Question 1

A rent ceiling below the equilibrium rent

Accepted Answer

A) increases the quantity of housing supplied. 
B) is an example of a price floor. 
C) has no effect on the housing market because the ceiling is below the equilibrium. 
D) can create a black market. 
E) limits search because people need no longer search for cheap apartments.

Question 2

-The figure above shows the market for tires.The government has imposed a tax on tires,and the buyers pay ________ of the tax.

Accepted Answer

A) $10 
B) $20 
C) $50 
D) $60 
E) $30

Question 3

Suppose the demand for specialty car license plates is perfectly inelastic and the supply curve for specialty license plates is upward sloping.A tax is imposed on specialty license plates.Which of the following is true?

Accepted Answer

A) Drivers pay the smallest share of the tax. 
B) Drivers pay none of the tax. 
C) Drivers pay all of the tax. 
D) The government pays all of the tax. 
E) The government collects nothing in tax revenues.

Question 4

If an apartment owner charged ________ than a specified rent for housing,the government ________ impose a rent ceiling.

Accepted Answer

A) more;can 
B) more;cannot 
C) less;can 
D) less;cannot 
E) less;might

Question 5

If a price ceiling is set above the equilibrium price,then

Accepted Answer

A) there will be a surplus of the good. 
B) there will be a shortage of the good. 
C) there will be neither a shortage nor a surplus of the good. 
D) the price ceiling will generate revenue for the government. 
E) the price ceiling affects suppliers but not demanders.

Question 6

Rent ceilings are difficult to abolish because

Accepted Answer

A) they create such large profits for landlords. 
B) current renters offer political support for ceilings. 
C) the government doesn't like to give up the tax revenues associated with ceilings. 
D) they result in an efficient use of resources. 
E) landlords lobby to keep them in place.

Question 7

If a good has a tax levied on it,sellers respond to the price that excludes the tax and not the price with the tax because

Accepted Answer

A) the tax is handed over to the state directly by buyers. 
B) sellers do not get to keep the tax revenue. 
C) the demand for the good has decreased. 
D) the quantity supplied of the good increases. 
E) demanders pay none of the tax.

Question 8

Sales taxes are usually collected from sellers,who view the tax as

Accepted Answer

A) resulting from a leftward of the demand curve. 
B) an additional cost of selling the good. 
C) an addition to the demand for the product. 
D) an addition to profit. 
E) the same as a rightward shift of the demand curve.

Question 9

Labor unions ________ increases in the minimum wage because an increase in the minimum wage ________ the demand for union labor.

Accepted Answer

A) support;increases 
B) support;decreases 
C) oppose;increases 
D) oppose;decreases 
E) support;has no effect on

Question 10

Suppose that the government imposes a price ceiling on gasoline that is below the equilibrium price.The black market for gasoline is ________ market in which the price ________ ceiling price.

Accepted Answer

A) a legal;exceeds the 
B) an illegal;exceeds the 
C) a legal;is less than the 
D) an illegal;is less than the 
E) an illegal;equals

Question 11

Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline.As a result,the

Accepted Answer

A) supply curve shifts leftward. 
B) supply curve shifts rightward. 
C) demand curve shifts leftward. 
D) demand curve shifts rightward. 
E) demand and supply curves both shift leftward.

Question 12

The deadweight loss of a tax

Accepted Answer

A) is the transfer of income from households to the government. 
B) determines the incidence of a tax. 
C) is part of the total burden of a tax. 
D) is greater than the total burden of a tax. 
E) equals the tax revenue collected by the government.

Question 13

-The above figure shows the market for buckets of golf balls at the driving range.A new leisure time tax is placed on suppliers in this market,shifting the supply curve from S0 to S1.The tax incidence is

Accepted Answer

A) split equally between buyers and sellers,each paying $1 per bucket. 
B) split equally between buyers and sellers,each paying $2 per bucket. 
C) such that buyers pay $2 per bucket and sellers pay $1 per bucket. 
D) such that buyers pay $1 per bucket and sellers pay $2 per bucket. 
E) such that sellers pay all of the tax.

Question 14

Suppose the equilibrium price of cotton is $100 per ton.A price support set at ________ than $100 per ton ________.

Accepted Answer

A) less;increases producer surplus 
B) less;increases consumer surplus 
C) more;increases consumer surplus 
D) more;decreases marginal cost 
E) more;creates a surplus that the government must buy

Question 15

In the 1980s,one of the most common sights in the socialist countries,such as the former Soviet Union and North Korea,were long lines for bread,sugar,and other necessities.These countries had price ceilings on these necessities.Some of the socialist nations,such as the former Soviet Union,have moved to a market economy by lifting the price ceilings,while others,such as North Korea,have retained their price ceilings.What prediction do you make about the presence (or absence)of long lines today in the former Soviet Union and North Korea? Explain your answer.

Accepted Answer

The answer of In the 1980s,one of the most common...

Question 16

A black market for housing exists because of a rent ceiling.The rent for housing in the black market is

Accepted Answer

A) the same as the equilibrium rent. 
B) lower than the ceiling rent. 
C) somewhere between the ceiling rent and the maximum rent a tenant is willing to pay. 
D) somewhere between zero and the equilibrium rent. 
E) not defined because the market is not legal.

Question 17

A price ceiling is

Accepted Answer

A) a maximum legal price. 
B) a minimum legal price. 
C) an equilibrium price. 
D) a market-determined price. 
E) the highest price at which the quantity demanded equals the quantity supplied.

Question 18

The "fair results" view of fairness says that a minimum wage law set above the equilibrium wage rate is unfair because the minimum wage

Accepted Answer

A) does not apply to all workers. 
B) boosts the income of highly skilled workers. 
C) benefits only those workers who are able to find and keep a job. 
D) benefits nobody. 
E) cannot be enforced.

Question 19

-The above figure shows the market for biologists.The government decides to set a minimum wage for biologists of $18 per hour.After this minimum wage is in effect,the deadweight loss equals ________.

Accepted Answer

A) $400 
B) $200 
C) $800 
D) $1600 
E) $100

Question 20

Both price supports and a price floor can

Accepted Answer

A) create a deadweight loss. 
B) decrease output below the equilibrium quantity. 
C) decrease the price below the equilibrium price. 
D) increase consumer surplus. 
E) have no effect on producer surplus.

Exam 7: Government Actions in Markets