Econ midterm

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

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

Both supply and demand are elastic.

ELASTIC DEMAND OR ELASTIC SUPPLY

Indicates a high responsiveness to changes in price

A tax of $1 per gallon on gasoline

PLACES A TAX WEDGE OF $1 BTW THE PRICE THE BUYERS PAY AND THE PRICE SELLERS RECEIVE.

Price ceilings are designed to benefit

Purchasers

A price floor

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

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.

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

The minimum wage

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

The quality of apartments will improve.

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

The tax burden falls most heavily on the buyers....NO The tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers

Suppose the demand for classical music concert tickets is downward sloping and the supply of classical music concert tickets is upward sloping. Lovers of classical music persuade Congress to impose a price ceiling of $40 per concert ticket. True or False: If the equilibrium price of concert tickets were $50, a price ceiling of $40 will cause fewer people to attend classical music concerts than if there is no price control.

When the government imposes a legal maximum on the price of a good, this is known as a price ceiling. *If the price ceiling being imposed is below the equilibrium price, the price ceiling is binding and causes a shortage in the market.* So, *if the equilibrium price is $40 or below, a price ceiling of $40 is not binding and has no effect on the number of people attending musical concerts. *However, if the equilibrium price in the absence of price controls is above $40 per ticket, then imposing a price ceiling of $40 *will cause quantity demanded to exceed quantity supplied*, causing a shortage of tickets and *a decrease in the number of people who attend classical music concerts*. See Section: How Price Ceilings Affect Market Outcomes. *True*

A price ceiling is binding when it is set

below the equilibrium price, causing a shortage

For which of the following products would the burden of a tax likely fall more heavily on the sellers? a. clothing b. housing c. food d. entertainment

d

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

A binding price ceiling creates

shortage

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