EC252: Exam 2 (Ch. 4 Quiz Questions)

A price floor that sets the price of a good above market equilibrium will cause

ALL THE ABOVE: a. a decrease in quantity demanded of the good b. an increase in quantity supplied of the good c. a surplus of the good

A black market is

a market that operates outside the legal system, either by selling illegal goods at illegal prices

Which of the following would tend to increase the price of lumber?

an increase in the demand for newly constructed homes

Other things constant, a decrease in the demand for computers will?

decrease the demand for computer manufacturing workers

If Susan's income increases from $40,000 to $50,000 and her tax liability increases from $6000 to $9000, which of the following is true?

her marginal tax rate is 30% in this range

The market pricing system corrects an excess supply by

lowering the price and decreasing producer profits

When a price ceiling prevents a higher market price from reaching a good,

non-price factors will play a more important role in the rationing process

If the demand for a good is highly inelastic, a tax on the good

permits sellers to pass most of the cost increase resulting from the tax on to the consumers of the product

A price floor set above an equilibrium price tends to cause persistent imbalances in the market because

quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus

When a price floor is above the equilibrium price

quantity supplied will exceed quantity demanded, so there will be a surplus

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggest that the below-equilibrium prices established by rent controls would

result in poor service and quality deterioration of many rental units

The Laffer curve illustrates the concept that

when marginal tax rates are quite high, a decrease in the tax rate may cause tax revenues to increase