Modules 10 and 14

Which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk? -Policymakers have studied the effects of the price ceiling carefully, and they recognize that the price ceiling is advantageous for society as a whole. -Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling. -Sellers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling. -Buyers and sellers of milk have agreed that the price ceiling is good for both of them and have therefore pressured policymakers into imposing the price ceiling.

-Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.

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. -a smaller quantity of the good is demanded. -a larger quantity of the good is supplied. -the price rises above the previous equilibrium.

-a smaller quantity of the good is bought and sold.

A tax imposed on the sellers of a good will lower the -price paid by buyers and lower the equilibrium quantity. -price paid by buyers and raise the equilibrium quantity. -effective price received by sellers and lower the equilibrium quantity. -effective price received by sellers and raise the equilibrium quantity.

-effective price received by sellers and lower the equilibrium quantity.

If a nonbinding price ceiling is imposed on a market, then the -quantity sold in the market will decrease. -quantity sold in the market will stay the same. -price in the market will increase. -price in the market will decrease.

-quantity sold in the market will stay the same.

Suppose the government has imposed a price ceiling on cellular phones. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

A technological advance makes cellular phone production less expensive.

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

Price

Which of the following is the most likely explanation for the imposition of a price floor on the market for corn?

Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor.

Rent-control laws dictate

a maximum rent that landlords may charge tenants.

A price floor will be binding only if it is set

above the equilibrium price.

A price ceiling will be binding only if it is set

below the equilibrium price

A shortage results when a

binding price ceiling is imposed on a market

Policymakers use taxes

both to raise revenue for public purposes and to influence market outcomes

Price controls

can generate inequities of their own.

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.

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 $3 tax levied on the buyers of shoes will cause the

demand curve for shoes to shift down by $3.

Which of the following is not an example of a public policy?

equilibrium laws

A legal minimum on the price at which a good can be sold is called a price

floor

If the labor supply curve is nearly vertical, a tax on labor

has little impact on the amount of work that workers are willing to do.

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.

If the government levies a $5 tax per ticket on buyers of NFL game tickets, then the price paid by buyers of NFL game tickets would

increase by less than $5.

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

increase.

When a binding price ceiling is imposed on a market,

price no longer serves as a rationing device.

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

price paid by buyers and lower the equilibrium quantity.

If the tax on a good is doubled, the deadweight loss of the tax

quadruples.

The term tax incidence refers to

the distribution of the tax burden between buyers and sellers.

If a price floor is not binding, then

the equilibrium price is above the price floor

A binding price floor will reduce a firm's total revenue

when demand is elastic

Price controls are usually enacted

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