Chapter 6

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. The price that buyers pay after the tax is imposed is

$18.

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

$6

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

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.

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.

Suppose the government wants to encourage Americans to eat healthier, so it imposes binding price ceilings on the markets for fresh vegetables. As a result,

a shortage of fresh vegetables will develop.

If a binding price floor is imposed on the market for carrots, then

a surplus of carrots will develop.

A binding minimum wage

alters both the quantity demanded of labor and the quantity supplied of labor.

Refer to the Figure. A government-imposed price of $24 in this market is an example of a

binding price floor that creates a surplus.

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.

If the market price of burgers is $8 and the government sets a legal minimum at $9, the government has imposed a price

floor that is binding.

A binding price ceiling

forces the price lower than the market price.

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.

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

no shortage.

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.