Question 1

Regardless of whether a tax is levied on sellers or buyers, taxes encourage market activity.

Accepted Answer

A) True 
 B)False

Question 2

A tax on sellers will shift the

Accepted Answer

A)  demand curve upward by the amount of the tax.
B)  demand curve downward by the amount of the tax.
C)  supply curve upward by the amount of the tax.
D)  supply curve downward by the amount of the tax.E) B) and C)
F) A) and B)

Question 3

Figure 6-10 
-Refer to Figure 6-10. A price ceiling set at

Accepted Answer

A)  $6 will be binding and will result in a shortage of 8 units.
B)  $6 will be binding and will result in a shortage of 4 units.
C)  $16 will be binding and will result in a shortage of 12 units.
D)  $16 will be binding and will result in a shortage of 6 units.E) C) and D)
F) A) and B)

Question 4

Figure 6-23 
-Refer to Figure 6-23. The per-unit burden of the tax is

Accepted Answer

A)  $4 for buyers and $6 for sellers.
B)  $5 for buyers and $5 for sellers.
C)  $6 for buyers and $4 for sellers.
D)  $10 for buyers and $0 for sellers.E) All of the above
F) A) and B)

Question 5

One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

Accepted Answer

A)  He fears that low rents will cause low-income people to move into the city, reducing the quality of life for other people.
B)  He fears that rent control will benefit landlords at the expense of tenants, increasing inequality in the city.
C)  He fears that rent controls will cause a construction boom, which will make the city crowded and more polluted.
D)  He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.E) None of the above
F) A) and B)

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

The burden that results from a tax on yachts falls more heavily on the buyers of yachts than on the sellers of yachts.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

A price ceiling is binding when it is set

Accepted Answer

A)  above the equilibrium price, causing a shortage.
B)  above the equilibrium price, causing a surplus.
C)  below the equilibrium price, causing a shortage.
D)  below the equilibrium price, causing a surplus.E) C) and D)
F) B) and D)

Question 10

When a tax is levied on sellers of tea,

Accepted Answer

A)  the well-being of both sellers and buyers of tea is unaffected.
B)  sellers of tea are made worse off, and the well-being of buyers is unaffected.
C)  sellers of tea are made worse off, and buyers of tea are made better off.
D)  both sellers and buyers of tea are made worse off.E) B) and C)
F) A) and D)

Question 11

The minimum wage was instituted to ensure workers

Accepted Answer

A)  a middle-class standard of living.
B)  employment.
C)  a minimally adequate standard of living.
D)  unemployment compensation.E) C) and D)
F) All of the above

Question 12

When a tax is placed on the buyers of tennis racquets, the size of the tennis racquet market

Accepted Answer

A)  and the price paid by buyers both decrease.
B)  decreases, but the price paid by buyers increases.
C)  increases, but the price paid by buyers decreases.
D)  and the price paid by buyers both increase.E) A) and D)
F) C) and D)

Question 13

Price controls can generate inequities.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following causes a shortage of a good?

Accepted Answer

A)  a binding price floor
B)  a binding price ceiling
C)  a tax on the good
D)  None of the above is correct.E) None of the above
F) A) and B)

Question 15

Figure 6-25
 
-Refer to Figure 6-25. In which market will the tax burden be most equally divided between buyers and sellers?

Accepted Answer

A)  market (a) 
B)  market (b) 
C)  market (c) 
D)  All of the above are correct.E) A) and D)
F) C) and D)

Question 16

One common example of a price ceiling is rent control.

Accepted Answer

A) True 
 B)False

Question 17

Figure 6-19 
-Refer to Figure 6-19. Which of the following is correct?

Accepted Answer

A)  One-fourth of the burden of the tax falls on buyers, and three-fourths of the burden of the tax falls on sellers.
B)  One-third of the burden of the tax falls on buyers, and two-thirds of the burden of the tax falls on sellers.
C)  One-half of the burden of the tax falls on buyers, and one-half of the burden of the tax falls on sellers.
D)  Two-thirds of the burden of the tax falls on buyers, and one-third of the burden of the tax falls on sellers.E) B) and C)
F) A) and C)

Question 18

A tax on buyers increases the size of a market.

Accepted Answer

A) True 
 B)False

Question 19

A price ceiling 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) None of the above
F) B) and C)

Question 20

The price paid by buyers in a market will increase if the government (i) 
Increases a binding price floor in that market.(ii) 
Increases a binding price ceiling in that market.(iii) 
Decreases a tax on the good sold in that market.

Accepted Answer

A)  (ii)  only
B)  (iii)  only
C)  (i)  and (ii)  only
D)  (i) , (ii) , and (iii) E) All of the above
F) B) and D)

Exam 6: Supply, Demand, and Government Policies

Price controls can generate inequities.

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A tax on buyers increases the size of a market.

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

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Figure 6-19 -Refer to Figure 6-19. Which of the following is correct?

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A tax on sellers will shift the

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The price paid by buyers in a market will increase if the government (i) Increases a binding price floor in that market.(ii) Increases a binding price ceiling in that market.(iii) Decreases a tax on the good sold in that market.

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Regardless of whether a tax is levied on sellers or buyers, taxes encourage market activity.

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One common example of a price ceiling is rent control.

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Which of the following causes a shortage of a good?

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When a tax is levied on sellers of tea,

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

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The burden that results from a tax on yachts falls more heavily on the buyers of yachts than on the sellers of yachts.

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Figure 6-25 -Refer to Figure 6-25. In which market will the tax burden be most equally divided between buyers and sellers?

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Figure 6-10 -Refer to Figure 6-10. A price ceiling set at

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A price ceiling is binding when it is set

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When a tax is placed on the buyers of tennis racquets, the size of the tennis racquet market

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The minimum wage was instituted to ensure workers

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One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

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Figure 6-23 -Refer to Figure 6-23. The per-unit burden of the tax is

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A price ceiling will be binding only if it is set

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