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Exam 6: Supply, Demand, and Government Policies

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Question 111

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

A) True
B) False

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Question 112

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A payroll tax is a

A) fixed number of dollars that every firm must pay to the government for each worker that the firm hires.
B) tax that each firm must pay to the government before the firm can hire workers and operate its business.
C) tax on the wages that firms pay their workers.
D) tax on all wages above the minimum wage.

E) A) and B)
F) A) and C)

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Question 113

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Figure 6-11 ​ -Refer to Figure 6-11. Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

Figure 6-10 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-10. The price that buyers pay after the tax is imposed is

When a free market for a good reaches equilibrium, anyone who is willing and able to pay the market price can buy the good.

Suppose there is currently a tax of $100 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $100 per ticket to $80 per ticket, then the

Taxes levied on sellers and taxes levied on buyers are equivalent.

Figure 6-2 ​ -Refer to Figure 6-2. The price ceiling causes quantity

A tax burden falls more heavily on the side of the market that is less elastic.

Table 6-2 $\begin{array} { | l | l | l | } \hline \text { Price (\$) } & \begin{array} { l } \text { Quantity } \\\text { Demanded }\end{array} & \begin{array} { l } \text { Quantity } \\\text { Supplied }\end{array} \\\hline 0 & 21 & 0 \\\hline 1 & 18 & 4 \\\hline 2 & 15 & 8 \\\hline 3 & 12 & 12 \\\hline 4 & 9 & 16 \\\hline 5 & 6 & 20 \\\hline 6 & 3 & 24 \\\hline 7 & 0 & 28 \\\hline\end{array}$ -Refer to Table 6-2. In this market, over what range of prices would a price ceiling set by the government be binding?

A binding minimum wage creates unemployment.

A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.

A price ceiling is a legal minimum on the price at which a good or service can be sold.

Define a price floor.

In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

Figure 6-19 ​ -Refer to Figure 6-19. If the government set a price ceiling at $50, would there be a shortage or surplus, and how large would be the shortage/surplus?

Figure 6-18 ​ -Refer to Figure 6-18. If the government set a price floor at $15, would there be a shortage or surplus, and how large would be the shortage/surplus?

Figure 6-17 ​ -Refer to Figure 6-17. If the government places a $2 tax in the market, the seller bears $2 of the tax burden.

Figure 6-5 -Refer to Figure 6-5. A government-imposed price of $12 in this market is an example of a

Figure 6-8 -Refer to Figure 6-8. When the price ceiling is enforced in this market and the supply curve for gasoline shifts from S₁ to S₂,