Question 1

If the government removes a $2 tax on buyers of cigars and imposes the same $2 tax on sellers of cigars, then the price paid by buyers will

Accepted Answer

A)   not change, and the price received by sellers will not change.
B)   not change, and the price received by sellers will decrease.
C)   decrease, and the price received by sellers will not change.
D)   decrease, and the price received by sellers will decrease.E) None of the above
F) All of the above

Question 2

A $2.00 tax levied on the sellers of birdhouses will shift the supply curve

Accepted Answer

A)   upward by exactly $2.00.
B)   upward by less than $2.00.
C)   downward by exactly $2.00.
D)   downward by less than $2.00.E) A) and B)
F) A) and C)

Question 3

You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA (Social Security/Medicare)  tax. Which of the following statements is correct?

Accepted Answer

A)   This type of tax is an example of a payback tax.
B)   Your employer is required by law to pay $400 to match the $400 deducted from your check.
C)   The $400 that you paid is the true burden of the tax that falls on you, the employee.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 4

Figure 6-15 
-Refer to Figure 6-15. Suppose a price ceiling of $2 is imposed on this market. As a result,

Accepted Answer

A)   the quantity of the good supplied decreases by 30 units.
B)   the demand curve shifts to the left so as to now pass through the point (quantity = 30, price = $2) .
C)   buyers' total expenditure on the good decreases by $75.
D)   buyers' total expenditure on the good falls by $15.E) B) and C)
F) A) and C)

Question 5

A price ceiling is

Accepted Answer

A)   often imposed on markets in which "cutthroat competition" would prevail without a price ceiling.
B)   a legal maximum on the price at which a good can be sold.
C)   often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 6

Figure 6-4 
-Refer to Figure 6-4. A government-imposed price of $12 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) A) and B)
F) B) and D)

Question 7

Figure 6-13
This figure shows the market demand and market supply curves for good X. 
-Refer to Figure 6-13. If the government imposes a price floor of $7 on this market, then there will be

Accepted Answer

A)   no surplus.
B)   a surplus of 10 units.
C)   a surplus of 15 units.
D)   a surplus of 20 units.E) All of the above
F) A) and C)

Question 8

Figure 6-23  
-Refer to Figure 6-23. Which of the following is correct?

Accepted Answer

A)   The entire burden of the tax falls on sellers, and none of the burden of the tax falls on buyers.
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) A) and B)
F) B) and C)

Question 9

The long-run effects of rent controls are a good illustration of the principle that

Accepted Answer

A)   society faces a short-run tradeoff between unemployment and inflation.
B)   the cost of something is what you give up to get it.
C)   people respond to incentives.
D)   government can sometimes improve on market outcomes.E) None of the above
F) B) and D)

Question 10

A tax on sellers and an increase in input prices affect the supply curve in the same way.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Which of the following statements is correct concerning the burden of a tax imposed on take-out food?

Accepted Answer

A)   Buyers bear the entire burden of the tax.
B)   Sellers bear the entire burden of the tax.
C)   Buyers and sellers share the burden of the tax.
D)   We have to know whether it is the buyers or the sellers that are required to pay the tax to the government in order to make this determination.E) B) and C)
F) None of the above

Question 13

A price ceiling set below the equilibrium price causes a shortage in the market.

Accepted Answer

A) True 
 B)False

Question 14

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) None of the above
F) A) and B)

Question 15

How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The tax burden fall...

Question 16

Figure 6-34 
-Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, who will bear the greater burden of the tax - the buyers, the sellers, or will the burden be shared equally?

Accepted Answer

With a $6 tax per unit, the bu...

Question 17

Workers with high skills and much experience are not typically affected by the minimum wage.

Accepted Answer

A) True 
 B)False

Question 18

If a tax is levied on the sellers of a product, then the supply curve will

Accepted Answer

A)   shift up.
B)   shift down.
C)   become flatter.
D)   not shift.E) A) and B)
F) None of the above

Question 19

If the government wants to reduce the burning of fossil fuels, it should impose a tax on

Accepted Answer

A)   buyers of gasoline.
B)   sellers of gasoline.
C)   either buyers or sellers of gasoline.
D)   whichever side of the market is less elastic.E) All of the above
F) A) and D)

Question 20

Figure 6-36 
-Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer bears $1 of the tax burden.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

If the government wants to reduce the burning of fossil fuels, it should impose a tax on

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A price ceiling is

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Figure 6-13 This figure shows the market demand and market supply curves for good X. -Refer to Figure 6-13. If the government imposes a price floor of $7 on this market, then there will be

Correct AnswerverifiedShow Answer

You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If a tax is levied on the sellers of a product, then the supply curve will

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Figure 6-4 -Refer to Figure 6-4. A government-imposed price of $12 in this market is an example of a

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Figure 6-36 -Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer bears $1 of the tax burden.

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A price ceiling set below the equilibrium price causes a shortage in the market.

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Figure 6-34 -Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, who will bear the greater burden of the tax - the buyers, the sellers, or will the burden be shared equally?

Correct AnswerverifiedWith a $6 tax per unit, the bu...View AnswerShow Answer

Figure 6-23 -Refer to Figure 6-23. Which of the following is correct?

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If the government removes a $2 tax on buyers of cigars and imposes the same $2 tax on sellers of cigars, then the price paid by buyers will

Correct AnswerverifiedShow Answer

The long-run effects of rent controls are a good illustration of the principle that

Correct AnswerverifiedShow Answer

How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.

Correct Answerverified The tax burden fall...View AnswerShow Answer

A $2.00 tax levied on the sellers of birdhouses will shift the supply curve

Correct AnswerverifiedShow Answer

A tax on sellers and an increase in input prices affect the supply curve in the same way.

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

A shortage results when a

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Figure 6-15 -Refer to Figure 6-15. Suppose a price ceiling of $2 is imposed on this market. As a result,

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Which of the following statements is correct concerning the burden of a tax imposed on take-out food?

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Workers with high skills and much experience are not typically affected by the minimum wage.

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With a $6 tax per unit, the bu...
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The tax burden fall...
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A price floor set at...
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