Chapter 6 MICRO
What kind of workers would be most likely to find it more difficult to get a job after a rise in the minimum wage rate?
A teenage worker with few qualifications
A correct statement about the burden of a tax would be...
The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and is not determined by legislation
What happens when a tax is placed 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
A price floor in a market always creates a surplus in that market
false
A €10 tax on football boots will always raise the price that the buyers pay for football boots by €10
false
The government can choose to place the burden of a tax on the buyers in a market by collecting the tax from the buyers rather than the sellers.
false
When we use the model of supply and demand to analyse a tax collected from the buyers, we shift the demand curve upward by the size of the tax.
false
A tax of €1.00 per litre on petrol
places a tax wedge of €1.00 between the price the buyers pay and the price the sellers receive
A binding price ceiling creates
shortage
Within the supply and demand model, a tax collected from the sellers of a good shifts
supply curve upward by the size of the tax per unit.
An example of price floor is..
the minimum wage
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.
A price ceiling that is not a binding constraint today could cause a shortage in the future if demand were to increase and raise the equilibrium price above the fixed price ceiling.
true
A tax collected from buyers has an equivalent impact to a same size tax collected from sellers
true
A tax creates a tax wedge between a buyer and a seller. This causes the price paid by the buyer to rise, the price received by the seller to fall, and the quantity sold to fall.
true
If medicine is a necessity, the burden of a tax on medicine will probably fall more heavily on the buyers of medicine
true
The ultimate burden of a tax falls most heavily on the side of the market that is less elastic.
true
If the government places a price ceiling on petrol at €1.50 per litre and the equilibrium price is €1.00 per litre then...
A significant increase in the demand for petrol could cause the price ceiling to become a binding constraint
A price ceiling set below the equilibrium price causes a surplus.
False
If the equilibrium price of petrol is €1.00 per litre and the government places a price ceiling on petrol of €1.50 per litre, the result will be a shortage of petrol.
False
The minimum wage helps all teenagers because they receive higher wages than they would otherwise.
False
Suppose the equilibrium price for apartments is €500 per month and the government imposes rent controls of €250. Which of the following is unlikely to occur as a result of the rent controls?
The quality of apartments will improve.
A price floor
The shortage created by the price ceiling is greater in the long run than in the short run.
A true statement about a binding price ceiling is.....
The shortage created by the price ceiling is greater in the long run than in the short run.
A 10 per cent increase in the minimum wage is more likely to raise unemployment among teenage workers than among mid-career professional workers
True
A price floor set above the equilibrium price is a binding constraint.
True
The shortage of housing caused by a binding rent control is likely to be more severe in the long run when compared to the short run.
True
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.
products that the burden of a tax likely fall more heavily on the sellers would be...
entertainment
A tax placed on a good that is a necessity for consumers will likely generate a tax burden that
falls more heavily on buy
Which side of the market is more likely to lobby government for a price floor?
the sellers