Question 1

Scenario 6-2
Suppose demand for a product is given by the equation  and supply for the product is given by the equation 
-Refer to Scenario 6-2. Suppose the government sets a price ceiling at $12 for this product. Is this price ceiling binding, and what will be the size of the shortage/surplus in this market?

Accepted Answer

The price ceiling wi...

Question 2

Which of the following is correct? A tax burden

Accepted Answer

A)   falls more heavily on the side of the market that is more elastic.
B)   falls more heavily on the side of the market that is less elastic.
C)   falls more heavily on the side of the market that is closest to unit elastic.
D)   is distributed independently of the relative elasticities of supply and demand.E) B) and D)
F) B) and C)

Question 3

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

Accepted Answer

A)   no shortage.
B)   a shortage of 10 units.
C)   a shortage of 20 units.
D)   a shortage of 30 units.E) None of the above
F) C) and D)

Question 4

When policymakers set prices by legal decree, they

Accepted Answer

A)   are usually following the advice of mainstream economists.
B)   improve the organization of economic activity.
C)   obscure the signals that normally guide the allocation of society's resources.
D)   are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency.E) A) and B)
F) B) and C)

Question 5

When government imposes a price ceiling or a price floor on a market,

Accepted Answer

A)   price no longer serves as a rationing device.
B)   efficiency in the market is enhanced.
C)   shortages and surpluses are eliminated.
D)   both buyers and sellers become better off.E) A) and D)
F) None of the above

Question 6

When policymakers set prices by legal decree, they obscure the signals that normally guide the allocation of society's resources.

Accepted Answer

A) True 
 B)False

Question 7

To say that a price ceiling is nonbinding is to say that the price ceiling

Accepted Answer

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

Question 8

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

Accepted Answer

A)   The effective price received by sellers is $0.40 per bottle less than it was before the tax.
B)   Sixty percent of the burden of the tax falls on sellers.
C)   This tax causes the demand curve for perfume to shift downward by $1.00 at each quantity of perfume.
D)   All of the above are correct.E) All of the above
F) C) and D)

Question 9

In the United States, before OPEC increased the price of crude oil in 1973, there was

Accepted Answer

A)   no price ceiling on gasoline.
B)   a nonbinding price ceiling on gasoline.
C)   a binding price ceiling on gasoline.
D)   a nonbinding price floor on gasoline.E) C) and D)
F) A) and B)

Question 10

Price controls often hurt those they are trying to help.

Accepted Answer

A) True 
 B)False

Question 11

A tax on buyers shifts the demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not a function of prices in a market system?

Accepted Answer

A)   Prices have the crucial job of balancing supply and demand.
B)   Prices send signals to buyers and sellers to help them make rational economic decisions.
C)   Prices coordinate economic activity.
D)   Prices ensure an equal distribution of goods and services among consumers.E) B) and D)
F) All of the above

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Buyers and sellers always share the burden of a tax equally.

Accepted Answer

A) True 
 B)False

Question 15

Figure 6-17
This figure shows the market demand and market supply curves for good Y 
-Refer to Figure 6-17. A government-imposed price of $24 in this market is an example of a

Accepted Answer

A)   binding price ceiling that creates a shortage.
B)   non-binding price ceiling that creates a shortage.
C)   binding price floor that creates a surplus.
D)   non-binding price floor that creates a surplus.E) None of the above
F) All of the above

Question 16

Using the graph shown, in which the vertical distance between points A and B represents the tax in the market, answer the following questions.
a. What was the equilibrium price and quantity in this market before the tax?
b. What is the amount of the tax?
c. How much of the tax will the buyers pay?
d. How much of the tax will the sellers pay?
e. How much will the buyer pay for the product after the tax is imposed?
f. How much will the seller receive after the tax is imposed?
g. As a result of the tax, what has happened to the level of market activity?

Accepted Answer

a. $8; 8,000 units
b. $5
c. $3...

Question 17

If a tax is imposed on a market with inelastic demand and elastic supply, then

Accepted Answer

A)   buyers will bear most of the burden of the tax.
B)   sellers will bear most of the burden of the tax.
C)   the burden of the tax will be shared equally between buyers and sellers.
D)   it is impossible to determine how the burden of the tax will be shared.E) A) and B)
F) B) and C)

Question 18

The minimum wage, if it is binding, raises the incomes of

Accepted Answer

A)   no workers.
B)   only those workers who cannot find jobs.
C)   only those workers whose jobs would pay less than the minimum wage if it didn't exist.
D)   all workers.E) None of the above
F) A) and D)

Question 19

Figure 6-32 
-Refer to Figure 6-32. If the government set a price floor at $70, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price floor set at...

Question 20

After a binding price floor becomes effective, a

Accepted Answer

A)   smaller quantity of the good is bought and sold.
B)   a larger quantity of the good is demanded.
C)   a smaller quantity of the good is supplied.
D)   All of the above are correct.E) A) and B)
F) None of the above

Exam 6: Supply, Demand, and Government Policies

When policymakers set prices by legal decree, they obscure the signals that normally guide the allocation of society's resources.

Correct Answer
verified

Correct Answer
verified
a. $8; 8,000 units
b. $5
c. $3...
View Answer

When government imposes a price ceiling or a price floor on a market,

Correct Answer
verified

When policymakers set prices by legal decree, they

Correct Answer
verified

After a binding price floor becomes effective, a

Correct Answer
verified

In the United States, before OPEC increased the price of crude oil in 1973, there was

Correct Answer
verified

If a tax is imposed on a market with inelastic demand and elastic supply, then

Correct Answer
verified

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

Correct Answer
verified

Price controls often hurt those they are trying to help.

Correct Answer
verified

Figure 6-32 -Refer to Figure 6-32. If the government set a price floor at $70, would there be a shortage or surplus, and how large would be the shortage/surplus?

Correct Answer
verified
A price floor set at...
View Answer

Buyers and sellers always share the burden of a tax equally.

Correct Answer
verified

A tax on buyers shifts the demand curve to the right.

Correct Answer
verified

Which of the following is correct? A tax burden

Correct Answer
verified

Figure 6-17 This figure shows the market demand and market supply curves for good Y -Refer to Figure 6-17. A government-imposed price of $24 in this market is an example of a

Correct Answer
verified

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

Correct Answer
verified

Which of the following is not a function of prices in a market system?

Correct Answer
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Correct Answer
verified
The price ceiling wi...
View Answer

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

Correct Answer
verified

To say that a price ceiling is nonbinding is to say that the price ceiling

Correct Answer
verified

The minimum wage, if it is binding, raises the incomes of

Correct Answer
verified

Exam 6: Supply, Demand, and Government Policies

When policymakers set prices by legal decree, they obscure the signals that normally guide the allocation of society's resources.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. $8; 8,000 unitsb. $5c. $3...View AnswerShow Answer

When government imposes a price ceiling or a price floor on a market,

Correct AnswerverifiedShow Answer

When policymakers set prices by legal decree, they

Correct AnswerverifiedShow Answer

After a binding price floor becomes effective, a

Correct AnswerverifiedShow Answer

In the United States, before OPEC increased the price of crude oil in 1973, there was

Correct AnswerverifiedShow Answer

If a tax is imposed on a market with inelastic demand and elastic supply, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Price controls often hurt those they are trying to help.

Correct AnswerverifiedShow Answer

Figure 6-32 -Refer to Figure 6-32. If the government set a price floor at $70, would there be a shortage or surplus, and how large would be the shortage/surplus?

Correct AnswerverifiedA price floor set at...View AnswerShow Answer

Buyers and sellers always share the burden of a tax equally.

Correct AnswerverifiedShow Answer

A tax on buyers shifts the demand curve to the right.

Correct AnswerverifiedShow Answer

Which of the following is correct? A tax burden

Correct AnswerverifiedShow Answer

Figure 6-17 This figure shows the market demand and market supply curves for good Y -Refer to Figure 6-17. A government-imposed price of $24 in this market is an example of a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not a function of prices in a market system?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe price ceiling wi...View AnswerShow Answer

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

To say that a price ceiling is nonbinding is to say that the price ceiling

Correct AnswerverifiedShow Answer

The minimum wage, if it is binding, raises the incomes of

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
a. $8; 8,000 units
b. $5
c. $3...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified
A price floor set at...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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The price ceiling wi...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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