Question 1

The price received by sellers in a market will decrease if the government

Accepted Answer

A)  increases a binding price floor in that market.
B)  increases a binding price ceiling in that market.
C)  decreases a tax on the good sold in that market.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 2

Unlike minimum wage laws, wage subsidies

Accepted Answer

A)  discourage firms from hiring the working poor.
B)  cause unemployment.
C)  help only wealthy workers.
D)  raise the living standards of the working poor without creating unemployment.E) A) and B)
F) All of the above

Question 3

A key lesson from the payroll tax is that the

Accepted Answer

A)  tax is a tax solely on workers.
B)  tax is a tax solely on firms that hire workers.
C)  tax eliminates any wedge that might exist between the wage that firms pay and the wage that workers receive.
D)  true burden of a tax cannot be legislated.E) A) and B)
F) A) and C)

Question 4

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)  $5E) A) and D)
F) All of the above

Question 5

A binding minimum wage creates a surplus of labor.

Accepted Answer

A) True 
 B)False

Question 6

A tax on sellers and an increase in input prices affect the supply curve in the same way.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

Accepted Answer

A)  less than $0.50.
B)  $0.50.
C)  between $0.50 and $1.
D)  $1.E) A) and B)
F) B) and C)

Question 8

Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy. Further, suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle. Which of the following statements is correct?

Accepted Answer

A)  This tax causes the demand curve for tequila to shift downward by $1.00 at each quantity of tequila.
B)  The price paid by buyers is $0.20 per bottle more than it was before the tax.
C)  Eighty percent of the burden of the tax falls on sellers.
D)  All of the above are correct.E) None of the above
F) B) and D)

Question 9

Figure 6-9 
-Refer to Figure 6-9. A price ceiling set at

Accepted Answer

A)  $4 will be binding and will result in a shortage of 3 units.
B)  $4 will be binding and will result in a shortage of 6 units.
C)  $7 will be binding and will result in a surplus of 6 units.
D)  $7 will be binding and will result in a surplus of 12 units.E) A) and B)
F) A) and C)

Question 10

Figure 6-11 
-Refer to Figure 6-11. If the government imposes a price ceiling at $3, it would be

Accepted Answer

A)  binding if market demand is Demand A or Demand B.
B)  non-binding if market demand is Demand A or Demand B.
C)  binding if market demand is Demand A and non-binding if market demand is Demand B.
D)  non-binding if market demand is Demand A and binding if market demand is Demand B.E) All of the above
F) A) and B)

Question 11

Figure 6-13 
-Refer to Figure 6-13. In this market, a minimum wage of $7.25 creates a labor

Accepted Answer

A)  shortage of 2,250 workers.
B)  shortage of 4,500 workers.
C)  surplus of 2,250 workers.
D)  surplus of 4,500 workers.E) All of the above
F) None of the above

Question 12

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

Accepted Answer

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

Question 13

Figure 6-14
The vertical distance between points A and B represents the tax in the market. 
-Refer to Figure 6-14. The per-unit burden of the tax on buyers is

Accepted Answer

A)  $6.
B)  $8.
C)  $14.
D)  $24.E) B) and D)
F) None of the above

Question 14

A $0.10 tax levied on the sellers of chocolate bars will cause the

Accepted Answer

A)  supply curve for chocolate bars to shift down by $0.10.
B)  supply curve for chocolate bars to shift up by $0.10.
C)  demand curve for chocolate bars to shift down by $0.10.
D)  demand curve for chocolate bars to shift up by $0.10.E) B) and C)
F) A) and C)

Question 15

The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.

Accepted Answer

A) True 
 B)False

Question 16

Buyers and sellers always share the burden of a tax equally.

Accepted Answer

A) True 
 B)False

Question 17

Figure 6-6 
-Refer to Figure 6-6. Which of the following price floors would be binding in this market?

Accepted Answer

A)  $6
B)  $8
C)  $10
D)  $12E) B) and C)
F) None of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

Accepted Answer

A) True 
 B)False

Question 20

When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

Unlike minimum wage laws, wage subsidies

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A tax on sellers and an increase in input prices affect the supply curve in the same way.

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Figure 6-14 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-14. The per-unit burden of the tax on buyers is

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A binding minimum wage creates a surplus of labor.

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When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

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Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy. Further, suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle. Which of the following statements is correct?

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Figure 6-9 -Refer to Figure 6-9. A price ceiling set at

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If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

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A key lesson from the payroll tax is that the

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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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The price received by sellers in a market will decrease if the government

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A $0.10 tax levied on the sellers of chocolate bars will cause the

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Figure 6-11 -Refer to Figure 6-11. If the government imposes a price ceiling at $3, it would be

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

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The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.

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Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

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Buyers and sellers always share the burden of a tax equally.

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Figure 6-13 -Refer to Figure 6-13. In this market, a minimum wage of $7.25 creates a labor

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

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Figure 6-6 -Refer to Figure 6-6. Which of the following price floors would be binding in this market?

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