Question 1

A binding minimum wage

Accepted Answer

A)  alters both the quantity demanded and quantity supplied of labor. 
B)  affects only the quantity of labor demanded; it does not affect the quantity of labor supplied. 
C)  has no effect on the quantity of labor demanded or the quantity of labor supplied. 
D)  causes only temporary unemployment because the market will adjust and eliminate any temporary surplus of workers.

Question 2

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 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 3

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

Accepted Answer

A)  with rent control, the government guarantees landlords a minimum level of profit. 
B)  they become resigned to the fact that many of their apartments are going to be vacant at any given time. 
C)  with shortages and waiting lists, they have no incentive to maintain and improve their property. 
D)  with rent control, it becomes the government's responsibility to maintain rental housing.

Question 4

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 5

Figure 6-22 
-Refer to Figure 6-22. As the figure is drawn, who sends the tax payment to the government?

Accepted Answer

A)  The buyers send the tax payment. 
B)  The sellers send the tax payment. 
C)  A portion of the tax payment is sent by the buyers, and the remaining portion is sent by the sellers. 
D)  The question of who sends the tax payment cannot be determined from the graph.

Question 6

A tax on buyers decreases demand.

Accepted Answer

A) True 
 B)False

Question 7

When government imposes a price ceiling or a price floor on a market,

Accepted Answer

A)  price no longer serves as a rationing device. 
B)  efficiency in the market is enhanced. 
C)  shortages and surpluses are eliminated. 
D)  both buyers and sellers become better off.

Question 8

Figure 6-31 
-Refer to Figure 6-31. If the government set a price floor at $15, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

The answer of Figure 6-31 
-Refer to Figure 6-31. If...

Question 9

The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Figure 6-35 
-Refer to Figure 6-35. A price floor set at $60 would create a surplus of 20 units.

Accepted Answer

A) True 
 B)False

Question 12

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Accepted Answer

A) True 
 B)False

Question 13

Figure 6-21 
-Refer to Figure 6-21. Suppose buyers, rather than sellers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in

Accepted Answer

A)  buyers bearing a larger share of the tax burden. 
B)  sellers bearing a smaller share of the tax burden. 
C)  the same amount of tax revenue for the government. 
D)  Both a) and b) are correct.

Question 14

Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift

Accepted Answer

A)  demand, raising both the equilibrium price and quantity in the market for artificially-sweetened beverages. 
B)  demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially- sweetened beverages. 
C)  supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially- sweetened beverages. 
D)  supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially- sweetened beverages.

Question 15

If a binding price ceiling is imposed on the baby formula market, then

Accepted Answer

A)  the quantity of baby formula demanded will increase. 
B)  the quantity of baby formula supplied will decrease. 
C)  a shortage of baby formula will develop. 
D)  All of the above are correct.

Question 16

Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

Accepted Answer

A) True 
 B)False

Question 17

Figure 6-24 
-Refer to Figure 6-24. In the after-tax equilibrium, government collects

Accepted Answer

A)  $1,440 in tax revenue; of this amount, $960 represents a burden on buyers and $480 represents a burden on sellers. 
B)  $1,440 in tax revenue; of this amount, $720 represents a burden on buyers and $720 represents a burden on sellers. 
C)  $1,680 in tax revenue; of this amount, $1,260 represents a burden on buyers and $420 represents a burden on sellers. 
D)  $1,680 in tax revenue; of this amount, $840 represents a burden on buyers and $840 represents a burden on sellers.

Question 18

A binding price ceiling may not help all consumers, but it does not hurt any consumers.

Accepted Answer

A) True 
 B)False

Question 19

A price ceiling will be binding only if it is set

Accepted Answer

A)  equal to the equilibrium price. 
B)  above the equilibrium price. 
C)  below the equilibrium price. 
D)  either above or below the equilibrium price.

Question 20

Which of the following would be the most likely result of a binding price ceiling imposed on the market for rental cars?

Accepted Answer

A)  frequent rental programs such as "Rent nine times and the tenth rental is free!" 
B)  enhanced maintenance programs to promote the high quality of the cars 
C)  free gasoline given to people as an incentive to a rent a car 
D)  slow replacement of old rental cars with newer ones

Exam 6: Supply, Demand, and Government Policies

A binding minimum wage

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

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

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

Figure 6-22 -Refer to Figure 6-22. As the figure is drawn, who sends the tax payment to the government?

A tax on buyers decreases demand.

When government imposes a price ceiling or a price floor on a market,

Figure 6-31 -Refer to Figure 6-31. If the government set a price floor at $15, would there be a shortage or surplus, and how large would be the shortage/surplus?

The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.

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

Figure 6-35 -Refer to Figure 6-35. A price floor set at $60 would create a surplus of 20 units.

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Figure 6-21 -Refer to Figure 6-21. Suppose buyers, rather than sellers, were required to pay this tax (in the same amount per unit as shown in the graph) . Relative to the tax on sellers, the tax on buyers would result in

Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift

If a binding price ceiling is imposed on the baby formula market, then

Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

Figure 6-24 -Refer to Figure 6-24. In the after-tax equilibrium, government collects

A binding price ceiling may not help all consumers, but it does not hurt any consumers.

A price ceiling will be binding only if it is set

Which of the following would be the most likely result of a binding price ceiling imposed on the market for rental cars?