

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

Question 14

The burden of a luxury tax falls

Accepted Answer

A)  more on the rich than on the middle class. 
B)  more on the poor than on the rich. 
C)  more on the middle class than on the rich. 
D)  equally on the rich, the middle class, and the poor.

Question 15

Figure 6-8 
-Refer to Figure 6-8. The price of the good would continue to serve as the rationing mechanism if

Accepted Answer

A)  a price ceiling of $3 is imposed. 
B)  a price ceiling of $5 is imposed. 
C)  a price floor of $5 is imposed. 
D)  All of the above are correct.

Question 16

Which of the following statements is correct concerning the burden of a tax imposed on take-out food?

Accepted Answer

A)  Buyers bear the entire burden of the tax. 
B)  Sellers bear the entire burden of the tax. 
C)  Buyers and sellers share the burden of the tax. 
D)  We have to know whether it is the buyers or the sellers that are required to pay the tax to the government in order to make this determination.

Question 17

Figure 6-16 
-Refer to Figure 6-16. In this market, a minimum wage of $7.25 is

Accepted Answer

A)  binding and creates a labor shortage. 
B)  binding and creates unemployment. 
C)  nonbinding and creates a labor shortage. 
D)  nonbinding and creates neither a labor shortage nor unemployment.

Question 18

One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

Accepted Answer

A)  He fears that low rents will cause low-income people to move into the city, reducing the quality of life for other people. 
B)  He fears that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. 
C)  He fears that rent controls will cause a construction boom, which will make the city crowded and more polluted. 
D)  He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.

Question 19

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

Accepted Answer

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

Question 20

Figure 6-36 
-Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer bears $2 of the tax burden.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

If the equilibrium price of an airline ticket is $500 and the government imposes a price floor of $400 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

In the United States, before OPEC increased the price of crude oil in 1973, there was

Figure 6-24 -Refer to Figure 6-24. Which of the following statements is correct?

The minimum wage, if it is binding, lowers the incomes of

To be binding, a price ceiling must be set above the equilibrium price.

The mayor of Workerville proposes a local payroll tax to fund a new water park for the city. The mayor proposes to collect half the tax from workers and half the tax from firms. The mayor will be able to successfully divide the burden of the tax equally if the

Figure 6-2 -Refer to Figure 6-2. The price ceiling

When a free market for a good reaches equilibrium, anyone who is willing and able to sell at the market price can sell the good.

Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the

A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.

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 $20 per ticket, then the

One common example of a price ceiling is rent control.

The quantity sold in a market will decrease if the government

The burden of a luxury tax falls

Figure 6-8 -Refer to Figure 6-8. The price of the good would continue to serve as the rationing mechanism if

Which of the following statements is correct concerning the burden of a tax imposed on take-out food?

Figure 6-16 -Refer to Figure 6-16. In this market, a minimum wage of $7.25 is

One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

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

Figure 6-36 -Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer bears $2 of the tax burden.