Economics Ch6

An effective price ceiling, which is belowBlank 1Blank 1 below , Correct Unavailable than the equilibrium price, will result in a higherBlank 2Blank 2 higher , Correct Unavailable quantity demanded, but lowerBlank 3Blank 3 lower , Correct Unavailable quantity supplied, than would occur at equilibrium

-Below -Higher -lower

A price ceiling is

a maximum legal price at which at good or service may be sold.

When a tax is imposed on sellers, at any given market price, sellers will now produce

a smaller quantity than they would have before the tax

An effective milk price floor, which is belowBlank 1Blank 1 below , Incorrect Unavailable (above/below) the equilibrium price, will result in a higherBlank 2Blank 2 higher , Incorrect Unavailable (lower/higher) quantity demanded but a lowerBlank 3Blank 3 lower , Incorrect Unavailable (smaller/larger) quantity supplied.

above lower larger

The _____ tax incidence describes who bears the burden of the tax; whereas the _____ incidence refers to the person who is legally responsible for paying the tax.

actual economic, statutory

Suppose a market has a demand curve that is less elastic than the supply curve. In this case,

buyers pay a higher share of the tax.

When there is a tax on buyers of a good,

buyers will behave as if the price were actually higher by the amount of the tax

When there is a market failure, intervening

can increase total surplus.

A tax wedge

equals the amount of the tax.

An effective milk price floorBlank 1Blank 1 floor , Correct Unavailable, which is above the equilibrium price creates an excess supplyBlank 2Blank 2 supply , Correct Unavailable (demand/supply) of milk.

floor supply

Unless demand is perfectly elastic or perfectly inelastic, when a tax is levied on buyers or on sellers, the cost

is shared.

When supply and demand are relatively elastic, the change in quantity is much

larger than when supply and demand are relatively inelastic.

A price ceiling is a legal price at ____ which a good can be sold

maximum

When producers receive a subsidy, the equilibrium

quantity increases and the equilibrium price decreases.

The incidence of a tax is determined by the

relative elasticity of the supply and demand curves.

When a tax is imposed on sellers,

stays the same

Raising revenue and/or discouraging consumption are the two primary effects of

taxes

When a tax is imposed on sellers, equilibrium

the equilibrium quantity is lower and the equilibrium price is higher.

When a tax is imposed on buyers, eq

the equilibrium quantity is lower and the equilibrium price is lower.

A tax on buyers does not change the supply of a good or service because

the non-price determinants of supply don't change.

When there is a tax imposed on buyers, prices

the outcome is the same as a tax on sellers.

When there is a tax on buyers of a good, Multiple choice question.

the supply curve stays the same.

Taxes and subsidies can have unintended, consequences.

unintended

A ________ is a minimum legal price at which a good can be sold.

price floor

When buyersBlank 1Blank 1 buyers , Incorrect Unavailable receive a subsidy, the demand curve remains unchanged.

producer

Suppose a market has a demand curve that is more elastic than the supply curve. In this case,

producers pay a higher share of the tax.

The arguments for intervention fall into which of the following three categories?

-Encouraging or discouraging consumption of certain goods -Changing the distribution of surplus -Correcting market failures

Price controls can be divided into two opposing categories: price ----and price----

-ceilings -floors

An effective milk price floor which is above the equilibrium price, means fewerBlank 1Blank 1 fewer , Incorrect Unavailable producers will be willing to sell milk but moreBlank 2Blank 2 more , Incorrect Unavailable buyers will be willing to buy milk.

-more -fewer

An effective price ceiling, which is below the equilibrium price, means ------producers will be willing to sell the good but ----buyers will be willing to buy.

-fewer -more

Policymakers can also use taxesBlank 1Blank 1 taxes , Correct Unavailable and subsidesBlank 2Blank 2 subsides , Correct Unavailable to correct market failures and to encourage or discourage production and consumption of particular goods.

-taxes -subsides

Price controls can do which of the following?

Cause excess supply Cause a shortage Increase quantity demanded and decrease quantity supplied Decrease quantity demanded and increase quantity supplied

Taxes and subsidies can do which of the following?

Decrease quantity supplied and demanded Increase quantity supplied and demanded

Which of the following is not one of the four effects that result from all taxes?

Equilibrium price paid by the buyers decreases.

The book gives examples of food markets in which there has been government intervention. These include which of the following?

Fats Milk Tortillas

Which of the following is not an argument for government intervention?

Favoring certain groups

Which of the following are examples of market failure?

Pollutants are emitted when gas burns in your car There is only one producer of a good

Describe what has happened in the markets for tortillas in Mexico and milk in the U.S..

Price floor in milk, price ceiling in tortillas

How do governments use subsidies?

To benefit certain groups without generating a shortage or an excess supply As an alternative to price controls To encourage the production and consumption of a particular good or service

True or false: Taxes decrease the quantity of a good or service that is sold, shrinking the market.

True

True or false: When a tax is imposed on buyers or sellers, the actual amount that buyers pay and sellers receive is the same no matter who pays the tax.

True