ECO 201 UNIT 7

The imposition of a binding price ceiling on a market causes a. quantity demanded to be greater than quantity supplied. b. quantity demanded to be less than quantity supplied. c. quantity demanded to be equal to quantity supplied. d. the price of the good to be greater than its equilibrium price.

a

A legal minimum on the price at which a good can be sold is called a a. price subsidy. b. price floor. c. tax. d. price ceiling.

b

If a price ceiling is not binding, then a. the equilibrium price is above the price ceiling. b. the equilibrium price is below the price ceiling. c. it has no legal enforcement mechanism. d. None of the above is correct because all price ceilings must be binding.

b

Price ceilings and price floors that are binding a. are desirable because they make markets more efficient and more fair. b. cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price. c. can have the effect of restoring a market to equilibrium. d. are imposed because they can make the poor in the economy better off without causing adverse effects.

b

The imposition of a binding price floor on a market a. causes quantity demanded to be greater than quantity supplied. b. causes quantity demanded to be less than quantity supplied. c. causes quantity demanded to be equal to quantity supplied. d. causes a decrease in demand.

b

The minimum wage is an example of a a. price ceiling. b. price floor. c. wage subsidy. d. tax.

b

price ceiling will be binding only if it is set a. equal to the equilibrium price. b. above the equilibrium price. c. below the equilibrium price. d. either above or below the equilibrium price.

b

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would a. increase by more than $1,000. b. increase by exactly $1,000. c. increase by less than $1,000. d. decrease by an indeterminate amount.

c

If the government removes a tax on a good, then the price paid by buyers will a. increase, and the price received by sellers will increase. b. increase, and the price received by sellers will decrease. c. decrease, and the price received by sellers will increase. d. decrease, and the price received by sellers will decrease.

c

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by a. less than $0.50. b. $0.50. c. between $0.50 and $1. d. $1

c

Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift a. demand, raising both the equilibrium price and quantity in the market for artificially-sweetened beverages. b. demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages. c. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially-sweetened beverages. d. supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages.

c

The quantity sold in a market will decrease if the government a. decreases a binding price floor in that market. b. increases a binding price ceiling in that market. c. increases a tax on the good sold in that market. d. All of the above are correct

c

price ceiling will be binding only if it is set a. equal to the equilibrium price. b. above the equilibrium price. c. below the equilibrium price. d. either above or below the equilibrium price.

c

The incidence of a tax falls more heavily on a. consumers than producers if demand is more inelastic than supply. b. producers than consumers if supply is more inelastic than demand. c. consumers than producers if supply is more elastic than demand. d. All of the above are correct

d