Question 1

Figure 6-19 
-Refer to Figure 6-19.The effective price received by sellers after the tax is imposed is

Accepted Answer

A)   $3.
B)   $4.
C)   $5.
D)   $7.E) B) and C)
F) A) and D)

Question 2

Under rent control,bribery is a mechanism to

Accepted Answer

A)   bring the total price of an apartment (including the bribe) closer to the equilibrium price.
B)   allocate housing to the poorest individuals in the market.
C)   force the total price of an apartment (including the bribe) to be less than the market price.
D)   allocate housing to the most deserving tenants.E) A) and C)
F) A) and D)

Question 3

A price floor set above the equilibrium price is not binding.

Accepted Answer

A) True 
 B)False

Question 4

If a tax is levied on the buyers of a product,then there will be a(n)

Accepted Answer

A)   downward shift of the supply curve.
B)   upward shift of the supply curve.
C)   movement up and to the right along the supply curve.
D)   movement down and to the left along the supply curve.E) None of the above
F) C) and D)

Question 5

Figure 6-6 
-Refer to Figure 6-6.If the government imposes a price floor of $6 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 40 units.E) B) and C)
F) B) and D)

Question 6

When a tax is imposed on the sellers of a good,the supply 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 D)
F) A) and B)

Question 7

Figure 6-16 
-Refer to Figure 6-16.Suppose a tax of $5 per unit is imposed on this market.How much will sellers receive per unit after the tax is imposed?

Accepted Answer

A)   $5
B)   between $5 and $10
C)   between $10 and $14
D)   $14E) None of the above
F) B) and C)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

If a price ceiling is not binding,then

Accepted Answer

A)   the equilibrium price is above the price ceiling.
B)   the equilibrium price is below the price ceiling.
C)   it has no legal enforcement mechanism.
D)   None of the above is correct because all price ceilings must be binding.E) C) and D)
F) A) and C)

Question 10

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) onlyE) A) and D)
F) B) and D)

Question 11

Figure 6-20 
-Refer to Figure 6-20.Which of the following statements is correct?

Accepted Answer

A)   The amount of the tax per unit is $6.
B)   The tax leaves the size of the market unchanged.
C)   The tax is levied on buyers of the good,rather than on sellers.
D)   All of the above are correct.E) A) and D)
F) All of the above

Question 12

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 13

If a tax is levied on the sellers of a product,then there will be a(n)

Accepted Answer

A)   downward shift of the supply curve.
B)   upward shift of the supply curve.
C)   movement up and to the right along the supply curve.
D)   movement down and to the left along the supply curve.E) A) and B)
F) A) and C)

Question 14

Suppose there is currently a tax of $50 per ticket on airline tickets.Sellers of airline tickets are required to pay the tax to the government.If the tax is reduced from $50 per ticket to $30 per ticket,then the

Accepted Answer

A)   demand curve will shift upward by $20,and the effective price received by sellers will increase by $20.
B)   demand curve will shift upward by $20,and the effective price received by sellers will increase by less than $20.
C)   supply curve will shift downward by $20,and the price paid by buyers will decrease by $20.
D)   supply curve will shift downward by $20,and the price paid by buyers will decrease by less than $20.E) None of the above
F) A) and B)

Question 15

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

Accepted Answer

A)   Cellular phones become less popular.
B)   Traditional land line phones become more expensive.
C)   The components used to produce cellular phones become less expensive.
D)   Firms expect the price of cellular phones to fall in the future.E) B) and C)
F) None of the above

Question 16

A price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded.

Accepted Answer

A) True 
 B)False

Question 17

Price controls

Accepted Answer

A)   always produce a fair outcome.
B)   always produce an efficient outcome.
C)   can generate inequities of their own.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

A price floor set above the equilibrium price is binding.

Accepted Answer

A) True 
 B)False

Question 20

Figure 6-5 
-Refer to Figure 6-5.Suppose the market is initially in equilibrium.Then the government imposes a price control,as represented by the horizontal line on the graph.If the price control is a price floor,then the price control

Accepted Answer

A)   causes the quantity demanded to decrease by 50 units,relative to the initial equilibrium.
B)   causes the quantity supplied to increase by 40 units,relative to the initial equilibrium.
C)   results in some firms being more successful than others in selling their goods.
D)   All of the above are correct.E) A) and D)
F) C) and D)

Exam 6: Supply,demand,and Government Policies

A price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded.

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

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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?

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

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Figure 6-5 -Refer to Figure 6-5.Suppose the market is initially in equilibrium.Then the government imposes a price control,as represented by the horizontal line on the graph.If the price control is a price floor,then the price control

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Figure 6-16 -Refer to Figure 6-16.Suppose a tax of $5 per unit is imposed on this market.How much will sellers receive per unit after the tax is imposed?

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If a price ceiling is not binding,then

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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.

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Price controls

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Figure 6-19 -Refer to Figure 6-19.The effective price received by sellers after the tax is imposed is

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

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A price floor set above the equilibrium price is not binding.

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If a tax is levied on the buyers of a product,then there will be a(n)

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A price floor set above the equilibrium price is binding.

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Suppose there is currently a tax of $50 per ticket on airline tickets.Sellers of airline tickets are required to pay the tax to the government.If the tax is reduced from $50 per ticket to $30 per ticket,then the

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Figure 6-20 -Refer to Figure 6-20.Which of the following statements is correct?

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

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When a tax is imposed on the sellers of a good,the supply curve shifts

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Under rent control,bribery is a mechanism to

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If a tax is levied on the sellers of a product,then there will be a(n)

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A price ceiling set ...
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