Question 1

Which of the following causes a surplus of a good?

Accepted Answer

A)   a binding price floor
B)   a binding price ceiling
C)   a tax on the good
D)   More than one of the above is correct.E) C) and D)
F) B) and C)

Question 2

Suppose the government has imposed a price ceiling on cellular phones.Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

Accepted Answer

A)   Cellular phones become more popular.
B)   Traditional land line phones become more expensive.
C)   The components used to produce cellular phones become more expensive.
D)   A technological advance makes cellular phone production less expensive.E) B) and D)
F) All of the above

Question 3

When OPEC raised the price of crude oil in the 1970s,it caused the United States'

Accepted Answer

A)   nonbinding price floor on gasoline to become binding.
B)   binding price floor on gasoline to become nonbinding.
C)   nonbinding price ceiling on gasoline to become binding.
D)   binding price ceiling on gasoline to become nonbinding.E) All of the above
F) A) and D)

Question 4

If a binding price floor is imposed on the video game market,then

Accepted Answer

A)   the demand for video games will decrease.
B)   the supply of video games will increase.
C)   a surplus of video games will develop.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 5

An outcome that can result from either a price ceiling or a price floor is

Accepted Answer

A)   an enhancement of efficiency.
B)   undesirable rationing mechanisms.
C)   a surplus.
D)   a shortage.E) A) and D)
F) A) and B)

Question 6

In 1990,Congress passed a new luxury tax on items such as yachts,private airplanes,furs,jewelry,and expensive cars.The goal of the tax was to

Accepted Answer

A)   raise revenue from the wealthy.
B)   prevent wealthy people from buying luxuries.
C)   force producers of luxury goods to reduce employment.
D)   limit exports of luxury goods to other countries.E) B) and D)
F) A) and B)

Question 7

Even though federal law mandates that workers and firms each pay half of the total FICA tax,the tax burden may not fall equally on workers and firms.

Accepted Answer

A) True 
 B)False

Question 8

When OPEC raised the price of crude oil in the 1970s,it caused the

Accepted Answer

A)   demand for gasoline to increase.
B)   demand for gasoline to decrease.
C)   supply of gasoline to increase.
D)   supply of gasoline to decrease.E) A) and C)
F) B) and C)

Question 9

Consider the market for watermelons.Buyers

Accepted Answer

A)   and sellers would lobby for a price ceiling.
B)   and sellers would lobby for a price floor.
C)   would lobby for a price ceiling,whereas sellers would lobby for a price floor.
D)   would lobby for a price floor,whereas sellers would lobby for a price ceiling.E) A) and B)
F) B) and C)

Question 10

Suppose that in a particular market,the supply curve is highly elastic and the demand curve is highly inelastic.If a tax is imposed in this market,then the

Accepted Answer

A)   buyers will bear a greater burden of the tax than the sellers.
B)   sellers will bear a greater burden of the tax than the buyers.
C)   buyers and sellers are likely to share the burden of the tax equally.
D)   buyers and sellers will not share the burden equally,but it is impossible to determine who will bear the greater burden of the tax without more information.E) C) and D)
F) A) and C)

Question 11

If a price floor is not binding,then

Accepted Answer

A)   the equilibrium price is above the price floor.
B)   the equilibrium price is below the price floor.
C)   there will be a surplus in the market.
D)   Both a) and c) are correct.E) A) and B)
F) A) and C)

Question 12

Over time,housing shortages caused by rent control

Accepted Answer

A)   increase,because the demand for and supply of housing are less elastic in the long run.
B)   increase,because the demand for and supply of housing are more elastic in the long run.
C)   decrease,because the demand for and supply of housing are less elastic in the long run.
D)   decrease,because the demand for and supply of housing are more elastic in the long run.E) A) and B)
F) All of the above

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Table 6-1
 
-Refer to Table 6-1.Which of the following price floors would be binding in this market?

Accepted Answer

A)   $1
B)   $2
C)   $3
D)   $4E) C) and D)
F) A) and D)

Question 15

Figure 6-27 
-Refer to Figure 6-27.If the government places a $2 tax in the market,the buyer pays $6.

Accepted Answer

A) True 
 B)False

Question 16

Price is the rationing mechanism in a free,competitive market.

Accepted Answer

A) True 
 B)False

Question 17

The mayor of Workerville proposes a local payroll tax to fund a new water park for the city.The mayor proposes to collect half the tax from workers and half the tax from firms.The mayor will be able to successfully divide the burden of the tax equally if the

Accepted Answer

A)   demand for labor is more elastic than the supply of labor.
B)   supply of labor is more elastic than the demand for labor.
C)   demand for labor and supply of labor are equally elastic.
D)   It is not possible for the tax burden to fall equally on firms and workers.E) A) and B)
F) A) and C)

Question 18

The goal of the minimum wage is to ensure workers a minimally adequate standard of living.

Accepted Answer

A) True 
 B)False

Question 19

Economists generally believe that rent control is

Accepted Answer

A)   an efficient and fair way to help the poor.
B)   inefficient but the best available means of solving a serious social problem.
C)   a highly inefficient way to help the poor raise their standard of living.
D)   an efficient way to allocate housing,but not a good way to help the poor.E) B) and C)
F) A) and C)

Question 20

Figure 6-14
The vertical distance between points A and B represents the tax in the market. 
-Refer to Figure 6-14.The per-unit burden of the tax on buyers is

Accepted Answer

A)   $6.
B)   $8.
C)   $14.
D)   $24.E) B) and D)
F) A) and B)

Exam 6: Supply,demand,and Government Policies

Price is the rationing mechanism in a free,competitive market.

Correct AnswerverifiedShow Answer

In 1990,Congress passed a new luxury tax on items such as yachts,private airplanes,furs,jewelry,and expensive cars.The goal of the tax was to

Correct AnswerverifiedShow Answer

If a binding price floor is imposed on the video game market,then

Correct AnswerverifiedShow Answer

Which of the following causes a surplus of a good?

Correct AnswerverifiedShow Answer

The mayor of Workerville proposes a local payroll tax to fund a new water park for the city.The mayor proposes to collect half the tax from workers and half the tax from firms.The mayor will be able to successfully divide the burden of the tax equally if the

Correct AnswerverifiedShow Answer

Suppose that in a particular market,the supply curve is highly elastic and the demand curve is highly inelastic.If a tax is imposed in this market,then the

Correct AnswerverifiedShow Answer

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

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Even though federal law mandates that workers and firms each pay half of the total FICA tax,the tax burden may not fall equally on workers and firms.

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When OPEC raised the price of crude oil in the 1970s,it caused the United States'

Correct AnswerverifiedShow Answer

Over time,housing shortages caused by rent control

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If a price floor is not binding,then

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Figure 6-27 -Refer to Figure 6-27.If the government places a $2 tax in the market,the buyer pays $6.

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Consider the market for watermelons.Buyers

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The goal of the minimum wage is to ensure workers a minimally adequate standard of living.

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Table 6-1 -Refer to Table 6-1.Which of the following price floors would be binding in this market?

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An outcome that can result from either a price ceiling or a price floor is

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When OPEC raised the price of crude oil in the 1970s,it caused the

Correct AnswerverifiedShow Answer

Economists generally believe that rent control is

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Figure 6-14 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-14.The per-unit burden of the tax on buyers is

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Suppose the government has imposed a price ceiling on cellular phones.Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

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