Question 1

Figure 6-22 
-Refer to Figure 6-22. How much tax revenue does this tax generate for the government?

Accepted Answer

A)  $80.
B)  $60.
C)  $15.
D)  $45.E) A) and D)
F) B) and C)

Question 2

Figure 6-25 
-Refer to Figure 6-25. The equilibrium price in the market before the tax is imposed is

Accepted Answer

A)  $1.
B)  $2.
C)  $5.
D)  $6.E) A) and B)
F) None of the above

Question 3

Which of the following is not a rationing mechanism used by landlords in cities with rent control?

Accepted Answer

A)  waiting lists
B)  race
C)  price
D)  bribesE) None of the above
F) B) and C)

Question 4

A binding price ceiling causes quantity demanded to be less than quantity supplied.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a function of prices in a market system?

Accepted Answer

A)  Prices have the crucial job of balancing supply and demand.
B)  Prices send signals to buyers and sellers to help them make rational economic decisions.
C)  Prices coordinate economic activity.
D)  Prices ensure an equal distribution of goods and services among consumers.E) None of the above
F) A) and B)

Question 6

Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

Accepted Answer

A)  An increase in the price of flour, which is used to make bread.
B)  A decrease in the price of lunch meat.
C)  A decrease in the price of unsliced bread, which people consider a substitute for sliced bread.
D)  An decrease in the price of peanut butter and jelly.E) None of the above
F) A) and B)

Question 7

If a price ceiling is a binding constraint on a market, then

Accepted Answer

A)  the equilibrium price must be below the price ceiling.
B)  the quantity supplied must exceed the quantity demanded.
C)  sellers cannot sell all they want to sell at the price ceiling.
D)  buyers cannot buy all they want to buy at the price ceiling.E) B) and D)
F) A) and D)

Question 8

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 9

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

Accepted Answer

A)  demand curve for toothpaste shifts to the left.
B)  supply curve for toothpaste shifts to the right.
C)  quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases.
D)  quantity supplied of toothpaste stays the same.E) A) and D)
F) C) and D)

Question 10

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)  $9E) B) and D)
F) B) and C)

Question 11

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.E) B) and C)
F) C) and D)

Question 12

A tax on sellers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied.

Accepted Answer

A) True 
 B)False

Question 13

A nonbinding price floor (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)  (iii)  only
B)  (iv)  only
C)  (i)  and (iii)  only
D)  (ii)  and (iv)  onlyE) A) and B)
F) A) and C)

Question 14

Figure 6-7 
-Refer to Figure 6-7. Suppose a price ceiling of $5 is imposed on this market. As a result,

Accepted Answer

A)  the quantity of the good supplied decreases by 20 units.
B)  the demand curve shifts to the left; quantity sold is now 30 units and the price is $5.
C)  buyers' total expenditure on the good decreases by $80.
D)  the price of the good continues to serve as the rationing mechanism.E) A) and B)
F) A) and C)

Question 15

A binding minimum wage raises the incomes of some workers, but it lowers the incomes of workers who cannot find jobs.

Accepted Answer

A) True 
 B)False

Question 16

A binding price floor may not help all sellers, but it does not hurt any sellers.

Accepted Answer

A) True 
 B)False

Question 17

A price floor set above the equilibrium price causes quantity supplied to exceed quantity demanded.

Accepted Answer

A) True 
 B)False

Question 18

The tax burden will fall most heavily on sellers of the good when the demand curve

Accepted Answer

A)  is relatively steep, and the supply curve is relatively flat.
B)  is relatively flat, and the supply curve is relatively steep.
C)  and the supply curve are both relatively flat.
D)  and the supply curve are both relatively steep.E) All of the above
F) C) and D)

Question 19

Figure 6-34 
-Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much is the burden of the tax on the sellers in this market?

Accepted Answer

With a $6 tax per unit, the am...

Question 20

Suppose the government imposes a 25-cent tax on the buyers of incandescent light bulbs. Which of the following is not correct? The tax would

Accepted Answer

A)  shift the demand curve downward by 25 cents.
B)  lower the equilibrium price by 25 cents.
C)  reduce the equilibrium quantity.
D)  discourage market activity.E) B) and C)
F) None of the above

Exam 6: Supply, Demand, and Government Policies

Which of the following is not a rationing mechanism used by landlords in cities with rent control?

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Figure 6-7 -Refer to Figure 6-7. Suppose a price ceiling of $5 is imposed on this market. As a result,

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Figure 6-34 -Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much is the burden of the tax on the sellers in this market?

Correct AnswerverifiedWith a $6 tax per unit, the am...View AnswerShow Answer

Which of the following is not a function of prices in a market system?

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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

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

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A binding price floor may not help all sellers, but it does not hurt any sellers.

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Suppose the government imposes a 25-cent tax on the buyers of incandescent light bulbs. Which of the following is not correct? The tax would

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A binding price ceiling causes quantity demanded to be less than quantity supplied.

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Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

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Figure 6-22 -Refer to Figure 6-22. How much tax revenue does this tax generate for the government?

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The tax burden will fall most heavily on sellers of the good when the demand curve

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Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

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If a price ceiling is a binding constraint on a market, then

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Figure 6-25 -Refer to Figure 6-25. The equilibrium price in the market before the tax is imposed is

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

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A price floor set above the equilibrium price causes quantity supplied to exceed quantity demanded.

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A nonbinding price floor (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.

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A binding minimum wage raises the incomes of some workers, but it lowers the incomes of workers who cannot find jobs.

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A tax on sellers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied.

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