Question 1

Figure 6-27
This figure shows the market demand and market supply curves for good Z. 
-Refer to Figure 6-27. Suppose a tax of $6 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) A) and B)
F) B) and D)

Question 2

Because the supply and demand of housing are inelastic in the short run, the initial shortage caused by rent control is large.

Accepted Answer

A) True 
 B)False

Question 3

Suppose that the demand for digital cameras is elastic, and the supply of digital cameras is inelastic. A tax of $20 per camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by

Accepted Answer

A)   less than $10
B)   $10.
C)   between $10 and $20.
D)   $20.E) C) and D)
F) B) and D)

Question 4

Suppose the government imposes a $40 tax on the buyers of refrigerators. The tax would

Accepted Answer

A)   shift the demand curve downward by less than $40.
B)   raise the equilibrium price by $40.
C)   create a $20 tax burden each for buyers and sellers.
D)   discourage market activity.E) A) and B)
F) A) and C)

Question 5

Figure 6-31 
-Refer to Figure 6-31. If the government set a price floor at $17, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price floor set at...

Question 6

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) C) and D)
F) All of the above

Question 7

A price floor 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.E) A) and D)
F) A) and C)

Question 8

Which of the following is correct? A tax burden

Accepted Answer

A)   falls more heavily on the side of the market that is more elastic.
B)   falls more heavily on the side of the market that is less elastic.
C)   falls more heavily on the side of the market that is closest to unit elastic.
D)   is distributed independently of the relative elasticities of supply and demand.E) C) and D)
F) None of the above

Question 9

Figure 6-11 
-Refer to Figure 6-11. Which of the following statements is not correct?

Accepted Answer

A)   A government-imposed price of $8 would be a binding price floor if market demand is Demand A and a binding price ceiling if market demand is Demand B.
B)   A government-imposed price of $10 would be a binding price ceiling if market demand is either Demand A or Demand B.
C)   A government-imposed price of $4 would be a binding price ceiling if market demand is either Demand A or Demand B.
D)   A government-imposed price of $10 would be a binding price floor if market demand is Demand A and a non-binding price ceiling if market demand is Demand B.E) A) and D)
F) A) and B)

Question 10

The Federal Insurance Contribution Act (FICA)  tax is an example of a(n)

Accepted Answer

A)   payroll tax.
B)   sales tax.
C)   farm subsidy.
D)   income subsidy.E) All of the above
F) A) and B)

Question 11

A tax of $1 on buyers shifts the demand curve downward by exactly $1.

Accepted Answer

A) True 
 B)False

Question 12

A payroll tax is a

Accepted Answer

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

Question 13

Table 6-1 
-Refer to Table 6-1. Suppose the government imposes a price floor of $70 on this market. What will be the size of the surplus in this market?

Accepted Answer

A)   0 units
B)   400 units
C)   600 units
D)   1000 unitsE) B) and D)
F) All of the above

Question 14

Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.

Accepted Answer

A) True 
 B)False

Question 15

A tax on buyers shifts the demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 16

Will a binding price floor result in a shortage or a surplus in the market?

Accepted Answer

A binding price floo...

Question 17

If a price floor is not binding, then

Accepted Answer

A)   the equilibrium price is above the price floor.
B)   the equilibrium price is below the price floor.
C)   there will be a surplus in the market.
D)   there will be a shortage in the market.E) C) and D)
F) A) and C)

Question 18

Figure 6-14 
-Refer to Figure 6-14. If the horizontal line on the graph represents a price floor, then the price floor is

Accepted Answer

A)   binding and creates a shortage of 20 units of the good.
B)   binding and creates a shortage of 40 units of the good.
C)   not binding but creates a shortage of 40 units of the good.
D)   not binding, and there will be no surplus or shortage of the good.E) A) and D)
F) B) and C)

Question 19

Tax incidence

Accepted Answer

A)   depends on the legislated burden.
B)   is entirely random.
C)   depends on the elasticities of supply and demand.
D)   falls entirely on buyers or entirely on sellers.E) A) and C)
F) B) and D)

Question 20

Rent subsidies and wage subsidies are better than price controls at helping the poor because they have no costs associated with them.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

Suppose the government imposes a $40 tax on the buyers of refrigerators. The tax would

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A payroll tax is a

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Table 6-1 -Refer to Table 6-1. Suppose the government imposes a price floor of $70 on this market. What will be the size of the surplus in this market?

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Because the supply and demand of housing are inelastic in the short run, the initial shortage caused by rent control is large.

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Figure 6-11 -Refer to Figure 6-11. Which of the following statements is not correct?

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The Federal Insurance Contribution Act (FICA) tax is an example of a(n)

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Rent subsidies and wage subsidies are better than price controls at helping the poor because they have no costs associated with them.

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If a price floor is not binding, then

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Figure 6-27 This figure shows the market demand and market supply curves for good Z. -Refer to Figure 6-27. Suppose a tax of $6 per unit is imposed on this market. Which of the following is correct?

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A price floor will be binding only if it is set

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Will a binding price floor result in a shortage or a surplus in the market?

Correct AnswerverifiedA binding price floo...View AnswerShow Answer

A tax of $1 on buyers shifts the demand curve downward by exactly $1.

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Suppose that the demand for digital cameras is elastic, and the supply of digital cameras is inelastic. A tax of $20 per camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by

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Which of the following is correct? A tax burden

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

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A tax on buyers shifts the demand curve to the right.

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Tax incidence

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Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.

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Figure 6-14 -Refer to Figure 6-14. If the horizontal line on the graph represents a price floor, then the price floor is

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Figure 6-31 -Refer to Figure 6-31. If the government set a price floor at $17, would there be a shortage or surplus, and how large would be the shortage/surplus?

Correct AnswerverifiedA price floor set at...View AnswerShow Answer

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A price floor set at...
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