Question 1

An example of a price floor is

Accepted Answer

A)  the regulation of gasoline prices in the U.S. in the 1970s.
B)  rent control.
C)  the minimum wage.
D)  any restriction on price that leads to a shortage.E) B) and C)
F) A) and C)

Question 2

Figure 6-15 
-Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at

Accepted Answer

A)  any price below $3.
B)  a price between $2 and $3.
C)  a price between $3 and $4.
D)  any price above $3.E) A) and D)
F) C) and D)

Question 3

To say that a price floor is binding is to say that the price floor

Accepted Answer

A)  results in a shortage.
B)  is set below the equilibrium price.
C)  causes quantity supplied to exceed quantity demanded.
D)  All of the above are correct.E) All of the above
F) B) and D)

Question 4

The imposition of a binding price floor on a market

Accepted Answer

A)  causes quantity demanded to be greater than quantity supplied.
B)  causes quantity demanded to be less than quantity supplied.
C)  causes quantity demanded to be equal to quantity supplied.
D)  causes a decrease in demand.E) A) and B)
F) A) and C)

Question 5

Figure 6-18
The vertical distance between points A and B represents the tax in the market. 
-Refer to Figure 6-18. The price that buyers pay after the tax is imposed is

Accepted Answer

A)  $8.
B)  $10.
C)  $16.
D)  $24.E) All of the above
F) None of the above

Question 6

A price floor set below the equilibrium price causes a surplus in the market.

Accepted Answer

A) True 
 B)False

Question 7

In a competitive market free of government regulation,

Accepted Answer

A)  price adjusts until quantity demanded is greater than quantity supplied.
B)  price adjusts until quantity demanded is less than quantity supplied.
C)  price adjusts until quantity demanded equals quantity supplied.
D)  supply adjusts to meet demand at every price.E) None of the above
F) C) and D)

Question 8

Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect

Accepted Answer

A)  most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.
B)  most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.
C)  the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government.
D)  a large percentage of smokers to quit smoking in response to the tax.E) A) and D)
F) B) and C)

Question 9

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 B)
F) All of the above

Question 10

If a binding price floor is imposed on the video game market, then

Accepted Answer

A)  the quantity of video games demanded will decrease.
B)  the quantity of video games supplied will increase.
C)  a surplus of video games will develop.
D)  All of the above are correct.E) C) and D)
F) A) and D)

Question 11

When a price floor is binding, is the price floor set above or below the market equilibrium price?

Accepted Answer

A binding price floo...

Question 12

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

Question 13

If the government wants to reduce smoking, it should impose a tax on

Accepted Answer

A)  buyers of cigarettes.
B)  sellers of cigarettes.
C)  either buyers or sellers of cigarettes.
D)  whichever side of the market is less elastic.E) None of the above
F) B) and D)

Question 14

Suppose buyers of vodka are required to send $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct?

Accepted Answer

A)  This tax causes the demand curve for vodka to shift downward by $5.00 at each quantity of vodka.
B)  The price paid by buyers is $2.00 per bottle more than it was before the tax.
C)  Sixty percent of the burden of the tax falls on sellers.
D)  All of the above are correct.E) All of the above
F) C) and D)

Question 15

When the government imposes a binding price ceiling on a competitive market, a surplus of the good arises, and sellers must ration the scarce goods among the large number of potential buyers.

Accepted Answer

A) True 
 B)False

Question 16

Table 6-2 
-Refer to Table 6-2. A price floor set at $20 results in

Accepted Answer

A)  75 units sold.
B)  125 units sold.
C)  200 units sold.
D)  275 units sold.E) A) and C)
F) None of the above

Question 17

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the

Accepted Answer

A)  buyers will bear a greater burden of the tax than the sellers.
B)  sellers will bear a greater burden of the tax than the buyers.
C)  buyers and sellers are likely to share the burden of the tax equally.
D)  buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information.E) B) and D)
F) None of the above

Question 18

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

Question 19

Figure 6-22 
-Refer to Figure 6-22. The price paid by buyers after the tax is imposed is

Accepted Answer

A)  $3.00.
B)  $3.50.
C)  $5.00.
D)  $6.00.E) All of the above
F) A) and B)

Question 20

A tax on buyers decreases the quantity of the good sold in the market.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

Tax incidence

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Figure 6-15 -Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at

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If the government wants to reduce smoking, it should impose a tax on

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A tax on buyers decreases the quantity of the good sold in the market.

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In a competitive market free of government regulation,

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When the government imposes a binding price ceiling on a competitive market, a surplus of the good arises, and sellers must ration the scarce goods among the large number of potential buyers.

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Suppose buyers of vodka are required to send $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct?

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Figure 6-18 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-18. The price that buyers pay after the tax is imposed is

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The imposition of a binding price floor on a market

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To say that a price floor is binding is to say that the price floor

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When a price floor is binding, is the price floor set above or below the market equilibrium price?

Correct AnswerverifiedA binding price floo...View AnswerShow Answer

Figure 6-22 -Refer to Figure 6-22. The price paid by buyers after the tax is imposed is

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Table 6-2 -Refer to Table 6-2. A price floor set at $20 results in

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A nonbinding price ceiling (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 price floor set below the equilibrium price causes a surplus in the market.

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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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Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the

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If a binding price floor is imposed on the video game market, then

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An example of a price floor is

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Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect

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A binding price floo...
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