Econ 101 chapter 6
Which of the following statements is true if the government places a price ceiling on gasoline at $4.00 per gallon and the equilibrium price is $3.00 per gallon?
A significant increase in the demand for gasoline could cause the price ceiling to become a binding constraint.
what is true about a burden of a tax?
The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and is not determined by legislation.
what takes place when a tax is placed on a good?
an increase in the price buyers pay, decrease in the price sellers receive, decrease in the quantity sold.
For a price ceiling to be a binding constraint on the market, the government must set it?
below the equilibrium price
the surplus caused by a binding price floor will be greatest if?
both supply and demand are elastic
studies show that a 10% increase in the minimum wage?
decreases teenage employment by about 1 to 3 percent
within the supply and demand model, a tax collected from 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
the burden of a tax falls more heavily on the buyers in a market when?
demand is inelastic and supply is elastic
what product would a burden of a tax likely fall more heavily on the sellers?
entertainment
a tax placed on a good that is a necessity for consumers will likely generate a tax burden that?
falls more heavily on buyers
the minimum wage helps all teenagers because they receive higher wages than they would otherwise.
false
a 10% increase in the minimum wage causes a 10% reduction in teenage employment.
false: causes 1 to 3 percent reduction in employment
a price floor in a market always creates a surplus in that market.
false: creates a surplus only is the floor is set above the equilibrium price
if the equilibrium price of gas is $3.00 per gallon and the government places a price ceiling on gas of $4.00 per gallon, the result will be a shortage of gas.
false: price ceiling set above equilibrium price is not binding
a price ceiling set below the equilibrium price causes a surplus.
false: shortage
the government can choose to place the burden of a tax on the buyers in a market by collecting the tax from the buyers rather than the sellers.
false: the burden of a tax is determined by the relative elasticities of supply and demand
when we use the model of supply and demand to analyze a tex collected from the buyers, we shift the demand curve upward by the size of the tax.
false: we shift the demand curve downward by the size of the tax
a $10 tax on baseball gloves will always raise the price that the buyers pay for baseball gloves by $10.
false: the difference between what the sellers receive and the buyers pay will be $10, but the price received by the sellers usually will fall some so the price paid by the buyers will rise by less than $10.
example of price floor?
minimum wage
a tax of $1.00 per gallon on gas?
places a tax wedge of $1.00 between the price the buyers pay and the price the sellers receive
a price floor?
sets a legal minimum on the price at which a good can be sold
a binding price ceiling creates?
shortage
what is true about a binding price ceiling?
shortage created by the price ceiling is greater in the long run than in the short run
within the supply and demand model, a tax collected from the sellers of a good shifts the?
supply curve upward by the size of the tax per unit
Suppose the equilibrium price for apartments is $800 per month and the government imposes rent controls of $500. Which of the following is unlikely to occur as a result of the rent controls?
the quality of apartments will improve
which side of the market is more likely to lobby government for a price floor?
the sellers
when a tax is collected from the buyers in a market?
the tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers
a price ceiling that is not a binding constraint today cause a shortage in the future if demand were to increase and raise the equilibrium price above the fixed price ceiling.
true
a price floor set above equilibrium price is a binding constraint.
true
a tax collected from buyers has an equivalent impact to a same size tax collected from sellers.
true
a tax creates a tax wedge between a buyer and a seller. this causes the price paid by the buyer to rise, the price received by the seller to fall, and the quantity sold to fall.
true
if medicine is a necessity, the burden of a tax on medicine will likely land more heavily on the buyers of medicine.
true
the shortage of housing caused by a binding rent control is likely to be more severe in the long run where compared to the short run.
true
the ultimate burden of a tax lands most heavily on the side of the market that is less elastic.
true
