Chapter 6 MICRO

What kind of workers would be most likely to find it more difficult to get a job after a rise in the minimum wage rate?

A teenage worker with few qualifications

A correct statement about the burden of a tax would be...

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 happens when a tax is placed a good?

an increase in the price buyers pay, a decrease in the price sellers receive, and a 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

A price floor in a market always creates a surplus in that market

false

A €10 tax on football boots will always raise the price that the buyers pay for football boots by €10

false

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

When we use the model of supply and demand to analyse a tax collected from the buyers, we shift the demand curve upward by the size of the tax.

false

A tax of €1.00 per litre on petrol

places a tax wedge of €1.00 between the price the buyers pay and the price the sellers receive

A binding price ceiling creates

shortage

Within the supply and demand model, a tax collected from the sellers of a good shifts

supply curve upward by the size of the tax per unit.

An example of price floor is..

the minimum wage

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 could cause a shortage in the future if demand were to increase and raise the equilibrium price above the fixed price ceiling.

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 probably fall more heavily on the buyers of medicine

true

The ultimate burden of a tax falls most heavily on the side of the market that is less elastic.

true

If the government places a price ceiling on petrol at €1.50 per litre and the equilibrium price is €1.00 per litre then...

A significant increase in the demand for petrol could cause the price ceiling to become a binding constraint

A price ceiling set below the equilibrium price causes a surplus.

False

If the equilibrium price of petrol is €1.00 per litre and the government places a price ceiling on petrol of €1.50 per litre, the result will be a shortage of petrol.

False

The minimum wage helps all teenagers because they receive higher wages than they would otherwise.

False

Suppose the equilibrium price for apartments is €500 per month and the government imposes rent controls of €250. Which of the following is unlikely to occur as a result of the rent controls?

The quality of apartments will improve.

A price floor

The shortage created by the price ceiling is greater in the long run than in the short run.

A true statement about a binding price ceiling is.....

The shortage created by the price ceiling is greater in the long run than in the short run.

A 10 per cent increase in the minimum wage is more likely to raise unemployment among teenage workers than among mid-career professional workers

True

A price floor set above the equilibrium price is a binding constraint.

True

The shortage of housing caused by a binding rent control is likely to be more severe in the long run when compared to the short run.

True

Within the supply and demand model, a tax collected from the 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.

products that the burden of a tax likely fall more heavily on the sellers would be...

entertainment

A tax placed on a good that is a necessity for consumers will likely generate a tax burden that

falls more heavily on buy

Which side of the market is more likely to lobby government for a price floor?

the sellers