Microeconomics Topics 6 and 7

What is the most likely effect of rent control laws, which forbid apartment owners from raising rents? A. A shortage of rental apartments B. A surplus of rental apartments C. Renters will have an easier time finding cheap apartments D. No apartments will be put up for rent E. Homeless people will be helped

A shortage of rental apartments

How do we model taxes using supply and demand?

A tax on producers decreases supply. A tax on consumers decreases demand.

When do sellers pay most of the tax?

When supply is less elastic than demand

When do buyers pay most of the tax?

Demand is less elastic than supply

Is the effect of the minimum wage on unemployment big or small?

Depends on elasticity of demand and supply. The more inelastic, the smaller the effect and vice versa

What is the main good taxed in our society?

Labor

What is the most likely effect of agricultural price supports, which guarantee a minimum price for such products as peanuts? A. They lead to shortages B. They lead to surpluses C. They reduce the demand for agricultural products D. They increase the supply of agricultural products

They lead to surpluses

At any price above the equilibrium price A. total surplus will be larger B. total surplus will be smaller C. total surplus will be the same, but consumers will get more of the gain D. total surplus will be the same, but producers will get more of the gain

Total surplus will be smaller

When is there a shortage?

When there is a price ceiling less than equilibrium price // when quantity demanded is greater than quantity supplied

When is there a surplus?

When there is a price floor greater than equilibrium price // when quantity supplied is greater than quantity demanded

Suppose a mysterious disease destroys a huge number of pumpkins right before Halloween. We would NOT expect to see A. a pumpkin shortage B. a rise in the price of pumpkins C. Americans carving fewer pumpkins D. we would expect to see all of the above

a pumpkin shortage

A tax on buyers a. decreases the quantity supplied, but not the quantity demanded b. decreases the quantity demanded, but not the quantity supplied c. decreases both the quantity supplied and quantity demanded, unless one or the other is perfectly inelastic d. increases the price that sellers receive

decreases both the quantity supplied and quantity demanded, unless one or the other is perfectly inelastic

According to the economic way of thinking, the price that results in quantity supplied being equal to quantity demanded is the best price because A. it results in no shortage B. it results in no surplus C. it maximizes the combined welfare of buyers and sellers D. it minimizes the amount spent by buyers E. it maximizes the profit of sellers

it maximizes the combined welfare of buyers and sellers

What will happen to the equilibrium quantity of potato chips after the tax? a. it will rise b. it will fall c. it will rise if demand is more elastic than supply d. it will rise if supply is more elastic than demand

it will fall

except if supply or demand is perfectly inelastic, when a good is taxed, a. less of it is produced b. the same amount is produced, but it costs more c. producers simply pass the whole tax on to consumers d. all of the above

less of it is produced

The government is considering taxing popcorn. Which of the following is the most accurate statement about who will beat the burden of a tax? a. the burden of the tax will always be shared exactly evenly between buyers and sellers b. the burden of the tax will never be shared equally between buyers and sellers c. rarely will the burden of the tax be shared equally; in most cases or or the other pays more of the tax d. the burden of the tax depends on whether the government applies it to sellers or to buyers

rarely will the burden of the tax be shared equally; in most cases or or the other pays more of the tax

We would expect a shortage or surplus created by a price control to be greater A. the more elastic demand and supply B. the less elastic demand and supply C. if supply is greater than the demand D. if demand is greater than supply

the more elastic demand and supply

If the price floor is not binding, then A. the quantity demanded to be greater than the quantity supplied B. the quantity supplied to be greater than the quantity demanded C. the quantity demanded and the quantity supplied to be equal D. supply to be less than demand E. demand to be less than supply

the quantity demanded and the quantity supplied to be equal

If the price ceiling is binding, we would expect A. the quantity demanded to be greater than the quantity supplied B. the quantity supplied to be greater than the quantity demanded C. the quantity demanded and the quantity supplied to be equal D. supply to be less than demand E. demand to be less than supply

the quantity demanded to be greater than the quantity supplied

When a good is taxed and neither demand nor supply is perfectly inelastic a. the quantity produced will rise b. the quantity produced will fall c. the quantity produced will not change d. the quantity produced may rise or fall, depending upon whether the producer or the consumer is taxed

the quantity produced will fall

When a good is taxed and either demand or supply is perfectly inelastic a. the quantity produced will rise b. the quantity produced will fall c. the quantity produced will not change d. the quantity produced may rise or fall, depending upon whether the producer or the consumer is taxed

the quantity produced will not change

Suppose the manufacturers of potato chips are subjected to a new ten cents tax. How much the market price of potato chips will rise after the tax depends upon a. the cost of producing potato chips b. whether there are any externalities in chip manufacturing c. the law of demand d. whether supply or demand is relatively more elastic e. the market price will rise by exactly ten cents

whether supply or demand is relatively more elastic

A tax on cigarette production a. will reduce cigarette consumption more if demand is elastic than if demand is inelastic. b. will only reduce cigarette consumption if the demand for cigarettes is elastic. c. will only reduce cigarette consumption if the demand for cigarettes is inelastic. d. will reduce the quantity of cigarettes supplied but not the quantity demanded.

will reduce cigarette consumption more if demand is elastic than if demand is inelastic.