Chapter 6: When Governments Intervene in Markets

A tax on buyers causes which of the following? (i) a leftward shift of the demand curve (ii) a decrease in quantity sold (iii) an increase in the price buyers pay

(i), (ii), and (iii)

A tax on sellers causes which of the following? (i) a leftward shift of the supply curve (ii) a decrease in quantity sold (iii) an increase in the price buyers pay

(i), (ii), and (iii)

Which of the following is an example of a quantity quota?

A city enforces zoning laws that restrict the number of housing units

A subsidy is a:

A government payment designed to encourage particular purchases or productive activities

(Figure: Market for Sustainable Furniture) The graph depicts the market for furniture made from sustainable, man-made forests. The government wants to encourage buyers to buy such furniture and imposes a price ceiling of $250. What occurs as a result of the price ceiling?

A shortage of 400,000 pieces of furniture

A binding price floor is:

Always above the equilibrium price

The economic burden of a tax is the:

Burden created by the change in after-tax prices faced by buyers and sellers

In 2016, Amazon began charging a 5.75% sales tax on products it sells in the District of Columbia. Holding all else constant, the effect of this tax would be to _____ in the District of Columbia.

Decrease Amazon sales

A subsidy for buyers of a product shifts the:

Demand curve to the right

Buyers bear a smaller incidence of the tax when:

Demand is more elastic than supply

The statutory burden of a tax is the:

Government-designated burden of a tax payment

A quantity regulation is a:

Minimum or maximum quantity that can be sold

In 2017, eBay started charging a 20% value-added tax on fees charged to small businesses in the United Kingdom. Holding all else constant, this would _____ in the United Kingdom.

Raise the prices that eBay sellers charge their customers

A tax on sellers shifts the:

Supply curve to the left

A binding price floor in a market is removed. Which of the following is likely to occur as a result?

The market price will fall

A price ceiling is:

The maximum price that a seller can charge in a market