Question 1

Figure 6-19 
-Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

Accepted Answer

A)   $3
B)   between $3 and $5
C)   between $5 and $7
D)   $7E) B) and D)
F) A) and D)

Question 2

Figure 6-12 
-Refer to Figure 6-12. Which of the following statements best relates the figure to the events that occurred in the United States in the 1970s?

Accepted Answer

A)   Buyers of gasoline paid a price of P1 before 1973; they paid a price of P2 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price.
B)   Buyers of gasoline paid a price of P1 before 1973; they paid a price of P3 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price.
C)   Buyers of gasoline paid a price of P2 before 1973; they paid a price of P3 after OPEC increased the price of crude oil in 1973, with no shortage of gasoline at that price.
D)   The price ceiling was binding before 1973; the price ceiling was no longer binding after OPEC increased the price of crude oil in 1973.E) A) and B)
F) B) and D)

Question 3

Rent control

Accepted Answer

A)   serves as an example of how a social problem can be alleviated or even solved by government policies.
B)   serves as an example of a price ceiling.
C)   is regarded by most economists as an efficient way of helping the poor.
D)   is the most efficient way to allocate scarce housing resources.E) A) and B)
F) All of the above

Question 4

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

Accepted Answer

A)   a smaller quantity of the good is bought and sold.
B)   a smaller quantity of the good is demanded.
C)   a larger quantity of the good is supplied.
D)   the price rises above the previous equilibrium.E) None of the above
F) A) and B)

Question 5

Figure 6-20 
-Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. Which of the following is correct?

Accepted Answer

A)   Buyers and sellers will share the burden of the tax equally.
B)   Buyers will bear more of the burden of the tax than sellers will.
C)   Sellers will bear more of the burden of the tax than buyers will.
D)   Any of the above is possible.E) B) and C)
F) A) and D)

Question 6

Whether a tax is levied on sellers or buyers, buyers and sellers usually share the burden of taxes.

Accepted Answer

A) True 
 B)False

Question 7

If a price ceiling of $1.50 per gallon is imposed on gasoline, and the market equilibrium price is $2, then the price ceiling is a binding constraint on the market.

Accepted Answer

A) True 
 B)False

Question 8

A tax on sellers shifts the supply curve but not the demand curve.

Accepted Answer

A) True 
 B)False

Question 9

Figure 6-24 
-Refer to Figure 6-24. The per-unit burden of the tax on buyers of the good is

Accepted Answer

A)   $2.
B)   $4.
C)   $6.
D)   $8.E) A) and C)
F) A) and B)

Question 10

When a tax is placed on the sellers of cell phones, the size of the cell phone market

Accepted Answer

A)   and the effective price received by sellers both increase.
B)   increases, but the effective price received by sellers decreases.
C)   decreases, but the effective price received by sellers increases.
D)   and the effective price received by sellers both decrease.E) None of the above
F) A) and B)

Question 11

An outcome that can result from either a price ceiling or a price floor is

Accepted Answer

A)   a surplus in the market.
B)   a shortage in the market.
C)   a nonbinding price control.
D)   long lines of frustrated buyers.E) All of the above
F) B) and D)

Question 12

Figure 6-35 
-Refer to Figure 6-35. A price floor set at $40 would create a surplus of 20 units.

Accepted Answer

A) True 
 B)False

Question 13

Minimum-wage laws dictate the

Accepted Answer

A)   average price employers must pay for labor.
B)   highest price employers may pay for labor.
C)   lowest price employers may pay for labor.
D)   the highest and lowest prices employers may pay for labor.E) C) and D)
F) A) and C)

Question 14

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 15

When a binding price ceiling is imposed on a market to benefit buyers,

Accepted Answer

A)   no buyers actually benefit.
B)   some buyers benefit, but no buyers are harmed.
C)   some buyers benefit, and some buyers are harmed.
D)   all buyers benefit.E) B) and D)
F) All of the above

Question 16

Figure 6-12 
-Refer to Figure 6-12. When the price ceiling applies in this market and the supply curve for gasoline shifts from S1 to S2,

Accepted Answer

A)   the market price will increase to P3.
B)   a surplus will occur at the new market price of P2.
C)   the market price will stay at P1.
D)   a shortage will occur at the new market price of P2.E) A) and D)
F) B) and D)

Question 17

Which of the following is not a short-run effect of rent control on the housing market?

Accepted Answer

A)   reduced rents
B)   a large shortage
C)   a small increase in quantity demanded
D)   a small decrease in quantity suppliedE) None of the above
F) B) and D)

Question 18

If a tax is levied on the buyers of a product, then the supply curve will

Accepted Answer

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

Question 19

The goal of the minimum wage is to ensure workers a minimally adequate standard of living.

Accepted Answer

A) True 
 B)False

Question 20

Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the i)  supply is more elastic than the demand.
Ii)  demand in more elastic than the supply.
Iii)  tax is placed on the sellers of the product.
Iv)  tax is placed on the buyers of the product.

Accepted Answer

A)   i)  only
B)   ii)  only
C)   i)  and iv)  only
D)   ii)  and iii)  onlyE) All of the above
F) None of the above

Exam 6: Supply, Demand, and Government Policies

If a price ceiling of $1.50 per gallon is imposed on gasoline, and the market equilibrium price is $2, then the price ceiling is a binding constraint on the market.

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Rent control

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If a tax is levied on the buyers of a product, then the supply curve will

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Whether a tax is levied on sellers or buyers, buyers and sellers usually share the burden of taxes.

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Figure 6-24 -Refer to Figure 6-24. The per-unit burden of the tax on buyers of the good is

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

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A tax on sellers shifts the supply curve but not the demand curve.

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Which of the following is not a short-run effect of rent control on the housing market?

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Figure 6-12 -Refer to Figure 6-12. Which of the following statements best relates the figure to the events that occurred in the United States in the 1970s?

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When a binding price ceiling is imposed on a market to benefit buyers,

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Figure 6-19 -Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

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An outcome that can result from either a price ceiling or a price floor is

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When a tax is placed on the sellers of cell phones, the size of the cell phone market

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Minimum-wage laws dictate the

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The goal of the minimum wage is to ensure workers a minimally adequate standard of living.

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Figure 6-12 -Refer to Figure 6-12. When the price ceiling applies in this market and the supply curve for gasoline shifts from S1 to S2,

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Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the i) supply is more elastic than the demand. Ii) demand in more elastic than the supply. Iii) tax is placed on the sellers of the product. Iv) tax is placed on the buyers of the product.

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Figure 6-35 -Refer to Figure 6-35. A price floor set at $40 would create a surplus of 20 units.

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Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

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Figure 6-20 -Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. Which of the following is correct?

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