Chapter 6- Test 2

A

1) To help pay for the cost of sport related injuries, the government imposes a tax on sellers of all sports equipment. Using the above figure, how much deadweight loss results from this tax on sports equipment? A) acd B) abd C) ced D) cbd

C

17) The more ________, the larger is the amount of the tax on the good that the ________ pays. A) elastic the supply of a good; sellers B) elastic the demand for a good; buyers C) inelastic the demand for a good; buyers D) inelastic the supply of a good; buyers

C

18) The above figure shows the market for neckties after the government has imposed a tax. How much deadweight loss results from this tax? A) $150.00 B) $250.00 C) $50.00 D) $200.00

D

19) The above figure shows the market for blouses. The government decides to impose the sales tax on sellers, as shown in the figure. How much producer surplus is lost? A) $40,000 B) $10,000 C) $20,000 D) $25,000

D

10) When a government fines and/or imprisons convicted drug dealers, it is attempting to reduce the illegal drug trade by shifting the ________ curve for illegal drugs ________. A) demand; leftward B) demand; rightward C) supply; rightward D) supply; leftward

B

11) In the above figure, if the minimum wage is set at $6 per hour, what quantity of labor is employed? A) 300 million hours B) 100 million hours C) 400 million hours D) 200 million hours

C

12) The figure above shows the housing market in the city of Appleville. A rent ceiling of $650 per month is imposed. With the rent ceiling, the deadweight loss in the Appleville housing market is A) 300 units per month. B) zero. C) at least $15,000 per month. D) at most $7,500 per month.

B

13) In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The rent ceiling leads to a A) surplus of 2000 apartments. B) shortage of 2000 apartments. C) shortage of 1000 apartments. D) surplus of 1000 apartments.

B

14) In the above figure, the equilibrium price of a paperback book is $6 per book and the equilibrium quantity is 3 million books. The National Literature Board convinces the government to impose a price ceiling of $6 per book. At this price, the quantity of books supplied to the market will be A) more than 3 million a month and will exceed the quantity demanded. B) 3 million a month and will equal the quantity demanded. C) less than 3 million a month and will be less than the quantity demanded. D) less than 3 million a month and will exceed the quantity demanded.

C

15) The stricter the enforcement of a price ceiling, the A) smaller is the difference between the black market price and the legal market price of the good. B) greater is the amount of the good available in total, from either the legal market or the black market. C) larger is the difference between the black market price and the legal market price of the good. D) Both answers B and C are correct.

B

16) A sales tax will be divided so that A) the sellers pay the full amount if supply is perfectly elastic. B) the sellers pay the full amount if supply is perfectly inelastic. C) the buyers pay the full amount if supply is perfectly inelastic. D) both buyers and sellers pay some of the tax if supply is perfectly elastic.

B

2) The above table gives the demand schedule and the supply schedule for housing in Anytown, U.S.A. If a rent ceiling of $600 was imposed in the housing market, then A) there would be a shortage of apartments. B) the market would reach equilibrium at the quantity of 60 housing units. C) there would be a surplus of apartments. D) the supply of housing would increase.

C

20) A minimum wage set above the equilibrium wage rate is a price ________ that ________ the quantity of low-skilled labor demanded. A) floor; increases B) ceiling; increases C) floor; decreases D) ceiling; decreases

A

21) The figure above shows the housing market in the city of Appleville. A rent ceiling of $650 per month is imposed. With the rent ceiling, what is the maximum black market rent in Appleville? A) $800 per month B) $750 per month C) $650 per month D) $700 per month

A

22) In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. Now suppose that demand increases. The increase in demand results in the quantity supplied A) staying the same. B) increasing. C) decreasing. D) increasing, staying the same, or decreasing depending on how much demand increases.

C

23) The figure above illustrates a rental housing market in which there is a rent ceiling of $400 a month. The rent ceiling is strictly enforced. The number of apartments rented is A) 3 thousand. B) 4 thousand. C) 2 thousand. D) less than 2 thousand.

B

24) In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month, which causes a shortage. Suppose that apartments are an inferior good and incomes rise. The increase in income A) increases the shortage. B) decreases the shortage. C) raises the rent. D) has no effect on the shortage.

C

25) The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $6 per hour, how many hours do students work? A) 12,000 hours B) 6,000 hours C) 9,000 hours D) None of the above answers is correct

C

26) Governments often intervene in agricultural markets by A) setting production quotas that will increase production. B) imposing heavy taxes on farm products. C) granting subsidies. D) setting price floors that reduce prices for buyers.

C

27) In the figure above, imposing a tax on the sellers of the product results in a division in which A) neither the buyers nor the sellers pay the tax. B) the buyers and sellers pay the same amount. C) all of the tax is paid by the sellers. D) all of the tax is paid by the buyers.

A

28) A rent ceiling creates a shortage. As a result, there is A) a decrease in the producer surplus in the housing market. B) a surplus of housing. C) an efficient allocation of housing. D) an increase in the producer surplus in the housing market.

A

29) When a tax is imposed on the suppliers of a good or service, then A) the consumers pay a larger part of the tax as the elasticity of demand for the product becomes smaller. B) the consumers pay a larger part of the tax as the elasticity of demand for the product becomes larger. C) in general, the consumers pay all the tax. D) in general, the producers pay all the tax.

D

3) The above figure shows the apartment rental market in Bigtown. If severe flooding resulted in the destruction of many of the city's apartment buildings, then the A) equilibrium market price of apartments rented would fall below $750.00. B) equilibrium quantity of apartments rented would increase beyond 3,000. C) demand curve for apartments would shift rightward and rent would rise above $750.00. D) supply curve of apartments would shift leftward and rent would rise above $750.00.

D

30) Most of us are dependent on crude oil in some shape or way, whether it's to power our cars or to heat our homes in some parts of the country. More than 80 percent of the home heating oil used in the United States goes to the Northeast. It is suggested that there needs to be government regulation to make it illegal to charge a very high price for oil. This type of regulation would be a ________. A) price floor B) tax incidence C) shortage regulation D) price ceiling

B

31) In the above figure, the price received by the seller before the tax is ________ per compact disc, and the price received and kept by the seller after the tax is ________ per compact disc. A) $20; $20 B) $20; $10 C) $30; $10 D) $30; $20

A

32) The above figure shows the apartment rental market in Bigtown. If the market is in equilibrium and then the Bigtown Housing Authority imposes a rent ceiling of $500 per apartment, which of the following would occur? A) an increase in the search time and expense of finding an apartment B) a decrease in the search time and expense of finding an apartment C) an increase in efficiency D) an increase in producer surplus but a decrease in consumer surplus

B

33) You are in the business of producing and selling hamburgers, french fries, pizza, and ice cream. The mayor plans to impose a tax on one of these products. Based on the elasticities in the above table, on which of these goods would your customers least like to be taxed? A) hamburgers B) pizza C) French fries D) ice cream

C

35) Which of the following is an effect of a price ceiling set below the equilibrium price? A) Consumers can buy more than they can at the equilibrium price because the ceiling price is lower. B) The price ceiling has no effect on the market equilibrium. C) Less of the good is produced with the ceiling than would be produced without the ceiling. D) None of the above answers is correct.

A

36) Assume that your state government has placed a price ceiling of $.20 per kilowatt hour on electricity. The equilibrium price per kilowatt hour for electricity is $.25. The government's action will result in A) a deadweight loss. B) a surplus of electricity in the electricity market. C) an increase in producer surplus. D) an increase in the price of electricity to $.25 per kilowatt hour

B

37) In the market for books, initially there are no taxes on books. Books are normal goods. The government introduces a tax of $4 a book and, at the same time, people's income fall by $4,000 a year. Following these two changes, the equilibrium quantity of books A) increases. B) decreases. C) remains unchanged. D) either increases or decreases. We cannot say which.

D

38) If the same fine is imposed on buyers and sellers of an illegal good so that the cost of breaking the law is the same for both, then A) there is more government revenue collected than with an excise tax on the good. B) there is no deadweight loss in this market because the extra producer surplus will exactly offset the lost consumer surplus. C) the equilibrium price of the good definitely increases. D) the supply and demand curves both shift leftward by equal amounts

B

39) In the above figure, the equilibrium price of a paperback book is $6 per book and the equilibrium quantity is 3 million books. The National Literature Board convinces the government to impose a price ceiling of $3 per book. At this price, the quantity of books supplied to the market will be A) 3 million a month and will equal the quantity demanded. B) less than 3 million a month and will be less than the quantity demanded. C) more than 3 million a month and will exceed the quantity demanded. D) less than 3 million a month and will exceed the quantity demanded.

D

40) A price floor is a price A) below which a seller cannot legally sell. B) above which a seller cannot legally sell. C) that creates a surplus of the good if it is set above the equilibrium price. D) Both answers A and C are correct.

D

5) The figure above shows the demand for and supply of rental housing in Smallton. If a rent ceiling is set at $800, there is A) a shortage of 6,000 units of rental housing. B) a shortage of 3,000 units of rental housing. C) a surplus of 3,000 units of rental housing. D) neither a shortage nor a surplus of rental housing

C

6) With rent controls set below the equilibrium rent, what mechanism might arise that moves the market closer to the efficient equilibrium? A) decreased search costs B) more favorable leases offered to tenants C) black market activity D) increased advertising by landlords

C

7) In general, a fine on buying a product leads to the A) supply curve shifting rightward. B) supply curve shifting leftward. C) demand curve shifting leftward. D) demand curve shifting rightward.

A

8) Suppose the government imposes a price ceiling on gasoline that is less than the equilibrium price. As a result, A) there is incentive for buyers to undertake search activity. B) the price of gasoline rises to the equilibrium price. C) the supply of gasoline will increase and the supply curve will shift rightward. D) the demand for gasoline will decrease and the demand curve will shift leftward.

C

9) A $10 per-unit tax on cell phones raises the equilibrium price paid by consumers by $5. Before the tax, 5,000 cell phones were sold per year. The revenue from the tax is A) $50,000 per year. B) more than $50,000 per year. C) positive but less than $50,000 per year. D) zero.

C

4) The market for unskilled labor is illustrated in the figure above. If a minimum wage of $5 per hour is imposed, an employer who breaks the law will be able to find a worker who is willing to work for A) between $4 and $5 per hour. B) more than or equal to $5 per hour. C) less than or equal to $4 per hour. D) None of the above because workers are not willing to supply labor for wage rates less than $5 per hour.

A

34) The market for unskilled labor is illustrated in the figure above. The market is in equilibrium and then a minimum wage of $3 per hour is imposed. Employment will decrease by A) 0 hours. B) 30 million hours per year. C) 10 million hours per year. D) 20 million hours per year.