Micro Econ Chapter 6

A binding minimum wage

alters both the quantity demanded and quantity supplied of labor.

Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

between $5 and $7

If the government removes a binding price ceiling from a market, then the price received by sellers will

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

The federal government uses the revenue from the FICA (Federal Insurance Contribution Act) tax to pay for

Social Security and Medicare.

If the minimum wage exceeds the equilibrium wage, then

the quantity supplied of labor will exceed the quantity demanded.

Refer to Figure 6-13. Which of the following statements is correct?

A price floor set at $6.50 would result in a surplus.

Refer to Figure 6-13. If the government imposes a price floor of $7 on this market, then there will be

a surplus of 20 units.

Refer to Figure 6-29. Suppose D1 represents the demand curve for paperback novels, D2 represents the demand curve for gasoline, and S1 represents the supply curve for paperback novels and gasoline. After the imposition of the $2 on paperback novels and on gasoline, the

buyers of gasoline bear a higher burden of the $2 tax than buyers of paperback novels.

Refer to Figure 6-21. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. Acme is left with how much money?

$8.00

A nonbinding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price.

(iii) only

The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $2 above the equilibrium price in this market. Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting shortage is

0 units.

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

Traditional land line phones become more expensive.

Refer to Figure 6-14. If the horizontal line on the graph represents a price ceiling, then the price ceiling is

binding and creates a shortage of 40 units of the good.

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

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

A $5 tax levied on the buyers of pants will cause the

demand curve for pants to shift down by $5.

Minimum-wage laws dictate the

lowest price employers may pay for labor.

The minimum wage, if it is binding, raises the incomes of

only those workers whose jobs would pay less than the minimum wage if it didn't exist.

The long-run effects of rent controls are a good illustration of the principle that

people respond to incentives.

Which of the following is not a rationing mechanism used by landlords in cities with rent control?

price

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

price paid by buyers and lower the equilibrium quantity.

If a tax is levied on the sellers of a product, then there will be a(n)

upward shift of the supply curve.

​Refer to Figure 6-32. Which of following statements is true based upon the conditions in the market?

​a surplus will develop when a price floor is imposed at a price of $12.

Refer to Figure 6-4. A government-imposed price of $6 in this market could be an example of a (i) binding price ceiling. (ii) non-binding price ceiling. (iii) binding price floor. (iv) non-binding price floor.

(i) and (iv) only

Which of the following is correct? A tax burden

falls more heavily on the side of the market that is less elastic.

Refer to Figure 6-25. How much tax revenue does this tax generate for the government?

$150

Refer to Figure 6-9. A price floor set at

$7 will be binding and will result in a surplus of 8 units.

Refer to Table 6-1. Which of the following price floors would be binding in this market?

$70

The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $2 above the equilibrium price in this market. Refer to Table 6-3. How many units of the good are sold after the imposition of the price floor?

5

Refer to Table 6-2. A price ceiling set at $5 results in

50 units sold.

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

A decrease in the price of unsliced bread, which people consider a substitute for sliced bread.

You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct?

Your employer is required by law to pay $400 to match the $400 deducted from your check.

One disadvantage of government subsidies over price controls is that subsidies

make higher taxes necessary.

The diagram shows the effect of a tax as measured by the distance between J and K. Refer to Figure 6-33. Based upon the diagram,​more of the incidence of the tax is on sellers, since supply is more inelastic than demand.​

more of the incidence of the tax is on sellers, since supply is more inelastic than demand.​

The quantity sold in a market will increase if the government

ncreases a binding price ceiling in that market. decreases a tax on the good sold in that market. decreases a binding price floor in that market. Correct Answer More than one of the above is correct.

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor,

quantity supplied increases. quantity demanded decreases. there is a surplus. Correct Answer All of the above are correct.

A tax imposed on the buyers of a good will

raise the price buyers pay and lower the effective price sellers receive.

A tax imposed on the sellers of a good will

raise the price buyers pay and lower the effective price sellers receive.

Rent control policies tend to cause

relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run.