Chapter 6

A tax placed on a good that is a necessity for consumers will likely generate a tax burden that a. falls more heavily on buyers. b. falls entirely on sellers. c. falls more heavily on sellers. d. is evenly distributed between buyers and sellers.

A

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

A

The burden of a tax falls more heavily on the buyers in a market when a. demand is inelastic and supply is elastic. b. demand is elastic and supply is inelastic. c. both supply and demand are elastic. d. both supply and demand are inelastic.

A

The surplus caused by a binding price floor will be greatest if a. both supply and demand are elastic. b. both supply and demand are inelastic. c. supply is inelastic and demand is elastic. d. demand is inelastic and supply is elastic.

A

Which of the following statements is true if the government places a price ceiling on petrol at €1.50 per litre and the equilibrium price is €1.00 per litre? a. A significant increase in the demand for gasoline could cause the price ceiling to become a binding constraint. b. There will be a shortage of gasoline. c. A significant increase in the supply of gasoline could cause the price ceiling to become a binding constraint. d. There will be a surplus of gasoline.

A

Within the supply and demand model, a tax collected from the buyers of a good shifts the a. demand curve downward by the size of the tax per unit. b. supply curve downward by the size of the tax per unit. c. demand curve upward by the size of the tax per unit. d. supply curve upward by the size of the tax per unit

A

For a price ceiling to be a binding constraint on the market, the government must set it a. precisely at the equilibrium price. b. below the equilibrium price. c. at any price because all price ceilings are binding constraints.

B

Studies show that a 10 percent increase in the minimum wage a. increases teenage employment by about 1 to 3 percent. b. decreases teenage employment by about 1 to 3 percent. c. decreases teenage employment by about 10 to 15 percent. d. increases teenage employment by about 10 to 15 percent.

B

The burden of a tax falls more heavily on the sellers in a market when a. demand is inelastic and supply is elastic. b. demand is elastic and supply is inelastic. c. both supply and demand are elastic. d. both supply and demand are inelastic.

B

Within the supply and demand model, a tax collected from the sellers of a good shifts the a. demand curve upward by the size of the tax per unit. b. supply curve upward by the size of the tax per unit. c. supply curve downward by the size of the tax per unit. d. demand curve downward by the size of the tax per unit.

B

A binding price ceiling creates a. an equilibrium. b. a surplus. c. a shortage. d. a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price

C

A price floor a. always determines the price at which a good must be sold. b. sets a legal maximum on the price at which a good can be sold. c. sets a legal minimum on the price at which a good can be sold.

C

A tax of $1.00 per gallon on gas a. increases the price the buyers pay by precisely $0.50 and reduces the price received by sellers by precisely $0.50. b. decreases the price the sellers receive by $1.00 per gallon. c. places a tax wedge of $1.00 between the price the buyers pay and the price the sellers receive. d. increases the price the buyers pay by $1.00 per gallon.

C

Which of the following is an example of a price floor? a. rent controls b. restricting gasoline prices to $2.00 per gallon when the equilibrium price is $3.00 per gallon c. the minimum wage d. All of the above are price floors.

C

Which of the following statements about a binding price ceiling is true? a. The shortage created by the price ceiling is greater in the short run than in the long run. b. The surplus created by the price ceiling is greater in the short run than in the long run. c. The shortage created by the price ceiling is greater in the long run than in the short run. d. The surplus created by the price ceiling is greater in the long run than in the short run.

C

Which of the following takes place when a tax is placed a good? a. a decrease in the price buyers pay, an increase in the price sellers receive, and a decrease in the quantity sold b. a decrease in the price buyers pay, an increase in the price sellers receive, and an increase in the quantity sold c. an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold d. an increase in the price buyers pay, a decrease in the price sellers receive, and an increase in the quantity sold

C

Which side of the market is more likely to lobby government for a price floor? a. Neither buyers nor sellers desire a price floor. b. Both buyers and sellers desire a price floor. c. the sellers d. the buyers

C

When a tax is collected from the buyers in a market, a. the tax burden falls most heavily on the buyers. b. the buyers bear the burden of the tax. c. the sellers bear the burden of the tax. d. the tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers

D

Which of the following statements about the burden of a tax is correct? a. The tax burden falls most heavily on the side of the market (buyers or sellers) that is most willing to leave the market when price movements are unfavorable to them. b. The tax burden generated from a tax placed on a good consumers perceive to be a necessity will fall most heavily on the sellers of the good. c. The burden of a tax lands on the side of the market (buyers or sellers) from which it is collected. d. The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and is not determined by legislation.

D

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? a. Landlords may discriminate among apartment renters. b. Landlords may be offered bribes to rent apartments. c. There may be long lines of buyers waiting for apartments. d. There will be a shortage of housing. e. The quality of apartments will improve.

E