Question 1

Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which

Accepted Answer

A)   the supply is more elastic than the demand.
B)   the demand in more elastic than the supply.
C)   the tax is placed on the sellers of the product.
D)   the tax is placed on the buyers of the product.

Question 2

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)   it has no legal enforcement mechanism.
D)   More than one of the above is correct.

Question 3

Which of the following is correct?

Accepted Answer

A)   Rent control and the minimum wage are both examples of price ceilings.
B)   Rent control is an example of a price ceiling,and the minimum wage is an example of a price floor.
C)   Rent control is an example of a price floor,and the minimum wage is an example of a price ceiling.
D)   Rent control and the minimum wage are both examples of price floors.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Suppose that the demand for picture frames is elastic and the supply of picture frames is inelastic.A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by

Accepted Answer

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

Question 6

Price controls can generate inequities.

Accepted Answer

A) True 
 B)False

Question 7

Figure 6-12 
-Refer to Figure 6-12.The effective price received by sellers after the tax is imposed is

Accepted Answer

A)   $3.
B)   $4.
C)   $5.
D)   $7.

Question 8

If the government removes a binding price ceiling from a market,then the price received by sellers will

Accepted Answer

A)   decrease and the quantity sold in the market will decrease.
B)   decrease and the quantity sold in the market will increase.
C)   increase and the quantity sold in the market will decrease.
D)   increase and the quantity sold in the market will increase.

Question 9

Which of the following would be the least likely result of a binding price ceiling imposed on the market for rental cars?

Accepted Answer

A)   an accumulation of dirt in the interior of rental cars
B)   poor engine maintenance in rental cars
C)   free gasoline given to people as an incentive to a rent a car
D)   slow replacement of old rental cars with new ones

Question 10

A tax on sellers increases the quantity of the good sold in the market.

Accepted Answer

A) True 
 B)False

Question 11

A price ceiling set above the equilibrium price causes a surplus in the market.

Accepted Answer

A) True 
 B)False

Question 12

Figure 6-17 
-Refer to Figure 6-17.A price ceiling set at $70 would result in a shortage of 40 units.

Accepted Answer

A) True 
 B)False

Question 13

If the government removes a tax on buyers of a good and imposes the same tax on sellers of the good,then the price paid by buyers will

Accepted Answer

A)   not change and the price received by sellers will not change.
B)   not change and the price received by sellers will decrease.
C)   decrease and the price received by sellers will not change.
D)   decrease and the price received by sellers will decrease.

Question 14

Figure 6-3 
-Refer to Figure 6-3.If the government imposes a price floor of $14 on this market,then there will be a

Accepted Answer

A)   surplus of 0.
B)   surplus of 20.
C)   surplus of 30.
D)   surplus of 40.

Question 15

The rationing mechanisms that develop under binding price floors are usually efficient.

Accepted Answer

A) True 
 B)False

Question 16

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.

Question 17

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

Accepted Answer

A)   the size of the cell phone market and the effective price received by sellers both increase.
B)   the size of the cell phone market increases,but the effective price received by sellers decreases.
C)   the size of the cell phone market decreases,but the effective price received by sellers increases.
D)   the size of the cell phone market and the effective price received by sellers both decrease.

Question 18

Policymakers use taxes

Accepted Answer

A)   to raise revenue for public purposes,but not to influence market outcomes.
B)   both to raise revenue for public purposes and to influence market outcomes.
C)   when they realize that price controls alone are insufficient to correct market inequities.
D)   only in those markets in which the burden of the tax falls clearly on the sellers.

Question 19

Figure 6-9 
-Refer to Figure 6-9.Suppose the same supply and demand curves apply and a tax of the same amount per unit as shown here is imposed.Now,however,the sellers of the good,rather than the buyers,are required to pay the tax to the government.Now,relative to the case depicted in the figure,

Accepted Answer

A)   the burden on buyers will be larger and the burden on sellers will be smaller.
B)   the burden on buyers will be smaller and the burden on sellers will be larger.
C)   the burden on buyers will be the same and the burden on sellers will be the same.
D)   The relative burdens in the two cases cannot be determined without further information.

Question 20

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

Accepted Answer

A)   the size of the cell phone market and the price paid by buyers both increase.
B)   the size of the cell phone market increases,but the price paid by buyers decreases.
C)   the size of the cell phone market decreases,but the price paid by buyers increases.
D)   the size of the cell phone market and the price paid by buyers both decrease.

Exam 6: Supply, Demand, and Government Policies

Price controls can generate inequities.

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A tax on sellers increases the quantity of the good sold in the market.

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

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Figure 6-9 -Refer to Figure 6-9.Suppose the same supply and demand curves apply and a tax of the same amount per unit as shown here is imposed.Now,however,the sellers of the good,rather than the buyers,are required to pay the tax to the government.Now,relative to the case depicted in the figure,

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

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If a price floor is not binding,then

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

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A price ceiling set above the equilibrium price causes a surplus in the market.

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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

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Suppose that the demand for picture frames is elastic and the supply of picture frames is inelastic.A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by

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If the government removes a tax on buyers of a good and imposes the same tax on sellers of the good,then the price paid by buyers will

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Which of the following would be the least likely result of a binding price ceiling imposed on the market for rental cars?

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The rationing mechanisms that develop under binding price floors are usually efficient.

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Figure 6-12 -Refer to Figure 6-12.The effective price received by sellers after the tax is imposed is

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If the government removes a binding price ceiling from a market,then the price received by sellers will

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Figure 6-17 -Refer to Figure 6-17.A price ceiling set at $70 would result in a shortage of 40 units.

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Which of the following is correct?

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Figure 6-3 -Refer to Figure 6-3.If the government imposes a price floor of $14 on this market,then there will be a

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Policymakers use taxes

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

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