Question 1

A binding price floor
(i) causes a surplus.
(ii) causes a shortage.
(iii) is set at a price above the equilibrium price.
(iv) is set at a price below the equilibrium price.

Accepted Answer

A)  (i)  only
B)  (iii)  only
C)  (i)  and (iii)  only
D)  (ii)  and (iv)  only

Question 2

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

Accepted Answer

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

Question 3

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.

Question 4

A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market.

Accepted Answer

A) True 
 B)False

Question 5

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.

Question 6

Figure 6-16 
-Refer to Figure 6-16. In this market, a minimum wage of $7.25 creates a labor

Accepted Answer

A)  shortage of 2,250 workers.
B)  shortage of 4,500 workers.
C)  surplus of 2,250 workers.
D)  surplus of 4,500 workers.

Question 7

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.

Question 8

Scenario 6-1
Suppose that demand in the market for good X is given by the equation  and that supply in the market for good X is given by the equation 
-Refer to Scenario 6-1. If the government set a price ceiling at $8, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price ceiling set ...

Question 9

Figure 6-10 
-Refer to Figure 6-10. A price ceiling set at

Accepted Answer

A)  $6 will be binding and will result in a shortage of 10 units.
B)  $6 will be binding and will result in a shortage of 6 units.
C)  $16 will be binding and will result in a shortage of 10 units.
D)  $16 will be binding and will result in a shortage of 4 units.

Question 10

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.

Question 11

A nonbinding price ceiling
(i) causes a surplus.
(ii) causes a shortage.
(iii) is set at a price above the equilibrium price.
(iv) is set at a price below the equilibrium price.

Accepted Answer

A)  (i)  only
B)  (iii)  only
C)  (i)  and (iii)  only
D)  (ii)  and (iv)  only

Question 12

The minimum wage has its greatest impact on the market for

Accepted Answer

A)  female labor.
B)  older labor.
C)  black labor.
D)  teenage labor.

Question 13

The price paid by buyers in a market will decrease if the government

Accepted Answer

A)  increases a binding price floor in that market.
B)  increases a binding price ceiling in that market.
C)  decreases a tax on the good sold in that market.
D)  All of the above are correct.

Question 14

Price floors are typically imposed to benefit sellers.

Accepted Answer

A) True 
 B)False

Question 15

Most of the burden of a luxury tax falls on the middle class workers who produce luxury goods rather than on the rich who buy them.

Accepted Answer

A) True 
 B)False

Question 16

​Suppose that a binding rent control law is repealed in San Francisco. As a result, we would expect the total number of units rented in the city to

Accepted Answer

A)  ​increase.
B)  ​decrease.
C)  ​remain unchanged.
D)  ​decrease, then increase.

Question 17

A tax imposed on the buyers of a good will

Accepted Answer

A)  raise both the price buyers pay and the effective price sellers receive.
B)  raise the price buyers pay and lower the effective price sellers receive.
C)  lower the price buyers pay and raise the effective price sellers receive.
D)  lower both the price buyers pay and the effective price sellers receive.

Question 18

When a tax is placed on the sellers of energy drinks, the

Accepted Answer

A)  sellers bear the entire burden of the tax.
B)  buyers bear the entire burden of the tax.
C)  burden of the tax will be always be equally divided between the buyers and the sellers.
D)  burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

Question 19

Figure 6-34 
-Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much is the burden of the tax on the buyers in this market?

Accepted Answer

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

Question 20

Figure 6-12 1 to S2, the resulting quantity of gasoline that is bought and sold is A) less than Q3. B) Q3. C) between Q1 and Q3. D) at least Q1." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 6-12. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is

Accepted Answer

A)  less than Q3.
B)  Q3.
C)  between Q1 and Q3.
D)  at least Q1.

Exam 6: Supply, Demand, and Government Policies

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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Most of the burden of a luxury tax falls on the middle class workers who produce luxury goods rather than on the rich who buy them.

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When a tax is placed on the sellers of energy drinks, the

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Correct AnswerverifiedA price ceiling set ...View AnswerShow Answer

A binding price floor (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price.

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

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A nonbinding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price.

Correct AnswerverifiedShow Answer

Rent control policies tend to cause

Correct AnswerverifiedShow Answer

​Suppose that a binding rent control law is repealed in San Francisco. As a result, we would expect the total number of units rented in the city to

Correct AnswerverifiedShow Answer

A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market.

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Price floors are typically imposed to benefit sellers.

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

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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 much is the burden of the tax on the buyers in this market?

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

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 6-12 -Refer to Figure 6-12. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is

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Figure 6-16 -Refer to Figure 6-16. In this market, a minimum wage of $7.25 creates a labor

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The minimum wage has its greatest impact on the market for

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The price paid by buyers in a market will decrease if the government

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A tax imposed on the buyers of a good will

Correct AnswerverifiedShow Answer

Figure 6-10 -Refer to Figure 6-10. A price ceiling set at

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A price ceiling set ...
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Suppose that a binding rent control law is repealed in San Francisco. As a result, we would expect the total number of units rented in the city to

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With a $6 tax per unit, the pr...
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Figure 6-12 -Refer to Figure 6-12. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S₁ to S₂, the resulting quantity of gasoline that is bought and sold is

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