ECON 1110 Reading Check Chpt 6-7

In response to a shortage caused by the imposition of a binding ceiling on a market,

All of the above are correct: Prices will no longer be the mechanism that rations scarce resources; long lines of buyers may develop; Sellers could ration the good or service according to their own personal biases.

When a tax is placed on the sellers of a product, the

All of the above are correct: Size of the market decreases; effective price recieved by sellers decreases, and the price paid by buyers increases; supply of the product decreases.

Refer to Figure 7-17. If the demand curve is D and the supply curve shifts left from S to S', what is the change in producer surplus when comparing the new equilibrium with the original equilibrium?

Producer surplus decreases by $225.

Refer to Figure 7-7. What happens to the consumer surplus if the price rises from $100 to $150?

The new consumer surplus is 25 percent of the original consumer surplus.

Which of the following statements about the effects of rent control is correct?

The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments.

Which of the following causes a surplus of a good?

a binding price floor

If a tax is levied on the sellers of flour, then

buyers and sellers will share the burden of the tax.

Price ceilings and price floors that are binding

cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.

To say that a price floor is binding is to say that the price floor

causes quantity supplied ot exceed quantity demanded.

Which of the following is correct? A tax burden

falls more heavily on the side of the market that is less elastic.

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

increase by less than $1,000.

Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect

most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.

If the government removes a $2 tax on buyers of cigars and imposes the same $2 tax on sellers of cigars, then the price paid by buyers will

not change, and the price received by sellers will not change.

An example of a price floor is

the minimum wage.

Refer to Figure 7-24. If 6 units of the good are produced and sold, then

the sum of consumer surplus and producer surplus is maximized.

Consider the market for gasoline. Buyers

would lobby for a price ceiling, whereas sellers would lobby for a price floor.