Ch. 6 ECON TEST

price ceiling

-a legal maximum on the price at which a good can be sold -price is not allowed to rise above this level -would most likely benefit buyers

price floor

-a legal minimum on the price at which a good can be sold -price is not allowed to fall below this level -would most likely benefit sellers

not binding, no effect

A price ceiling above the eq'm price is _______— has _______ on the market outcome.

wedge

A tax drives a ______ between the price buyers pay and the price sellers receive

fall

A tax on a good causes the eq'm quantity to ___, whether the tax is imposed on buyers or sellers

>

As long as labor supply and labor demand both have price elasticity _ 0, the tax cut will be shared by workers and employers

less

If labor demand is ___ elastic than labor supply, employers get the larger share of the tax cut.

more

If labor demand is ___ elastic than labor supply, workers get more of the tax cut than employers.

price-elastic, larger

In the long run of the price being above the price ceiling (binding constraint), supply and demand are more ________. So, the shortage is ______.

binding constraint, shortage

The eq'm price is above the ceiling and therefore illegal. The ceiling is a ____________ on the price, causes a ________.

binding constraint, surplus

The eq'm wage is below the floor and therefore illegal. The floor is a ____________ on the wage, causes a _______ (i.e., unemployment).

price elasticities

The incidence of the tax depends on the ____________ of supply and demand.

long-run

______ effect of rent control: supply and demand curves for apartments are elastic, therefore the price ceiling imposed by rent-control causes a large shortage

highly skilled, experienced, above

_________ and _________ workers are not affected by the minimum wage because their equilibrium wages are ______ the minimum

short-run

___________ effect of rent control: supply and demand curves for apartments are relatively inelastic, therefore the price ceiling causes a small shortage of housing

binding constraint

a govt. imposes a price ceiling, the equilibrium price is above the price ceiling, making the price ceiling a ____________

not binding

a govt. imposes a price ceiling, the price that balances supply and demand is below the ceiling, making the price ceiling __________

not binding

a govt. imposes a price floor, the equilibrium price is above the floor, making the price floor _____________

binding constraint

a govt. imposes a price floor, the equilibrium price is below the floor, making the price floor a _____________

less elastic

a tax burden falls more heavily on the side of the market that is ___________

demand

a tax on buyers shifts the ______ curve down by the amount of the tax

supply

a tax on sellers shifts the ______ curve up by the amount of the tax

payroll tax

a tax on the wages that firms pay their workers

lower

buyers always want a _____ price

small elasticity of demand

buyers do not have good alternatives to consuming this particular good

rent-control laws

dictate a maximum rent that landlords may charge tenants

minimum-wage laws

dictate the lowest wage that firms may pay workers

prices

free markets ration good with ________

earned income tax credit

govt. program that supplements the incomes of low-wage workers

demanded, supplied, shortage

if a price ceiling is a binding constraint, and the market price hits the price ceiling, quantity ______ exceeds quantity __________ creating a ________

cannot

if a price ceiling is a binding constraint, and the market price hits the price ceiling, the market price ______ rise any further

no effect

if a price ceiling is not binding, the price ceiling has __________ on the price or the quantity sold

fall no further

if a price floor is a binding constraint and market forces naturally move the economy to the equilibrium which is below the floor, the price floor can _____________

supplied, demanded, surplus

if a price floor is a binding constraint and the market price hits the floor, quantity _______ exceeds the quantity _______ causing a ________

no effect

if a price floor is not binding and market forces naturally move the economy to the equilibrium which is above the floor, the price floor has ________

above, unemployment

if minimum wage level is _____ equilibrium: quantity of labor supplied exceeds the quantity demanded; leads to _________

same incentive, not affected, shifts

immediate impact of tax on buyers: -for any given price of a good, sellers have the __________ to provide the good to the market -supply curve _________ -demand curve ____

stays the same, does not, less, shifts

immediate impact of tax on sellers: -quantity of good demanded at any price ___________, demand curve __________ change -tax on sellers makes business ________ profitable at any given price, supply curve ______

price, equilibrium

in a free market the _______ serves as the rationing mechanism, and sellers can sell all they want at the __________ price

shortages

in a free market, the price of housing adjusts to eliminate the _______ that give rise to undesirable landlord behaviors

elastic

long-run effect of rent control: supply and demand curves for apartments are _____, therefore the price ceiling imposed by rent-control causes a large shortage

large

long-run effect of rent control: supply and demand curves for apartments are elastic, therefore the price ceiling imposed by rent-control causes a _____ shortage

amount

market price increases by tax ______

elasticity

measures the willingness of buyers or sellers to leave the market when conditions become unfavorable

raises, lowers

minimum wage ______ incomes of workers that have jobs and _______ the income of workers that cannot find jobs

teenage

minimum wage has the greatest impact on _________ labor

price floor

minimum wage is an example of a _________

wage subsidies

raise the living standards of the working poor without discouraging firms from hiring them; i.e. earned income tax credit

price ceiling

rent control is an example of a __________

higher

sellers always want a _____ price

small elasticity of supply

sellers do not have good alternatives to producing this particular good

inelastic

short run effect of rent control: supply and demand curves for apartments are relatively ______, therefore the price ceiling causes a small shortage of housing

small

short run effect of rent control: supply and demand curves for apartments are relatively inelastic, therefore the price ceiling causes a ____ shortage of housing

burden

tax incidence: the manner in which the _______ of a tax is shared among participants in a market

very elastic, relatively inelastic

tax on a market with _______ supply and ________ demand: -suppliers are very responsive to changes in the price of the good -buyers are not very responsive

very elastic, relatively inelastic

tax on a market with ________ supply and __________ demand: -when tax is imposed, price received by sellers does not fall much; sellers bear only a small burden -when tax is imposed, price paid by buyers rises substantially; buyers bear most of the burden

relatively inelastic, very elastic

tax on a market with ____________ supply and __________ demand: -sellers are not very responsive to changes in the price -buyers are very responsive

relatively inelastic, very elastic

tax on a market with ____________ supply and __________ demand: -when tax is imposed, price paid by buyers does not rise much -when tax is imposed, price received by sellers falls substantially, sellers bear most of the burden

lower, lower, reduces

tax on buyers: -b/c sellers get a ______ price for their product and buyers pay a _____ market price to sellers than they did previously the tax _______ the size of the market

smaller, left, downwards

tax on buyers: -buyers demand a _______ quantity of the good at every price -demand curve shifts to the ___ -demand curve shifts _________ by the exact size of the tax

raises, reduces, left, size

tax on sellers: -____ the cost of producing and selling the good -_______ quantity supplied at every price -supply curve shifts to the _____ -supply curve shifts ______ by the exact _____ of the tax

discourage

taxes ________ market activity

equal

taxes levied on sellers and taxes levied on buyers are ______

taxes

the govt can make buyers or sellers pay a specific amount on each unit

skills, experience

the impact of minimum wage depends on the ______ and ______ of workers

tax incidence

the manner in which the burden of a tax is shared among participants in a market

free competitive

the rationing mechanism in a _______________ market is both efficient and impersonal

price controls

usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers

earned income tax credit

what is an example of wage subsidies

smaller

when a good is taxed, the quantity of the good sold is _______ in the new equilibrium

fewer, less, more

when a good is taxed, the side of the market with ______ good alternatives is ____ wiling to leave the market = bears ___ of the burden of the tax

falls, raises

when a payroll tax is enacted, the wage received by workers ____ and the wage paid by firms ____

binding price ceiling, ration

when the govt. imposes a __________________ on a competitive market, a shortage of the good arises, and sellers must ______ the scarce goods among the large number of potential buyers (i.e. lines)

share

workers and firms _____ the burden of the payroll tax

labor, demand

workers determine the supply of _______ and firms determine the _________