Question 1

Figure 6-23
 
-Refer to Figure 6-23. How much tax revenue does this tax produce for the government?

Accepted Answer

A)  $18. 
B)  $30. 
C)  $6. 
D)  $36.

Question 2

A tax levied on the sellers of blueberries

Accepted Answer

A)  increases sellers' costs, reduces profits, and shifts the supply curve up. 
B)  increases sellers' costs, reduces profits, and shifts the supply curve down. 
C)  decreases sellers' costs, increases profits, and shifts the supply curve up. 
D)  decreases sellers' costs, increases profits, and shifts the supply curve down.

Question 3

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 4

Price ceilings and price floors that are binding

Accepted Answer

A)  are desirable because they make markets more efficient and more fair. 
B)  cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price. 
C)  can have the effect of restoring a market to equilibrium. 
D)  are imposed because they can make the poor in the economy better off without causing adverse effects.

Question 5

Suppose the equilibrium price of a physical examination "physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

Accepted Answer

A)  demand curve for physicals shifts to the right. 
B)  supply curve for physicals shifts to the left. 
C)  quantity demanded of physicals increases, and the quantity supplied of physicals decreases. 
D)  number of physicals performed stays the same.

Question 6

Which of the following is the most likely explanation for the imposition of a price floor on the market for corn?

Accepted Answer

A)  Policymakers have studied the effects of the price floor carefully, and they recognize that the price floor is advantageous for society as a whole. 
B)  Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressured policy makers into imposing the price floor. 
C)  Buyers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor. 
D)  Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor.

Question 7

Figure 6-20 
-Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

Accepted Answer

A)  $5 
B)  between $5 and $10 
C)  between $10 and $14 
D)  $14

Question 8

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

Accepted Answer

A)  increase by more than $1,000. 
B)  increase by exactly $1,000. 
C)  increase by less than $1,000. 
D)  decrease by an indeterminate amount.

Question 9

A nonbinding price ceiling 
i) causes a surplus.
Ii) causes a shortage.
Iii) is set at a price above the equilibrium price.
Iv) is set at a price below the equilibrium price.

Accepted Answer

A)  i) only 
B)  iii) only 
C)  i) and iii) only 
D)  ii) and iv) only

Question 10

If the demand curve is very inelastic and the supply curve is very elastic in a market, then the sellers will bear a greater burden of a tax imposed on the market, even if the tax is imposed on the buyers.

Accepted Answer

A) True 
 B)False

Question 11

Figure 6-32 
-Refer to Figure 6-32. If the government set a price ceiling at $40, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

The answer of Figure 6-32 
-Refer to Figure 6-32. If...

Question 12

A price ceiling caused the gasoline shortage of 1973 in the United States.

Accepted Answer

A) True 
 B)False

Question 13

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.

Question 14

If the government passes a law requiring buyers of college textbooks to send $5 to the government for every textbook they buy, then

Accepted Answer

A)  the demand curve for textbooks shifts downward by $5. 
B)  buyers of textbooks pay $5 more per textbook than they were paying before the tax. 
C)  sellers of textbooks are unaffected by the tax. 
D)  All of the above are correct.

Question 15

A key lesson from the payroll tax is that the

Accepted Answer

A)  tax is a tax solely on workers. 
B)  tax is a tax solely on firms that hire workers. 
C)  tax eliminates any wedge that might exist between the wage that firms pay and the wage that workers receive. 
D)  true burden of a tax cannot be legislated.

Question 16

To say that a price ceiling is binding is to say that the price ceiling

Accepted Answer

A)  results in a surplus. 
B)  is set above the equilibrium price. 
C)  causes quantity demanded to exceed quantity supplied. 
D)  All of the above are correct.

Question 17

Which of the following is not correct?

Accepted Answer

A)  Some states in the U.S. mandate minimum wages above the federal level. 
B)  Most European nations have minimum-wage laws. 
C)  The U.S. minimum wage is significantly higher than the minimum wages in France and the United Kingdom. 
D)  The U.S. Congress first instituted a minimum wage with the Fair Labor Standards Act.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Most labor economists believe that the supply of labor is

Accepted Answer

A)  less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. 
B)  less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. 
C)  more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. 
D)  more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.

Question 20

The long-run effects of rent controls are a good illustration of the principle that

Accepted Answer

A)  society faces a short-run tradeoff between unemployment and inflation. 
B)  the cost of something is what you give up to get it. 
C)  people respond to incentives. 
D)  government can sometimes improve on market outcomes.

Exam 6: Supply, Demand, and Government Policies

Figure 6-23 -Refer to Figure 6-23. How much tax revenue does this tax produce for the government?

A tax levied on the sellers of blueberries

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

Price ceilings and price floors that are binding

Suppose the equilibrium price of a physical examination "physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

Which of the following is the most likely explanation for the imposition of a price floor on the market for corn?

Figure 6-20 -Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

A nonbinding price ceiling i) causes a surplus. Ii) causes a shortage. Iii) is set at a price above the equilibrium price. Iv) is set at a price below the equilibrium price.

If the demand curve is very inelastic and the supply curve is very elastic in a market, then the sellers will bear a greater burden of a tax imposed on the market, even if the tax is imposed on the buyers.

Figure 6-32 -Refer to Figure 6-32. If the government set a price ceiling at $40, would there be a shortage or surplus, and how large would be the shortage/surplus?

A price ceiling caused the gasoline shortage of 1973 in the United States.

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

If the government passes a law requiring buyers of college textbooks to send $5 to the government for every textbook they buy, then

A key lesson from the payroll tax is that the

To say that a price ceiling is binding is to say that the price ceiling

Which of the following is not correct?

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

Most labor economists believe that the supply of labor is

The long-run effects of rent controls are a good illustration of the principle that