Exam 2 Chapter 6

If the government imposes a binding price ceiling on a market, then the price paid by buyers will a. Decrease, and the quantity sold in the market will decrease b. Increase, and the quantity sold in the market will increase c. Increase, and the quantity sold in the market will decrease d. Decrease, and the quantity sold in the market will increase

a. Decrease, and the quantity sold in the market will decrease

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the a. Sellers will bear a greater burden of the tax than the buyers b. buyers will bear a greater burden of the tax than the sellers c. buyers and sellers are likely to share the burden of tax equally d. buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information.

a. Sellers will bear a greater burden of the tax than the buyers

The price ceiling shown a. Causes a shortage of 60 units of the good b. Makes it necessary for sellers to ration the good using a mechanism other than price c. It is not binding because it is set below the equilibrium point d. Causes a shortage of 30 units of the good

b. Makes it necessary for sellers to ration the good using a mechanism other than price

When a tax is placed on the sellers of a product, buyers pay a. More, and sellers receive more than they did before the tax b. More, and sellers receive less than they did before the tax c. Less, and sellers receive more than they did before the tax d. Less, and sellers receive less than they did before the tax

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

Suppose that the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result, a. The demand for treadmills will increase b. The supply treadmills will decrease c. A shortage of treadmills will develop d. A surplus of treadmills will develop

c. A shortage of treadmills will develop

Look at the figure above. Suppose a tax $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market? a. Less than 60 units b. 60 units c. Between 60 units and 100 units d. Greater than 100 units

c. Between 60 units and 100 units

If the government removes a binding price floor from a market, then the price paid by buyers will a. Increase, and the quantity sold in the market will decrease b. Increase, and the quantity sold in the market will increase c. Decrease, and the quantity sold in the market will increase d. Decrease, and the quantity sold in the market will decrease

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

Suppose the equilibrium price of deodorant is $4, and the government imposes a price floor of $5 per stick. As a result of this price floor, the a. Demand curve for deodorant shifts to the left b. Supply curve for deodorant shifts to the right c. Quantity demanded of deodorant decreases, and the quantity of deodorant that firms want to supply increases d. quantity supplied of deodorant stays the same

c. Quantity demanded of deodorant decreases, and the quantity of deodorant that firms want to supply increases

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. Supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially-sweetened beverages.

Suppose there is currently a tax of $80 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $80 per ticket to $64 per ticket, then the a. demand curve will shift upward by $16, and the price paid by buyers will decrease by less than $16. b. demand curve will shift upward by $16, and the price paid by buyers will decrease by $16. c. supply curve will shift downward by $16, and the effective price received by sellers will increase by less than $16. d. supply curve will shift downward by $16, and the effective price received by sellers will increase by $16.

c. supply curve will shift downward by $16, and the effective price received by sellers will increase by less than $16.

When a certain price control is imposed on this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P1dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2dollars per unit for that quantity. If P1− P2= $3, then the price control is a. Only a price ceiling of $3.00 b. Only a price ceiling of $6.00 c. Only a price floor of $6.00 d. Either a price ceiling of $3.00 or a price floor of $6.00

d. Either a price ceiling of $3.00 or a price floor of $6.00

If a price ceiling is not binding, then a. There will be a surplus in the market b. There will be a shortage in the market c. The market will be less efficient than it would without the price ceiling d. There will be no effect on the market price or quantity sold.

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