Ch 6 Micro Economics

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

downward shift of the demand curve.

Suppose the government has imposed a price floor on the market for soybeans. Which of the following events could transform the price floor from one that is not binding into one that is binding? Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans. The number of farmers selling soybeans decreases. Consumers' income increases, and soybeans are a normal good. The number of consumers buying soybeans increases.

farmers use improved, draught resistance seeds, which lowers cost of growing soybeans.

Refer to Figure 6-17. What is the amount of the tax per unit?

$4

Refer to Figure 6-22. The burden of the tax on sellers is $1 per unit. $1.50 per unit. $2 per unit. $3 per unit.

1

Figure 6-14The vertical distance between points A and B represents the tax in the market.Refer to Figure 6-14. The effective price that sellers receive after the tax is imposed is $6. $10. $16. $24.

10

efer to Figure 6-18. How much tax revenue does this tax generate for the government?

125

Refer to Figure 6-22. The burden of the tax on buyers is $1 per unit. $1.50 per unit. $2 per unit. $3 per unit.

2

Refer to Figure 6-6. Which of the following price ceilings would be binding in this market?

8 dollars

$5 2 10 Refer to Table 6-1. Suppose the government imposes a price floor of $5 on this market. What will be the size of the surplus in this market?

8 units

Refer to Table 6-1. Suppose the government imposes a price ceiling of $1 on this market. What will be the size of the shortage in this market?

8 units

Which of the following statements about the effects of rent control is correct? The short-run effect of rent control is a surplus of apartments, and the long-run effect of rent control is a shortage of apartments. The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments. In the long run, rent control leads to a shortage of apartments and an improvement in the quality of available apartments. The effects of rent control are very noticeable to the public in the short run because the primary effects of rent control occur very quickly.

The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments.

The tax burden will fall most heavily on buyers of the good when the demand curve is relatively steep, and the supply curve is relatively flat. is relatively flat, and the supply curve is relatively steep. and the supply curve are both relatively flat. and the supply curve are both relatively steep.

The tax burden will fall most heavily on buyers of the good when the demand curve is relatively steep, and the supply curve is relatively flat. is relatively flat, and the supply curve is relatively steep. and the supply curve are both relatively flat. and the supply curve are both relatively steep.

refer to Figure 6-19. Which of the following is correct? One-fourth of the burden of the tax falls on buyers, and three-fourths of the burden of the tax falls on sellers. One-third of the burden of the tax falls on buyers, and two-thirds of the burden of the tax falls on sellers. One-half of the burden of the tax falls on buyers, and one-half of the burden of the tax falls on sellers. Two-thirds of the burden of the tax falls on buyers, and one-third of the burden of the tax falls on sellers.

Two-thirds of the burden of the tax falls on buyers, and one-third of the burden of the tax falls on sellers.

Minimum-wage laws dictate the exact wage that firms must pay workers. a maximum wage that firms may pay workers. a minimum wage that firms may pay workers. both a minimum wage and a maximum wage that firms may pay workers.

a minimum wage that firms may pay workers

Refer to Figure 6-6. If the government imposes a price ceiling of $8 on this market, then there will be no shortage. a shortage of 10 units. a shortage of 20 units. a shortage of 40 units.

a shortage of 20 units

Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

a shortage of treadmills will develop

Refer to Figure 6-12. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2,

a shortage will occur at the new market price of P2.

You receive a paycheck from your employer, and your pay stub indicates that $300 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct? The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee. Your employer is required by law to pay $300 to match the $300 deducted from your check. This type of tax is an example of a payroll tax. All of the above are correct.

all above are correct

Refer to Figure 6-20. Suppose sellers, rather than buyers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on buyers, the tax on sellers would result in buyers bearing the same share of the tax burden. sellers bearing the same share of the tax burden. the same amount of tax revenue for the government. All of the above are correct.

all of the above

When a binding price floor is imposed on a market, price no longer serves as a rationing device. the quantity supplied at the price floor exceeds the quantity that would have been supplied without the price floor. only some sellers benefit. All of the above are correct.

all of the above

If a binding price ceiling is imposed on the baby formula market, then the quantity of baby formula demanded will increase. the quantity of baby formula supplied will decrease. a shortage of baby formula will develop. All of the above are correct.

all of the above are correct

Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy. Further, suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle. Which of the following statements is correct?

all of the above are correct

Refer to Figure 6-16. Suppose a tax of $5 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed? $5 between $5 and $10 between $10 and $14 $14

between 5 and 10 dollars

Refer to Figure 6-15. 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 dollars

Refer to Figure 6-4. A government-imposed price of $6 in this market is an example of a binding price ceiling that creates a shortage. non-binding price ceiling that creates a shortage. binding price floor that creates a surplus. non-binding price floor that creates a surplus.

binding price ceiling that creates a shortage

When a tax is levied on sellers of tea,

both sellers and buyers of tea are made worse off

f a tax is levied on the sellers of flour, then buyers will bear the entire burden of the tax. sellers will bear the entire burden of the tax. buyers and sellers will share the burden of the tax. the government will bear the entire burden of the tax.

buyers and sellers will share of the burden

If a tax is levied on the buyers of dog food, then buyers will bear the entire burden of the tax. sellers will bear the entire burden of the tax. buyers and sellers will share the burden of the tax. the government will bear the entire burden of the tax.

buyers and sellers will share the burden

The price received by sellers in a market will decrease if the government

decreases a binding price ceiling in that market

A tax imposed on the buyers of a good will lower the price paid by buyers and lower the equilibrium quantity. price paid by buyers and raise the equilibrium quantity. effective price received by sellers and lower the equilibrium quantity. effective price received by sellers and raise the equilibrium quantity.

effective price received by sellers and lower the equilibrium quantity

Which of the following is not an example of a public policy?

equilibrium

When a payroll tax is enacted, the wage received by workers falls, and the wage paid by firms rises. falls, and the wage paid by firms falls. rises, and the wage paid by firms falls. rises, and the wage paid by firms rises.

falls and the wage paid by firms rises

The tax burden will fall most heavily on sellers of the good when the demand curve

is relatively flat and the supply is relatively steep.

Most labor economists believe that the supply of labor is less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.

less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.

Refer to Figure 6-12. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is less than Q3. Q3. between Q1 and Q3. at least Q1.

less than q3

minimum wage laws

may encourage some teenagers to drop out and take jobs

In the housing market, supply and demand are more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. 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.

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.

The burden of a luxury tax falls more on the rich than on the middle class. more on the poor than on the rich. more on the middle class than on the rich. equally on the rich, the middle class, and the poor.

more on the middle class than on the rich

The minimum wage, if it is binding, raises the incomes of no workers. only those workers who cannot find jobs. only those workers whose jobs would pay less than the minimum wage if it didn't exist. all workers.

only those workers whose jobs would pay less

Unlike minimum wage laws, wage subsidies

raise the living standards of the working poor without creating unemployment.

Suppose that in a particular market, the demand curve is highly elastic, and the supply curve is highly inelastic. If a tax is imposed in this market, then the

sellers will bear greater burden of tax than the buyers

When OPEC raised the price of crude oil in the 1970s, it caused the demand for gasoline to increase. demand for gasoline to decrease. supply of gasoline to increase. supply of gasoline to decrease.

supply of gasoline

Refer to Figure 6-22. As the figure is drawn, who sends the tax payment to the government? The buyers send the tax payment. The sellers send the tax payment. A portion of the tax payment is sent by the buyers, and the remaining portion is sent by the sellers. The question of who sends the tax payment cannot be determined from the figure.

the buyers send tax payment

If the minimum wage exceeds the equilibrium wage, then the quantity demanded of labor will exceed the quantity supplied. the quantity supplied of labor will exceed the quantity demanded. the minimum wage will not be binding. there will be no unemployment.

the quantity supplied of labor will exceed the quantity demanded

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? Cellular phones become less popular. Traditional land line phones become more expensive. The components used to produce cellular phones become less expensive. Firms expect the price of cellular phones to fall in the future.

traditional land line phones become more expensive

An outcome that can result from either a price ceiling or a price floor is an enhancement of efficiency. undesirable rationing mechanisms. a surplus. a shortage.

undesirable rationing mechanisms

A $2.00 tax levied on the sellers of birdhouses will shift the supply curve upward by exactly $2.00. upward by less than $2.00. downward by exactly $2.00. downward by less than $2.00.

upward by exactly 2.00

When a tax is imposed on the sellers of a good, the supply curve shifts upward by the amount of the tax. downward by the amount of the tax. upward by less than the amount of the tax. downward by less than the amount of the tax.

upward by the amount of the tax.

Which of the following statements is correct? A tax levied on buyers will never be partially paid by sellers. Who actually pays a tax depends on the price elasticities of supply and demand. Government can decide who actually pays a tax. A tax levied on sellers always will be passed on completely to buyers.

who actually pays a tax depends on the price ....

Refer to Figure 6-20. What is the amount of the tax per unit? $8 $6 $4 $2

8 dollars