Applied Eco. Chapter 6a

. The minimum wage is an example of a. a price floor. b. a price ceiling. c. a free-market process. d. an efficient labor allocation mechanism.

a

A binding price ceiling is imposed on the market for peaches. At the ceiling price, the quantity demanded of peaches will be a. greater than the quantity supplied. b. smaller than the quantity supplied. c. equal to the quantity supplied. d. artificially restricted by the price ceiling.

a

A tax of $.10 per bag on the sellers of popcorn will cause the a. supply curve of popcorn to shift up by $.10 per bag. b. supply curve of popcorn to shift down by $.05 per bag. c. demand curve of popcorn to shift up by $.10 per bag. d. supply curve of popcorn to shift down by $.10 per bag.

a

A tax on the buyers of popcorn a. reduces the size of the popcorn market. b. increases the size of the popcorn market. c. has no effect on the size of the popcorn market. d. may increase, decrease, or have no effect on the size of the popcorn market.

a

A tax placed on the sellers of a product has an initial impact on a. the supply of the product. b. the demand for the product. c. both the product supply and demand. d. Taxes do not impact demand and supply.

a

Buyers of a product will pay most of the burden of a tax if a. supply is more elastic than demand. b. the demand is more elastic than supply. c. the tax is placed on the seller of the product. d. the tax is placed on the buyer of the product.

a

Payroll taxes cause wages received by workers to a. fall and wages paid by firms to rise. b. fall and wages paid by firms to fall. c. rise and wage paid by firms to fall. d. rise and wage paid by firms to rise.

a

When policymakers choose to enact price controls in a market, they do so because a. they believe the market's outcome to be unfair. b. enacting price controls will directly increase tax revenues. c. they are required by law to improve market conditions. d. they believe that the market system is inefficient and their actions will improve efficiency.

a

A government-imposed maximum price at which a good can be sold is called a price a. floor. b. ceiling. c. support. d. equilibrium.

b

A legal minimum price at which a good can be sold is a price a. cut. b. floor. c. ceiling. d. stabilization.

b

A price floor is binding if it is a. set by the government. b. higher than the equilibrium market price. c. lower than the equilibrium market price. d. equal to the equilibrium market price.

b

A tax on the sellers of popcorn a. causes the supply curve to shift to the right. b. leads sellers to supply a smaller quantity at every price. c. leads buyers to demand a smaller quantity at every price. d. leads sellers to supply a larger quantity at every price.

b

A tax placed on the sellers of a product will shift the a. supply curve to the right. b. supply curve to the left. c. demand curve to the left. d. demand curve to the right.

b

If a tax is imposed on a market with inelastic demand and elastic supply, a. sellers will bear most of the burden of the tax. b. buyers will bear most of the burden of the tax. c. the burden of the tax will be shared equally between buyers and sellers. d. it is impossible to determine how the burden of the tax will be shared.

b

If the government establishes a legal price floor for a good, the result will be a a. shortage of the good, but only if the floor is equal to the equilibrium price. b. surplus of the good, but only if the floor is above the equilibrium price. c. surplus of the good, but only if the floor is below the equilibrium price. d. shortage of the good, but only if the floor is above the equilibrium price.

b

In the final analysis, tax incidence is determined by a. the size of the tax imposed. b. the forces of supply and demand. c. trial and error. d. the policymakers who wrote the tax law.

b

Price controls such as price ceilings and price floors a. are desirable because they make markets more efficient as well as equitable. b. cause surpluses and shortages to persist since price cannot adjust to the market equilibrium price. c. can be enacted to restore a market to equilibrium. d. are imposed because they can make the poor in the economy better off without causing adverse effects.

b

Tax incidence deals with a. the level of taxable income. b. who bears the burden of a tax. c. the level of taxation on sales. d. the dollar amount of incidental taxes.

b

When minimum wage laws are established, employers must a. pay the going (equilibrium) wage in the market. b. pay a wage equal to, or higher than, the minimum wage. c. hire a minimum number of employees, which is set by the government. d. hire only those workers who will work for the established minimum wage..

b

A common example of a price ceiling is a. farm price supports. b. the minimum wage. c. rent control. d. income taxes.

c

A tax on the sellers of popcorn will a. reduce the equilibrium price of popcorn, and increase the equilibrium quantity. b. reduce the equilibrium price of popcorn, and reduce the equilibrium quantity. c. increase the equilibrium price of popcorn, and reduce the equilibrium quantity. d. increase the equilibrium price of popcorn, and increase the equilibrium quantity.

c

If a binding price ceiling is imposed in the market for gasoline, a. there will be a surplus of gasoline in the market. b. the price of gasoline will be legally forced toward equilibrium price. c. there will be a shortage of gasoline in the market. d. market forces will guarantee that the price will be at equilibrium.

c

If a price ceiling is a binding constraint on the market, a. the forces of supply and demand must be in equilibrium. b. the equilibrium price must be below the price ceiling. c. the equilibrium price must be above the price ceiling. d. it will have no effect on supply or demand.

c

What is true about the burden of a tax imposed on popcorn? a. Sellers bear the entire burden of the tax. b. Buyers bear the entire burden of the tax. c. Buyers and sellers share the burden of the tax. d. The government bears the entire burden of the tax.

c

Which of the following statements is correct? a. It is relatively easy to legislate the burden of a tax. b. If supply is relatively elastic, sellers will bear more of the incidence of a tax. c. A tax will have the same incidence whether it is placed on the buyer or the seller. d. If government makes buyers pay a tax on a good, the buyers are made worse off while the sellers are made better off.

c

A binding price ceiling will make it necessary to a. supply more of the product. b. increase demand for the product, because there will be a surplus. c. develop a better marketing plan, because there will be a surplus. d. develop a way of rationing the product, because there will be a shortage.

d

A tax on the sellers of popcorn will cause the price the buyers pay a. and the effective price the sellers receive to rise. b. and the effective price the sellers receive to fall. c. to fall, and the price the sellers receive to rise. d. to rise, and the effective price the sellers receive to fall.

d

A tax placed on the buyers of a product will a. reduce the equilibrium price and increase the equilibrium quantity of that product. b. reduce the equilibrium price and equilibrium quantity of that product. c. increase the equilibrium price and equilibrium quantity of that product. d. increase the equilibrium price and reduce the equilibrium quantity of that product.

d

If a price ceiling is not binding, it will a. cause a surplus in the market. b. cause a shortage in the market. c. cause the market price to fluctuate. d. have no effect on the market price.

d

If the minimum wage is above the equilibrium wage, a. anyone who wants a job at the minimum wage can find one. b. the quantity demanded of labor will be greater than the quantity supplied. c. the quantity demanded of labor will equal the quantity supplied. d. the quantity demanded of labor will be less than the quantity supplied.

d

Price controls are a. established by firms with monopoly power. b. used to make markets more efficient. c. nearly always effective in eliminating inequities. d. usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

d

The key feature of a payroll tax is that it a. is a tax on corporations. b. is a tax on poor people. c. does not affect equilibrium in labor markets. d. places a wedge between the wage that firms pay and the wage that workers receive.

d

The term tax incidence refers to the a. Boston Tea Party. b. "flat tax" movement. c. division of the tax burden between sales taxes and income taxes. d. division of the tax burden between buyers and sellers.

d

When a tax is imposed on the buyers of a product, the burden of the tax falls a. entirely on the buyers. b. entirely on the sellers. c. entirely on the government. d. on both the buyers and the sellers.

d

Which of the following is the most correct statement about tax burdens? a. A tax burden falls most heavily on the side of the market that is closer to unit elastic. b. A tax burden is distributed independently of relative elasticities of supply and demand. c. A tax burden falls most heavily on the side of the market that is elastic. d. A tax burden falls most heavily on the side of the market that is inelastic.

d