Chapter 6 Extra Credit

After a tax is imposed on the buyers of bottled water, the price buyers pay is $2.50 per bottle and the price sellers receive is $1.75. If the equilibrium price was $2.00 before the tax was imposed on the market, how much is the tax per unit?

$0.75

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

$10

Refer to the Figure. The effective price that sellers receive after the tax is imposed is

$11

Refer to the Figure. The price that buyers pay after the tax is imposed is

$18

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

$2

Refer to the Figure. In the after-tax equilibrium, how much revenue does the government collect from the tax on this good?

$240

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

$3

Refer to the Figure. The per-unit burden of the tax on buyers is

$4

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

$6

Refer to the Figure. The amount of the tax per unit is

$7

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

12 units

Refer to the Table. Suppose the government imposes a price ceiling of $2 on this market. What will be the size of the shortage in this market?

6 units

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

A bovine disease affects half of the cow population resulting in a higher price for milk.

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

A price floor set at $9 would result in a surplus.

Suppose sellers of gasoline are required to send $0.50 to the government for every gallon of gasoline they sell. Further, suppose this tax causes the price paid by buyers of gasoline to rise by $0.40 per gallon. Which of the following statements is correct?

Demand is relatively inelastic compared to supply of gasoline

After a tax is imposed on the market for bottled water, the price buyers pay is $2.50 per bottle and the price sellers receive is $1.75. If the equilibrium price was $2.00 before the tax was imposed on the market, what can you conclude about the relative price elasticities of demand and supply?

Supply is more elastic than demand

Suppose the government has imposed a price ceiling on textbooks. Which of the following events could transform the price ceiling from one that is not binding into one that is binding?

The number of students buying textbooks increases

A tax on fur coats, a luxury good is not likely redistribute income from the rich to the poor because demand is more elastic than supply.

True

Refer to the Figure. In which of the following cases would the market price serve as a rationing mechanism?

a price floor set at $6

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

a shortage of 20 units.

Refer to the Table. A price floor set at $4 will

be binding and will result in a surplus of 6 units

If the market price of 60-inch flat-screen TVs is $1,200 and the government imposes a price control setting the price at $1,000, this price control could be a

binding price ceiling or a nonbinding price floor.

A government-mandated maximum price that is set below the market equilibrium price is a

binding price ceiling that results in a shortage.

A $15.00 tax levied on the sellers of car batteries will

cause the supply curve for car batteries to shift to the left by $15.00.

Before OPEC raised the price of crude oil in the 1970s, the price

ceiling on gasoline was not binding, but it became binding and caused a shortage when the supply of gasoline decreased

Rent control is an example of a price

ceiling; in cities with rent control mechanisms other than price are used to ration housing.

Rent control is

considered to be an inefficient way to help the poor raise their standard of living.

A tax on the sellers of chocolate

decreases the amount of chocolate that will be bought and sold.

When a tax is placed on the buyers of hockey skates, the size of the hockey skate market

decreases, but the price paid by buyers increases.

Refer to the Figure. A price ceiling set at $4 causes quantity

demanded to exceed quantity supplied by 20 units.

A binding price ceiling

forces the price lower than the market price.

If the government levies a $10 tax per designer handbag, then the price paid by buyers of designer handbags would

increase by less than $10.

A payroll tax has the effect of

increasing the wages paid by firms and decreasing the wages received by workers.

Suppose that the demand for toilet paper is highly inelastic, and the supply of toilet paper is highly elastic. A tax of $0.10 per roll levied on toilet paper will decrease the effective price received by sellers of toilet paper by

less than $0.05.

The Earned Income Tax Credit is a

method of raising living standards of the working poor without creating unemployment.

Refer to the Figure. If the government imposes a price ceiling of $10 on this market, then there will be

no shortage

If the government removes a $4 tax on buyers of restaurant meals and imposes the same $4 tax on sellers of restaurant meals, then the price paid by buyers will

not change, and the price received by sellers will not change

Suppose the equilibrium price of a jar of spaghetti sauce is $3, and the government imposes a price floor of $4 per jar. As a result of the price floor, the

quantity demanded of spaghetti sauce decreases, and the quantity of spaghetti sauce that firms want to supply increases

If the market price of T-shirts is $10 and the government imposes a price ceiling at $12, the market will

reach the equilibrium and the price ceiling is not binding.

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

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

Refer to the Figure. A price ceiling at $4.00 causes a

shortage of 20 units.

When OPEC raised the price of crude oil in the 1970s, it caused a

shortage of gasoline as the nonbinding price ceiling became binding.

Which of the following is correct? Price controls often help

some of those they are designed to help.

If the government removes a binding price ceiling in the market for gasoline, then

the price of gasoline will increase, and the quantity of gasoline sold will increase.

When policymakers impose a luxury tax on buyers of a good,

they are not successful in redistributing income from the rich to the poor.

Refer to the Figure. How is the burden of the tax shared between buyers and sellers? Buyers bear

two-thirds of the burden, and sellers bear one-third of the burden

Consider the market for electricity. Buyers

would lobby for a price ceiling, whereas sellers would lobby for a price floor.