Chapter 4: Working with Supply and Demand (yaya)

Figure 4-3 shows the supply and demand for socks. If a price floor $10 is imposed, the quantity of socks actually purchased will be..

2 pairs

If the government thinks the price that a consumer has to pay for a good is too high, then which of the following would solve this problem?

A price ceiling or a subsidy

In Figure 4-5, at a temporary price of $4,

A surplus occurs

Federal subsidies to higher education benefit..

Both universities and students

Figure 4-4 depicts a market in which the government has imposed a price floor of $5.00 per unit. To maintain the price floor, the government should..

Buy 200 units of the good

Price ceilings are primarily targeted to help____, while price floors generally benefit____.

Consumers; producers

A price floor on corn would have the effect of..

Creating a surplus supply when the floor is above the equilibrium price

In Figure 4-2, if the government imposes a price ceiling of $2, the result will be..

Excess demand

A government-imposed price ceiling set below the market's equilibrium price will create an excess demand for a product. As a result of the excess demand, either the demand curve will tend to shift to the left or the supply curve will shift to the right-or-both. (T/F)

False

After an excise tax is imposed on a good or service,

Firms must charge a higher price for any particular quantity

Rent control is an example of a price ceiling. Which of the following problems must be addressed under a rent control program?

How to allocate scarce rental units

Whether an excise tax is imposed on a demander or supplier is irrelevant because..

In either case the price that the demander has to pay will increase; while the price the supplier receives will decrease

Whether an excise tax is imposed on a demander or a demander or supplier is irrelevant because..

In either case the price the demander has to pay will decrease; while the price of the supplier will increase

Federal subsidies to higher education have the effect of..

Increasing the number of people seeking higher education and lowering tuition

A government-imposed price ceiling set below the market's equilibrium price for a good will produce an excess demand of the good.

Price and quantity will fall

The incidence of an excise tax..

Refers to who really pays it

In what way is the result of an excise tax imposed on either demanders or suppliers similar to the result of a price ceiling?

The amount of the good that will be traded in the market will be less than previously traded

Which of the following might explain why the government would create a price ceiling for a certain good?

The equilibrium price that would result in the market would be considered too high

Which of the following might explain why the government would create a price floor for a certain good?

The equilibrium price that would result in the market would be considered too low

If an excise tax is imposed on steak,

The government's tax revenue will increase

If an excise tax is imposed on shirts,

The net revenue producers receive from each shirt will decrease

Suppose that a market is initially in equilibrium. Then the government imposes a price floor above the equilibrium price. Which of the following will occur in the absence of a black market?

The quantity sold will drop

If an excise tax is imposed on automobiles,

The supply curve will shift upward and the market price will increase

Price floors and price ceilings..

Usually result from government intervention

An excise tax on cigarettes..

Will cause the market price to rise and the market quantity to fall

Federal subsidies to higher education have the effect of..

increasing the demand for higher education