Chapter 6

Which of the following price ceilings would be binding in this market?

$3

The incidence of a tax falls more heavily on

All of the above are correct

A price ceiling will be binding only if it is set

below the equilibrium price

In a market with a binding price ceiling, an increase in the ceiling will ________ the quantity supplied, ________ the quantity demanded, and reduce the ________.

increase, decrease, shortage

If the government removes a tax on a good, then the quantity of the good sold will

increase.

If a price ceiling is not binding, then

there will be no effect on the market price or quantity sold.

When a good is taxed, the burden of the tax falls mainly on consumers if

supply is elastic, and demand is inelastic.

A minimum wage that is set above a market's equilibrium wage will result in an excess

supply of labor, that is, unemployment

The buyers will bear a higher share of the tax burden than sellers if the demand is

D2, and the supply is S2.

Which of the following price floors would be binding in this market?

$9

Suppose the government imposes a price floor of $3 on this market. What will be the size of the surplus (or shortage) in this market?

0 units

Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage depresses teenage employment by about

1 to 3 percent.

Which of the following is not correct? In a 2006 survey of Ph.D. economists,

10 percent would decrease the minimum wage.

The U.S. Congress first instituted a minimum wage in

1938

Suppose the government imposes a price ceiling of $3 on this market. What will be the size of the shortage in this market?

75 units

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

The effective price received by sellers is $0.40 per bottle less than it was before the tax.

If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would

decrease by less than $500

A tax burden falls more heavily on the side of the market that

is more inelastic.

The tax burden will fall most heavily on sellers of the good when the demand curve

is relatively flat, and the supply curve is relatively steep.

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

more, and sellers receive less than they did before the tax.

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.

A $1 per unit tax levied on consumers of a good is equivalent to

a $1 per unit tax levied on producers of the good.

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

a smaller quantity of the good is bought and sold.

When the government imposes a binding price floor, it causes

a surplus of the good to develop.

Suppose that the demand for light bulbs is inelastic, and the supply of light bulbs is elastic. A tax of $2 per bulb levied on light bulbs will increase the price paid by buyers of light bulbs by

between $1 and $2.

Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of

both taxes would fall more heavily on the buyers than on the sellers.

A minimum wage that is set below a market's equilibrium wage will

have no impact on employment

A tax on the sellers of coffee will increase the price of coffee paid by buyers,

decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee.

If the government removes a tax on a good, then the price paid by buyers will

decrease, and the price received by sellers will increase

A tax imposed on the sellers of a good will lower the

effective price received by sellers and lower the equilibrium quantity.

A tax imposed on the sellers of a good will raise the

price paid by buyers and lower the equilibrium quantity.

If a nonbinding price ceiling is imposed on a market, then the

quantity sold in the market will stay the same.

A tax imposed on the sellers of a good will

raise the price buyers pay and lower the effective price sellers receive.

If a tax is imposed on a market with inelastic supply and elastic demand, then

sellers will bear most of the burden of the tax.

Which of the following would increase quantity supplied, decrease quantity demanded, and increase the price that consumers pay?

the imposition of a binding price floor

In which market will the majority of the tax burden fall on buyers?

the market shown in panel (b).

Which of the following would increase quantity supplied, increase quantity demanded, and decrease the price that consumers pay?

the repeal of a tax levied on producers