ch 6

Refer to the Figure. If the government imposes a price floor of $45 in this market, then consumer surplus will decrease by a.$450. b.$800. c.$350. d.$300.

$350. When the price is $35, consumer surplus is ½ x 40 x (75-35) = $800. With a price floor of $45, consumer surplus is ½ x 30 x (75-45) = $450. Consumer surplus decreases by ($800 - $450) = $350.

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? a.$1.00 b.$2.00 c.$5.00 d.$3.00

.$2.00

Refer to the Figure. The effective price that sellers receive after the tax is imposed is a.$11. b.$14. c.the same price that they received before the tax was imposed. d.$18.

a.11

A $15.00 tax levied on the sellers of car batteries will a.cause the supply curve for car batteries to shift to the left by $15.00. b.cause the supply curve for car batteries to shift to the right by $15.00. c.not cause any shift in the demand or supply curves for car batteries because car batteries are a necessity. d.cause the demand curve for car batteries to shift to the left by $15.00.

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

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? a.The effective price received by sellers is $0.40 per gallon less than it was before the tax. b.Ten percent of the burden of the tax falls on sellers. c.Demand is relatively inelastic compared to supply of gasoline. d.This tax causes the demand curve for gasoline to shift downward by $0.50 at each quantity of gasoline.

c.Demand is relatively inelastic compared to supply of gasoline.

Before OPEC raised the price of crude oil in the 1970s, the price a.ceiling on gasoline was not binding, but it became binding and caused a shortage when the supply of gasoline decreased. b.ceiling on gasoline was binding, but it became nonbinding and caused a shortage when the supply of gasoline decreased. c.floor on gasoline was not binding, but it became binding and caused a surplus when the supply of gasoline decreased. d.floor on gasoline was binding, but it became nonbinding and resulted in equilibrium when the supply of gasoline decreased.

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

Refer to the Figure. How is the burden of the tax shared between buyers and sellers? Buyers bear a.one-third of the burden, and sellers bear two-thirds of the burden. b.two-thirds of the burden, and sellers bear one-third of the burden. c.all of the burden, and sellers bear none of the burden. d.one-half of the burden, and sellers bear one-half of the burden.

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