Econ Chapter 6 Final Exam
Refer to Table 6-1. Suppose the government imposes a price floor of $30 on this market. What will be the size of the surplus in this market?
0 units
Refer to Table 6-1. Suppose the government imposes a price ceiling of $40 on this market. What will be the size of the shortage in this market?
1200 units
price ceiling
A legal maximum on the price at which a good can be sold (rent control)
price floor
A legal minimum on the price at which a good can be sold (minimum wage)
Rent control can cause...
a decline in the quality of housing available for rent, the development of a black market to allocate apartments to renters and longer search times for renters attempting to find an apartment
What does not interfere with market equilibrium?
a non-binding price floor
A binding minimum wage
alters both the quantity demanded and quantity supplied of labor.
Refer to Table 6-2. A price ceiling set at $5 will
be binding and will result in a shortage of 250 units.
Refer to Table 6-2. A price floor set at $20 will
binding at 125 units
Refer to Figure 6-4. A government-imposed price of $12 in this market is an example of a
binding price floor that creates a surplus
who shares the tax burden?
buyers and sellers
To say that a price floor is binding is to say that the price floor
causes quantity supplied to exceed quantity demanded.
When a binding price floor is imposed on a market,
price no longer serves as a rationing device
Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the
quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases.
Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the
supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20.
Buyers of a good bear the larger share of the tax burden when the
supply is more elastic than the demand for the product.
when the government levies a tax on a good...
the equilibrium quantity of the good falls
If a price floor is not binding, then
there will be no effect on the market price or quantity sold.
One common example of a price ceiling is rent control.
true
Refer to Figure 6-30. In which market will the majority of the tax burden fall on sellers?
panel A
If the government removes a tax on a good, then the price paid by buyers will
decrease, and the price received by sellers will increase.
A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied.
false
If the government levies a $5 tax per ticket on buyers of NFL game tickets, then the price paid by buyers of NFL game tickets would
increase by less than $5
