Question 1

A $0.10 tax levied on the sellers of chocolate bars will cause the

Accepted Answer

A)  supply curve for chocolate bars to shift down by $0.10. 
B)  supply curve for chocolate bars to shift up by $0.10. 
C)  demand curve for chocolate bars to shift down by $0.10. 
D)  demand curve for chocolate bars to shift up by $0.10.

Question 2

In a competitive market free of government regulation,

Accepted Answer

A)  price adjusts until quantity demanded is greater than quantity supplied. 
B)  price adjusts until quantity demanded is less than quantity supplied. 
C)  price adjusts until quantity demanded equals quantity supplied. 
D)  supply adjusts to meet demand at every price.

Question 3

Which of the following causes the price paid by buyers to be different than the price received by sellers?

Accepted Answer

A)  a binding price floor 
B)  a binding price ceiling 
C)  a tax on the good 
D)  All of the above are correct.

Question 4

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 5

The price paid by buyers in a market will decrease if the government

Accepted Answer

A)  imposes 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)  decreases a binding price floor in that market.

Question 6

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

Accepted Answer

A)  The effective price received by sellers is $0.40 per bottle less than it was before the tax. 
B)  Sixty percent of the burden of the tax falls on sellers. 
C)  This tax causes the demand curve for perfume to shift downward by $1.00 at each quantity of perfume. 
D)  All of the above are correct.

Question 7

A tax on buyers decreases demand.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Figure 6-7 
-Refer to Figure 6-7. Which of the following price controls would cause a shortage 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

Question 10

Figure 6-8 
-Refer to Figure 6-8. When a certain price control is imposed on this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P1 dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2 dollars per unit for that quantity. If P1 - P2 = $3, then the price control is

Accepted Answer

A)  a price ceiling of $2.00. 
B)  a price ceiling of $5.00. 
C)  a price floor of $5.00. 
D)  either a price ceiling of $2.00 or a price floor of $5.00.

Question 11

Figure 6-9 
-Refer to Figure 6-9. At which price would a price floor be nonbinding?

Accepted Answer

A)  $8 
B)  $7 
C)  $6 
D)  $9

Question 12

Figure 6-29
Suppose the government imposes a $2 on this market. 
-Refer to Figure 6-29. Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1 represents the supply curve for gasoline in the short run, and S2 represents the supply curve for gasoline in the long run. After the imposition of the $2,

Accepted Answer

A)  buyers bear a higher burden of the tax in the short run than in the long run. 
B)  sellers bear a higher burden of the tax in the short run than in the long run. 
C)  buyers and sellers bear an equal burden of the tax in both the short run and long run. 
D)  buyers and sellers bear an equal burden of the tax in the short run, but buyers bear a higher burden of the tax in the long run.

Question 13

Which of the following is correct?

Accepted Answer

A)  Rent control and the minimum wage are both examples of price ceilings. 
B)  Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor. 
C)  Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling. 
D)  Rent control and the minimum wage are both examples of price floors.

Question 14

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers 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 price paid by buyers will decrease by less than $20. 
B)  demand curve will shift upward by $20, and the price paid by buyers will decrease by $20. 
C)  supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20. 
D)  supply curve will shift downward by $20, and the effective price received by sellers will increase by $20.

Question 15

Which of the following is correct? Price controls

Accepted Answer

A)  always help those they are designed to help. 
B)  never help those they are designed to help. 
C)  often hurt those they are designed to help. 
D)  always hurt those they are designed to help.

Question 16

Studies by economists have found that a 10 percent increase in the minimum wage decreases teenage employment 10 percent.

Accepted Answer

A) True 
 B)False

Question 17

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.

Question 18

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

Accepted Answer

A)  shift the supply curve upward by less than 50 cents. 
B)  raise the equilibrium price by 50 cents. 
C)  create a 50-cent tax burden each for buyers and sellers. 
D)  discourage market activity.

Question 19

As rationing mechanisms, prices

Accepted Answer

A)  and long lines are efficient. 
B)  are efficient, but long lines are inefficient. 
C)  are inefficient, but long lines are efficient. 
D)  and long lines are inefficient.

Question 20

Figure 6-22 
-Refer to Figure 6-22. Buyers pay how much of the tax per unit?

Accepted Answer

A)  $0.50. 
B)  $1.50. 
C)  $3.00. 
D)  $5.00.

Exam 6: Supply, Demand, and Government Policies