Chapter 6 Practice

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Refer to Figure 6-11. Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

Between 60 units and 100 units

A tax of $1 on sellers always increases the equilibrium price by $1.

False

A tax on buyers increases the size of a market.

False

If the demand curve is very inelastic and the supply curve is very elastic in a market, then the sellers will bear a greater burden of a tax imposed on the market, even if the tax is imposed on the buyers.

False

Minimum-wage laws benefit society by creating a surplus of labor.

False

Rent control may lead to lower rents for those who find housing, but the quality of the housing may also be lower.

T

A tax burden falls more heavily on the side of the market that is less elastic

True

A tax on golf clubs will cause buyers of golf clubs to pay a higher price, sellers of golf clubs to receive a lower price, and fewer golf clubs to be sold.

True

If a price ceiling of $1.50 per gallon is imposed on gasoline, and the market equilibrium price is $2, then the price ceiling is a binding constraint on the market.

True

Price ceilings are typically imposed to benefit buyers.

True

Refer to Figure 6-17. If the government places a $2 tax in the market, the seller bears $1 of the tax burden.

True

The primary effect of rent control in the short run is to reduce rents.

True

The true burden of a payroll tax has nothing to do with the percentage of the tax that employers are required to pay.

True

When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

True

Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.

True

A price ceiling is

a legal maximum on the price at which a good can be sold.

If a binding price floor is imposed on the video game market, then

a surplus of video games will develop.

When a tax is placed on the sellers of cell phones, the size of the cell phone market

and the effective price received by sellers both decrease.

A binding minimum wage creates a shortage of labor.

false

Refer to Figure 6-16. A price ceiling set at $70 would create a shortage of 40 units.

false

In the housing market, supply and demand are

more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.

Refer to Figure 6-7. If the government imposes a price ceiling at $6, it would be

nonbinding if market demand is Demand A and binding if market demand is Demand B.

A price ceiling set below the equilibrium price causes quantity demanded to exceed quantity supplied.

true

A tax on sellers shifts the supply curve to the left.

true

Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

true

Refer to Figure 6-17. If the government places a $2 tax in the market, the seller receives $4.

true

Regardless of whether a tax is levied on sellers or buyers, taxes discourage market activity.

true

The effects of rent control in the long run include lower rents and lower-quality housing.

true

Refer to Figure 6-16. A price floor set at $60 would create a surplus of 20 units.

true look at quantity


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