ECON EXAM chapter 6

when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

1. Price controls are usually enacted

causes a shortage. is set at a price below the equilibrium price

A binding price ceiling

have no impact on employment

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

emphasize the low annual incomes of those who work for the minimum wage.

Advocates of the minimum wage

the equilibrium price is above the price ceiling.

If a price ceiling is not binding, then

buyers will bear most of the burden of the tax.

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

shift up.

If a tax is levied on the sellers of a product, then the supply curve will

increase by less than $1,000.

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

increase, and the quantity sold in the market will increase.

If the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the price received by sellers will decrease.

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

a. increase. b. decrease. c. not change.

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

price

In a free, competitive market, what is the rationing mechanism?

may encourage some teenagers to drop out and take jobs.

Minimum wage laws

less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.

Most labor economists believe that the supply of labor is

a. encourages teenagers to drop out of school. b. prevents some workers from getting needed on-the-job training. c. contributes to the problem of unemployment.

Opponents of the minimum wage point out that the minimum wage

cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.

Price ceilings and price floors that are binding

between $0.50 and $1.

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

quantity demanded of physicals increases, and the quantity supplied of physicals decreases.

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

depends on the elasticities of supply and demand.

Tax incidence

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

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

the distribution of the tax burden between buyers and sellers.

The term tax incidence refers to

fails to raise the wage of any employed person

There are several criticisms of the minimum wage. Which of the following is not one of those criticisms? The minimum wage

falls, and the wage paid by firms rises.

When a payroll tax is enacted, the wage received by workers

Prices ensure an equal distribution of goods and services among consumers.

Which of the following is not a function of prices in a market system?

higher quality housing

Which of the following is not a result of rent control?

a. The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee. b. Your employer is required by law to pay $300 to match the $300 deducted from your check. c. This type of tax is an example of a payroll tax.

You receive a paycheck from your employer, and your pay stub indicates that $300 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct

and the effective price received by sellers both decrease.

when a tax is placed on the buyers of cell phones, the size of the cell phone market