Chapter 6

For a price ceiling to be a binding constraint on the market, the government must set it: a. below the equilibrium price b. precisely at the equilibrium price c. at any price because all price ceilings are binding constraints d. above equilibrium price

a. below the equilibrium price

The surplus causes by a binding price floor will be greater if: a. both supply and demand are elastic b. both supply and demand are inelastic c. supply is inelastic and demand is elastic d. supply is elastic and demand is inelastic

a. both supply and demand are elastic

In a market with a binding price ceiling, increasing the ceiling price will: a. decrease the shortage b. decrease the surplus c. increase the shortage d. increase the surplus

a. decrease the shortage

A price floor: a. set a legal minimum on the price at which a good can be sold b. always determines the price at which a good must be sold c. is not a binding constraint if it is set above the equilibrium price d. sets a legal minimum on the price at which a good can be sold

a. sets a legal minimum on the price at which a good can be sold

Within the supply and demand model, a tax collected from the sellers of a good shifts the: a. supply curve upward by the size of the tax per unit b. the demand curve downward by the size of the tax per unit c. supply curve downward by the size of the tax per unit d. demand curve upward by the size of the tax per unit

a. supply curve upward by the size of the tax per unit

Which of the following increases quantity supplied, decreases quantity demanded, and increase the price that consumers pay? a. the imposition of a binding price floor b. the repeal of tax on a good c. the passage of a tax on a good d. the removal of a binding price floor

a. the imposition of a binding price floor

Which of the following statements about a binding price ceiling is true? a. the shortage created by the price ceiling is greater in the long run than in the short run b. the surplus created by the price ceiling is greater in the long run than in the short run c. the surplus created by the price ceiling is greater in the short run than in the long run d. the shortage created by the price ceiling is grater in the short run than in the long run

a. the shortage created in the price ceiling is greater in the long run than in the short run

A $1 per unit tax levied on consumers of a good is equivalent to: a. a $1 per unit subsidy paid to producers of the good b. a $1 per unit tax levied on producers of the good c. a price floor that raised the good's price by $1 per unit d. a price ceiling that raises the good's price by $1 per unit

b. a $1 per unit tax levied on producers of the good

Studied show that a 10 percent increase in the minimum wage: a. increase teenage employment by about 10 to 15 percent b. decrease teenage employment by about 1 to 3 percent c. increase teenage employment by about 1 to 3 percent d. decrease teenage employment by about 10 to 15 percent

b. decrease teenage employment by about 1 to 3 percent

Within the supply and demand model, a tax collected from buyers of a good shifts the: a. supply curve upward by the size of the tax per unit b. the demand curve downward by the size of the tax per unit c. supply curve downward by the size of the tax per unit d. demand curve upward by the size of the tax per unit

b. the demand curve downwards by the size of the tax per unit

Which of the following increase quantity supplied, increases quantity demanded, and decreases the price that consumers pay? a. the imposition of a binding price floor b. the repeal of tax on a good c. the passage of a tax on a good d. the removal of a binding price floor

b. the repeal of a tax on a good

A binding price ceiling creates: a. an equilibrium b. a surplus c. a shortage d. a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price

c. a shortage

When the government imposes a binding price floor, it causes: a. the supply curve to shift to the left b. a shortage of the good to develop c. a shortage of the good to develop d. the demand curve to shift to the right

c. a shortage of the good to develop

Rent control causes larger shortages in the ___________ run because over that time horizon, supply and demand are ____________ elastic. a. short; more b. long; less c. long; more d. short; less

c. long; more

When a good is taxed, the burden of the tax falls mainly on consumers if: a. the tax is levied on producers b. the tax is levied on consumers c. supply is elastic and demand is inelastic d. supply is inelastic and demand is elastic

c. supply is elastic and demand is inelastic

Which of the following is an example of a price floor? a. rent controls b. restricting gasoline prices to $2.00 per gallon when the equilibrium price is $3.00 per gallon c. the minimum wage d. all the above

c. the minimum wage

Suppose the equilibrium price for apartments is $800 per month and the government imposes rent controls of $500. Which of the following is unlikely to occur as a result of the rent controls? a. there will be a shortage of housing b. landlords may be offered bribes to rent apartments c. the quality of apartments will improve d. there may be a long line of buyers waiting for apartments

c. the quality of apartments will improve

Which side of the market is more likely to lobby government for a price floor? a. neither buyers nor sellers desire a price floor. b. bother buyers and sellers desire a price floor c. the sellers d. the buyers

c. the sellers

Which of the following statements is true if the government places a price ceiling on gasoline at $4.00 per gallon and the equilibrium price is $3.00 per gallon? a. a significant increase in the supply of gasoline could cause the price to become a binding constraint b. there will be a shortage of gasoline c. there will a surplus of gasoline d. a significant increase in the demand could cause the price ceiling to become a binding constraint

d. a significant increase in the demand could cause the price ceiling to become a binding constraint

Which of the following takes place when a tax is placed on a good? a. a decrease in the price buyers pay, and increase in the price sellers receive, and an increase in the quantity sold b. an increase in the price buyers pay, a decrease in the price sellers receive, and an increase in the quantity sold c. a decrease in the price buyers pay, an increase in the price sellers receive, an an decrease in the quantity sold d. an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold

d. an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold

An increase in the minimum wage reduces the total amount paid to the affect workers if the price elasticity of _________ is _________ than one. a. supply; less b. demand; greater c. demand; less d. supply; greater

b. demand; greater