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Exam 6: Supply, Demand, and Government Policies

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Question 81

True/False

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At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers want to sell.

A) True
B) False

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Question 82

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Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

A) the demand for treadmills will increase.
B) the supply of treadmills will decrease.
C) a shortage of treadmills will develop.
D) a surplus of treadmills will develop.

E) None of the above
F) All of the above

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Question 83

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Table 6-1 The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $2 above the equilibrium price in this market. ​ $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Price } \\\text { (Dollars per unit) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Quantity Supplied } \\\text { (Units) }\end{array} \\\hline 0 & 15 & 0 \\\hline 1 & 13 & 3 \\\hline 2 & 11 & 6 \\\hline 3 & 9 & 9 \\\hline 4 & 7 & 12 \\\hline 5 & 5 & 15 \\\hline 6 & 3 & 18 \\\hline\end{array}$ -Refer to Table 6-1. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is

Scenario 6-1 Suppose that demand in the market for good X is given by the equation $Q ^ { D } = 30 - P$ and that supply in the market for good X is given by the equation $Q ^ { S } = 2 P$ -Refer to Scenario 6-1. If the government set a price ceiling at $12, would there be a shortage or surplus, and how large would be the shortage/surplus?

Figure 6-17 ​ -Refer to Figure 6-17. If the government places a $2 tax in the market, the buyer pays $4.

If the government imposes a binding price ceiling on a market, then the price paid by buyers will

Not all sellers benefit from a binding price floor.

Figure 6-21 ​ -Refer to Figure 6-21. If the government imposes a tax of $6 per unit in this market, how many units will be bought and sold in the market after the tax is imposed?

A tax on sellers shifts the supply curve to the left.

Figure 6-10 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-10. The per-unit burden of the tax on buyers is

Rent subsidies and wage subsidies are better than price controls at helping the poor because they have no costs associated with them.

The federal government uses the revenue from the FICA (Federal Insurance Contribution Act) tax to pay for

Figure 6-17 ​ -Refer to Figure 6-17. If the government places a $2 tax in the market, the buyer pays $6.

Figure 6-18 ​ -Refer to Figure 6-18. If the government set a price floor at $9, would there be a shortage or surplus, and how large would be the shortage/surplus?

A price floor set above the equilibrium price is not binding.

Which of the following is not correct?

A price floor set above the equilibrium price causes quantity supplied to exceed quantity demanded.

Suppose sellers of cologne are required to send $2.25 to the government for every bottle of cologne they sell. Further, suppose this tax causes the price paid by buyers of cologne to rise by $1.35 per bottle. Which of the following statements is correct?

Figure 6-16 ​ ​ -Refer to Figure 6-16. A price floor set at $60 would create a surplus of 20 units.

If a tax is imposed on the buyers of a product, then the tax burden will fall entirely on the buyers.