Chapter 6 Econ

Which of the following statements is true if the government places a price ceiling on gasoline at $4.00 per gallon and the equilibrium price is $3.00 per gallon?

A significant increase in the demand for gasoline could cause the price ceiling to become a binding constraint.

Which of the following statements about the burden of a tax is correct?

The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and is not determined by legislation

Suppose the equilibrium price for apartments is $800 per month and the government imposes rent controls of $500. Which of the following is unlikely to occur as a result of the rent controls?

The quality of apartments will improve

Which of the following statements about a binding price ceiling is true?

The shortage created by the price ceiling is greater in the long run than in the short run

A $1 per unit tax levied on consumers of a good is equivalent to

a $1 per unit tax levied on producers of the good.

A binding price ceiling creates

a shortage

When the government imposes a binding price floor, it causes

a surplus of the good to develop

Which of the following takes place when a tax is placed on a good?

an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold

For a price ceiling to be a binding constraint on the market, the government must set it

below the equilibrium price

The surplus caused by a binding price floor will be greatest if

both supply and demand are elastic

In a market with a binding price ceiling, increasing the ceiling price will

decrease the shortage

Studies show that a 10 percent increase in the minimum wage

decreases teenage employment by about 1 to 3 percent.

Within the supply-and-demand model, a tax collected from the buyers of a good shifts the

demand curve downward by the size of the tax per unit

The burden of a tax falls more heavily on the sellers in a market when

demand is elastic and supply is inelastic

The burden of a tax falls more heavily on the buyers in a market when

demand is inelastic and supply is elastic

An increase in the minimum wage reduces the total amount paid to the affected workers if the price elasticity of ________ is ________ than one.

demand, greater

For which of the following products would the burden of a tax likely fall more heavily on the sellers?

entertainment

A tax placed on a good that is a necessity for consumers will likely generate a tax burden that

falls more heavily on buyers

Rent control causes larger shortages in the ________ run because over that time horizon, supply and demand are ________ elastic.

long, more

A tax of $1.00 per gallon on gasoline

places a tax wedge of $1.00 between the price the buyers pay and the price the sellers receive.

A price floor

sets a legal minimum on the price at which a good can be sold

Within the supply-and-demand model, a tax collected from the sellers of a good shifts the

supply curve upward by the size of the tax per unit

When a good is taxed, the burden of the tax falls mainly on consumers if

supply is elastic and demand is inelastic

Which of the following increases quantity supplied, decreases quantity demanded, and increases the price that consumers pay?

the imposition of a binding price floor

Which of the following is an example of a price floor?

the minimum wage

Which of the following increases quantity supplied, increases quantity demanded, and decreases the price that consumers pay?

the repeal of a tax on a good

Which side of the market is more likely to lobby government for a price floor?

the sellers

When a tax is collected from the buyers in a market,

the tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers