Question 1

In a free, competitive market, what is the rationing mechanism?

Accepted Answer

A)   seller bias
B)   buyer bias
C)   government law
D)   priceE) A) and D)
F) None of the above

Question 2

Figure 6-34 
-Refer to Figure 6-34. 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?

Accepted Answer

With a $6 tax per un...

Question 3

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) All of the above
F) C) and D)

Question 4

Figure 6-4 
-Refer to Figure 6-4. Which of the following statements is not correct?

Accepted Answer

A)   When the price is $10, quantity supplied equals quantity demanded.
B)   When the price is $6, there is a surplus of 8 units.
C)   When the price is $12, there is a surplus of 4 units.
D)   When the price is $16, quantity supplied exceeds quantity demanded by 12 units.E) B) and D)
F) A) and B)

Question 5

Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect

Accepted Answer

A)   most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.
B)   most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.
C)   the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government.
D)   a large percentage of smokers to quit smoking in response to the tax.E) None of the above
F) A) and B)

Question 6

The housing shortages caused by rent control are larger in the long run than in the short run because both the supply of housing and the demand for housing are more elastic in the long run.

Accepted Answer

A) True 
 B)False

Question 7

Rent control policies tend to cause

Accepted Answer

A)   relatively smaller shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run.
B)   relatively larger shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run.
C)   relatively larger shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run.
D)   relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run.E) B) and C)
F) None of the above

Question 8

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

Accepted Answer

A)   shift the supply curve upward by less than 50 cents.
B)   raise the equilibrium price by 50 cents.
C)   create a 50-cent tax burden each for buyers and sellers.
D)   discourage market activity.E) B) and D)
F) A) and D)

Question 9

If the demand curve is more price elastic than the supply curve, will the buyers or the sellers bear a greater burden of a tax? Draw a diagram to illustrate your answer.

Accepted Answer

When the demand curve is more elastic th...

Question 10

Table 6-2 
-Refer to Table 6-2. A price ceiling set at $5 results in

Accepted Answer

A)   50 units sold.
B)   250 units sold.
C)   300 units sold.
D)   350 units sold.E) A) and C)
F) None of the above

Question 11

Figure 6-24 
-Refer to Figure 6-24. Suppose sellers, rather than buyers, were required to pay this tax (in the same amount per unit as shown in the graph) . Relative to the tax on buyers, the tax on sellers would result in

Accepted Answer

A)   buyers bearing the same share of the tax burden.
B)   sellers bearing the same share of the tax burden.
C)   the same amount of tax revenue for the government.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 12

The tax burden will fall most heavily on buyers 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) B) and C)

Question 13

The Earned Income Tax Credit is an example of a

Accepted Answer

A)   minimum-wage law.
B)   price ceiling.
C)   wage subsidy.
D)   rent subsidy.E) A) and C)
F) B) and C)

Question 14

A tax on sellers increases the quantity of the good sold in the market.

Accepted Answer

A) True 
 B)False

Question 15

Figure 6-21 
-Refer to Figure 6-21. In the after-tax equilibrium, how much revenue does the government collect from the tax on this good?

Accepted Answer

A)   $210
B)   $345
C)   $420
D)   $480E) B) and C)
F) B) and D)

Question 16

When a tax is imposed on the buyers of a good, the demand curve shifts

Accepted Answer

A)   upward by the amount of the tax.
B)   downward by the amount of the tax.
C)   upward by less than the amount of the tax.
D)   downward by less than the amount of the tax.E) B) and C)
F) C) and D)

Question 17

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

Accepted Answer

A)   demand curve for toothpaste shifts to the left.
B)   supply curve for toothpaste shifts to the right.
C)   quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases.
D)   quantity supplied of toothpaste stays the same.E) B) and C)
F) A) and B)

Question 18

Which of the following is not correct?

Accepted Answer

A)   Economists have two roles: scientist and policy adviser.
B)   As scientists, economists develop and test theories to explain the world around them.
C)   Economic policies rarely have effects that their architects did not intend or anticipate.
D)   As policy advisers, economists use their theories to help change the world for the better.E) All of the above
F) None of the above

Question 19

A price ceiling set below the equilibrium price is binding.

Accepted Answer

A) True 
 B)False

Question 20

Most labor economists believe that the supply of labor is

Accepted Answer

A)   less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.
B)   less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.
C)   more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.
D)   more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.E) A) and D)
F) C) and D)

Exam 6: Supply, Demand, and Government Policies

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

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When a tax is imposed on the buyers of a good, the demand curve shifts

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Most labor economists believe that the supply of labor is

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Figure 6-21 -Refer to Figure 6-21. In the after-tax equilibrium, how much revenue does the government collect from the tax on this good?

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A tax on sellers increases the quantity of the good sold in the market.

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Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

Correct AnswerverifiedShow Answer

A price ceiling set below the equilibrium price is binding.

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Figure 6-24 -Refer to Figure 6-24. Suppose sellers, rather than buyers, were required to pay this tax (in the same amount per unit as shown in the graph) . Relative to the tax on buyers, the tax on sellers would result in

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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, how many units will be bought and sold in the market after the tax is imposed?

Correct AnswerverifiedWith a $6 tax per un...View AnswerShow Answer

In a free, competitive market, what is the rationing mechanism?

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If the demand curve is more price elastic than the supply curve, will the buyers or the sellers bear a greater burden of a tax? Draw a diagram to illustrate your answer.

Correct AnswerverifiedWhen the demand curve is more elastic th...View AnswerShow Answer

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

Correct AnswerverifiedShow Answer

The housing shortages caused by rent control are larger in the long run than in the short run because both the supply of housing and the demand for housing are more elastic in the long run.

Correct AnswerverifiedShow Answer

The Earned Income Tax Credit is an example of a

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Which of the following is not correct?

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Figure 6-4 -Refer to Figure 6-4. Which of the following statements is not correct?

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Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect

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Table 6-2 -Refer to Table 6-2. A price ceiling set at $5 results in

Correct AnswerverifiedShow Answer

Rent control policies tend to cause

Correct AnswerverifiedShow Answer

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

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With a $6 tax per un...
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When the demand curve is more elastic th...
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