Question 1

Figure 6-16 
-Refer to Figure 6-16. In this market, a minimum wage of $2.75 is

Accepted Answer

A)  binding and creates a labor shortage.
B)  binding and creates unemployment.
C)  nonbinding and creates a labor shortage.
D)  nonbinding and creates neither a labor shortage nor unemployment.E) All of the above
F) B) and C)

Question 2

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

Accepted Answer

A)  frequent rental programs such as "Rent nine times and the tenth rental is free!"
B)  enhanced maintenance programs to promote the high quality of the cars
C)  free gasoline given to people as an incentive to a rent a car
D)  slow replacement of old rental cars with newer onesE) A) and B)
F) C) and D)

Question 3

A shortage results when a

Accepted Answer

A)  nonbinding price ceiling is imposed on a market.
B)  nonbinding price ceiling is removed from a market.
C)  binding price ceiling is imposed on a market.
D)  binding price ceiling is removed from a market.E) A) and C)
F) B) and D)

Question 4

The minimum wage is more often binding for teenagers than for other members of the labor force.

Accepted Answer

A) True 
 B)False

Question 5

A price ceiling set below the equilibrium price causes quantity demanded to exceed quantity supplied.

Accepted Answer

A) True 
 B)False

Question 6

Workers, rather than firms, bear most of the burden of the payroll tax.

Accepted Answer

A) True 
 B)False

Question 7

Figure 6-7 
-Refer to Figure 6-7. For a price floor to be binding in this market, it would have to be set at

Accepted Answer

A)  any price below $7.
B)  any price below $3.
C)  any price below $9.
D)  any price above $7.E) A) and C)
F) C) and D)

Question 8

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

Accepted Answer

A)  be binding and will result in a surplus of 75 units.
B)  be binding and will result in a surplus of 125 units.
C)  be binding and will result in a surplus of 200 units.
D)  not be binding.E) A) and D)
F) All of the above

Question 9

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

Accepted Answer

A binding price floo...

Question 10

The quantity sold in a market will decrease if the government decreases a

Accepted Answer

A)  binding price floor in that market.
B)  binding price ceiling in that market.
C)  tax on the good sold in that market.
D)  All of the above are correct.E) A) and C)
F) All of the above

Question 11

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 C)

Question 12

Most of the burden of a luxury tax falls on the middle class workers who produce luxury goods rather than on the rich who buy them.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

Lawmakers can decide whether the buyers or the sellers must send a tax to the government, but they cannot legislate the true burden of a tax.

Accepted Answer

A) True 
 B)False

Question 15

If a price floor is not binding, then it will have no effect on the market.

Accepted Answer

A) True 
 B)False

Question 16

Table 6-1 
-Refer to Table 6-1. Suppose the government imposes a price floor of $30 on this market. What will be the size of the surplus in this market?

Accepted Answer

A)  0 units
B)  200 units
C)  1800 units
D)  2000 unitsE) B) and D)
F) A) and D)

Question 17

Figure 6-9 
-Refer to Figure 6-9. At which price would a price ceiling be binding?

Accepted Answer

A)  $8
B)  $5
C)  $6
D)  $7E) None of the above
F) A) and C)

Question 18

Figure 6-11 
-Refer to Figure 6-11. If the government imposes a price floor at $10, 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) A) and D)
F) B) and D)

Question 19

A tax on buyers increases the size of a market.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the equilibrium price of a physical examination ("physical")  by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

Accepted Answer

A)  demand curve for physicals shifts to the right.
B)  supply curve for physicals shifts to the left.
C)  quantity demanded of physicals increases, and the quantity supplied of physicals decreases.
D)  number of physicals performed stays the same.E) B) and C)
F) All of the above

Exam 6: Supply, Demand, and Government Policies

A key lesson from the payroll tax is that the

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A price ceiling set below the equilibrium price causes quantity demanded to exceed quantity supplied.

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If a price floor is not binding, then it will have no effect on the market.

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Table 6-1 -Refer to Table 6-1. Suppose the government imposes a price floor of $30 on this market. What will be the size of the surplus in this market?

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The quantity sold in a market will decrease if the government decreases a

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Lawmakers can decide whether the buyers or the sellers must send a tax to the government, but they cannot legislate the true burden of a tax.

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

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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 shortage results when a

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Figure 6-7 -Refer to Figure 6-7. For a price floor to be binding in this market, it would have to be set at

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A tax on buyers increases the size of a market.

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A tax on sellers will shift the

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Figure 6-16 -Refer to Figure 6-16. In this market, a minimum wage of $2.75 is

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Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

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

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Workers, rather than firms, bear most of the burden of the payroll tax.

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The minimum wage is more often binding for teenagers than for other members of the labor force.

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Figure 6-9 -Refer to Figure 6-9. At which price would a price ceiling be binding?

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Figure 6-11 -Refer to Figure 6-11. If the government imposes a price floor at $10, it would be

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Most of the burden of a luxury tax falls on the middle class workers who produce luxury goods rather than on the rich who buy them.

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A binding price floo...
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