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Suppose the government has imposed a price floor on the market for soybeans.Which of the following events could transform the price floor from one that is not binding into one that is binding?


A) Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans.
B) The number of farmers selling soybeans decreases.
C) Consumers' income increases, and soybeans are a normal good.
D) The number of consumers buying soybeans increases.

E) A) and C)
F) None of the above

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A key lesson from the payroll tax is that the


A) tax is a tax solely on workers.
B) tax is a tax solely on firms that hire workers.
C) tax eliminates any wedge that might exist between the wage that firms pay and the wage that workers receive.
D) true burden of a tax cannot be legislated.

E) None of the above
F) All of the above

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Figure 6-18 Figure 6-18 -Refer to Figure 6-18.Sellers pay how much of the tax per unit? A) $1.00. B) $1.50. C) $2.50. D) $3.50. -Refer to Figure 6-18.Sellers pay how much of the tax per unit?


A) $1.00.
B) $1.50.
C) $2.50.
D) $3.50.

E) B) and D)
F) B) and C)

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In 2009,the U.S.minimum wage according to federal law was


A) $4.25 per hour.
B) $5.15 per hour.
C) $5.75 per hour.
D) $7.25 per hour.

E) A) and B)
F) A) and C)

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Figure 6-13 Figure 6-13 -Refer to Figure 6-13.In this market,a minimum wage of $2.75 is A) binding and creates a labor shortage. B) binding and creates unemployment. C) nonbinding and creates a labor shortage. D) nonbinding and creates neither a labor shortage nor unemployment. -Refer to Figure 6-13.In this market,a minimum wage of $2.75 is


A) binding and creates a labor shortage.
B) binding and creates unemployment.
C) nonbinding and creates a labor shortage.
D) nonbinding and creates neither a labor shortage nor unemployment.

E) A) and B)
F) A) and C)

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


A) seller bias
B) buyer bias
C) government law
D) price

E) B) and C)
F) C) and D)

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Figure 6-17 Figure 6-17 -Refer to Figure 6-17.What is the amount of the tax per unit? A) $1 B) $2 C) $3 D) $4 -Refer to Figure 6-17.What is the amount of the tax per unit?


A) $1
B) $2
C) $3
D) $4

E) All of the above
F) A) and C)

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When policymakers set prices by legal decree,they


A) are usually following the advice of mainstream economists.
B) improve the organization of economic activity.
C) obscure the signals that normally guide the allocation of society's resources.
D) are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency.

E) C) and D)
F) A) and B)

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If a price ceiling is not binding,then


A) there will be a surplus in the market.
B) there will be a shortage in the market.
C) the market will be less efficient than it would be without the price ceiling.
D) there will be no effect on the market price or quantity sold.

E) A) and D)
F) A) and C)

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There are several criticisms of the minimum wage.Which of the following is not one of those criticisms? The minimum wage


A) often hurts those people who it is intended to help.
B) results in an excess supply of low-skilled labor.
C) prevents some unskilled workers from getting needed on-the-job training.
D) fails to raise the wage of any employed person.

E) A) and B)
F) B) and C)

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Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the (i) supply is more elastic than the demand. (ii) demand in more elastic than the supply. (iii) tax is placed on the sellers of the product. (iv) tax is placed on the buyers of the product.


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

E) All of the above
F) A) and D)

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If a price floor is not binding,then it will have no effect on the market.

A) True
B) False

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

A) True
B) False

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Which of the following is not correct? In a 2006 survey of Ph.D.economists,


A) 47 percent favored eliminating the minimum wage.
B) 14 percent would maintain the minimum wage at its current level.
C) 38 percent would increase the minimum wage.
D) 10 percent would decrease the minimum wage.

E) None of the above
F) C) and D)

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Suppose sellers of liquor are required to send $1.00 to the government for every bottle of liquor they sell.Further,suppose this tax causes the price paid by buyers of liquor to rise by $0.80 per bottle.Which of the following statements is correct?


A) This tax causes the supply curve for liquor to shift upward by $1.00 at each quantity of liquor.
B) The effective price received by sellers is $0.20 per bottle less than it was before the tax.
C) Eighty percent of the burden of the tax falls on buyers.
D) All of the above are correct.

E) A) and B)
F) C) and D)

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A tax of $1 on sellers shifts the supply curve upward by exactly $1.

A) True
B) False

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Figure 6-24 Suppose the government imposes a $2 on this market. Figure 6-24 Suppose the government imposes a $2 on this market. -Refer to Figure 6-24.Suppose D1 represents the demand curve for gasoline in both the short run and long run,S1 represents the supply curve for gasoline in the short run,and S2 represents the supply curve for gasoline in the long run.After the imposition of the $2, A) buyers bear a higher burden of the tax in the short run than in the long run. B) sellers bear a higher burden of the tax in the short run than in the long run. C) buyers and sellers bear an equal burden of the tax in both the short run and long run. D) buyers and sellers bear an equal burden of the tax in the short run, but buyers bear a higher burden of the tax in the long run. -Refer to Figure 6-24.Suppose D1 represents the demand curve for gasoline in both the short run and long run,S1 represents the supply curve for gasoline in the short run,and S2 represents the supply curve for gasoline in the long run.After the imposition of the $2,


A) buyers bear a higher burden of the tax in the short run than in the long run.
B) sellers bear a higher burden of the tax in the short run than in the long run.
C) buyers and sellers bear an equal burden of the tax in both the short run and long run.
D) buyers and sellers bear an equal burden of the tax in the short run, but buyers bear a higher burden of the tax in the long run.

E) None of the above
F) All of the above

Correct Answer

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Figure 6-14 The vertical distance between points A and B represents the tax in the market. 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 A) $6. B) $8. C) $14. D) $24. -Refer to Figure 6-14.The per-unit burden of the tax on buyers is


A) $6.
B) $8.
C) $14.
D) $24.

E) All of the above
F) B) and D)

Correct Answer

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A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.

A) True
B) False

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A price ceiling is always a binding price control,whereas a price floor may be either binding or not binding.

A) True
B) False

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