Question 1

Suppose that the demand for light bulbs is inelastic, and the supply of light bulbs is elastic. A tax of $2 per bulb levied on light bulbs will increase the price paid by buyers of light bulbs by

Accepted Answer

A)  less than $1.
B)  $1.
C)  between $1 and $2.
D)  $2.E) All of the above
F) C) and D)

Question 2

Figure 6-30
Panel (a) 
Panel (b)    Panel (c)  
-Refer to Figure 6-30. In which market will the majority of the tax burden fall on sellers?

Accepted Answer

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

Question 3

Binding price floors benefit sellers because they allow sellers to sell all the goods they want at a higher price.

Accepted Answer

A) True 
 B)False

Question 4

The imposition of a binding price ceiling on a market causes

Accepted Answer

A)  quantity demanded to be greater than quantity supplied.
B)  quantity demanded to be less than quantity supplied.
C)  quantity demanded to be equal to quantity supplied.
D)  the price of the good to be greater than its equilibrium price.E) A) and C)
F) All of the above

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

Question 6

The tax burden will fall most heavily on sellers of the good when the demand curve

Accepted Answer

A)  is relatively steep, and the supply curve is relatively flat.
B)  is relatively flat, and the supply curve is relatively steep.
C)  and the supply curve are both relatively flat.
D)  and the supply curve are both relatively steep.E) A) and B)
F) A) and C)

Question 7

Figure 6-28 
-Refer to Figure 6-28. Suppose a tax of $4 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

Accepted Answer

A)  $4
B)  between $4 and $7
C)  between $7 and $10
D)  $10E) C) and D)
F) B) and C)

Question 8

In 2012, the U.S. minimum wage according to federal law was

Accepted Answer

A)  $4.25 per hour.
B)  $5.15 per hour.
C)  $5.75 per hour.
D)  $7.25 per hour.E) None of the above
F) B) and C)

Question 9

A tax of $1 on sellers always increases the equilibrium price by $1.

Accepted Answer

A) True 
 B)False

Question 10

Figure 6-24 
-Refer to Figure 6-24. The price paid by buyers after the tax is imposed is

Accepted Answer

A)  $24.
B)  $21.
C)  $18.
D)  $16.E) A) and C)
F) None of the above

Question 11

Figure 6-29
Suppose the government imposes a $2 on this market. 
-Refer to Figure 6-29. The buyers will bear a higher share of the tax burden than sellers if the demand is

Accepted Answer

A)  D1, and the supply is S1.
B)  D2, and the supply is S1.
C)  D1, and the supply is S2.
D)  D2, and the supply is S2.E) B) and C)
F) A) and D)

Question 12

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 B)
F) A) and C)

Question 13

Lawmakers designed the burden of the FICA payroll tax to be split evenly between workers and firms. Labor economists believe that

Accepted Answer

A)  lawmakers may have actually achieved their goal because statistics show that the tax burden is currently equally divided.
B)  the tax raises too little revenue for the government, so it should be eliminated.
C)  firms bear most of the burden of the tax.
D)  workers bear most of the burden of the tax.E) A) and B)
F) B) and C)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

​Figure 6-32 
-​Refer to Figure 6-32. Which of the following statements is NOT accurate regarding the situation reflected by this diagram?

Accepted Answer

A)  ​the price will reflect the scarcity of the good when a price floor is imposed at a price of $8.
B)  ​the price will reflect the scarcity of the good when a price ceiling is imposed at a price of $10.
C)  ​the price will reflect the scarcity of the good when a price ceiling is imposed at a price of $12.
D)  ​the price will reflect the scarcity of the good when a price floor is imposed at a price of $14.E) A) and B)
F) A) and C)

Question 16

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 D)
F) B) and C)

Question 17

Figure 6-4 
-Refer to Figure 6-4. A government-imposed price ceiling of $6 in this market results in

Accepted Answer

A)  a shortage of 8 units.
B)  a shortage of 4 units.
C)  14 units sold.
D)  10 units sold.E) None of the above
F) B) and C)

Question 18

Figure 6-6 
-Refer to Figure 6-6. If the government imposes a price floor of $10 on this market, then there will be

Accepted Answer

A)  no surplus.
B)  a surplus of 20 units.
C)  a surplus of 30 units.
D)  a surplus of 10 units.E) B) and C)
F) All of the above

Question 19

Figure 6-36 
-Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer pays $6.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

Lawmakers designed the burden of the FICA payroll tax to be split evenly between workers and firms. Labor economists believe that

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Suppose that the demand for light bulbs is inelastic, and the supply of light bulbs is elastic. A tax of $2 per bulb levied on light bulbs will increase the price paid by buyers of light bulbs by

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Figure 6-30 Panel (a) Panel (b) Panel (c) -Refer to Figure 6-30. In which market will the majority of the tax burden fall on sellers?

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In 2012, the U.S. minimum wage according to federal law was

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

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An example of a price floor is

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The imposition of a binding price ceiling on a market causes

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

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Figure 6-4 -Refer to Figure 6-4. A government-imposed price ceiling of $6 in this market results in

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Figure 6-29 Suppose the government imposes a $2 on this market. -Refer to Figure 6-29. The buyers will bear a higher share of the tax burden than sellers if the demand is

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A tax of $1 on sellers always increases the equilibrium price by $1.

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The tax burden will fall most heavily on sellers of the good when the demand curve

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Figure 6-6 -Refer to Figure 6-6. If the government imposes a price floor of $10 on this market, then there will be

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Figure 6-36 -Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer pays $6.

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Figure 6-28 -Refer to Figure 6-28. Suppose a tax of $4 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

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

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Figure 6-24 -Refer to Figure 6-24. The price paid by buyers after the tax is imposed is

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​Figure 6-32 -​Refer to Figure 6-32. Which of the following statements is NOT accurate regarding the situation reflected by this diagram?

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Binding price floors benefit sellers because they allow sellers to sell all the goods they want at a higher price.

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Figure 6-32 -Refer to Figure 6-32. Which of the following statements is NOT accurate regarding the situation reflected by this diagram?

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