Econ 101 chapter 6

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Which of the following statements is true if the government places a price ceiling on gasoline at $4.00 per gallon and the equilibrium price is $3.00 per gallon?

A significant increase in the demand for gasoline could cause the price ceiling to become a binding constraint.

what is true about a burden of a tax?

The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and is not determined by legislation.

what takes place when a tax is placed on a good?

an increase in the price buyers pay, decrease in the price sellers receive, decrease in the quantity sold.

For a price ceiling to be a binding constraint on the market, the government must set it?

below the equilibrium price

the surplus caused by a binding price floor will be greatest if?

both supply and demand are elastic

studies show that a 10% increase in the minimum wage?

decreases teenage employment by about 1 to 3 percent

within the supply and demand model, a tax collected from buyers of a good shifts the?

demand curve downward by the size of the tax per unit

the burden of a tax falls more heavily on the sellers in a market when?

demand is elastic and supply is inelastic

the burden of a tax falls more heavily on the buyers in a market when?

demand is inelastic and supply is elastic

what product would a burden of a tax likely fall more heavily on the sellers?

entertainment

a tax placed on a good that is a necessity for consumers will likely generate a tax burden that?

falls more heavily on buyers

the minimum wage helps all teenagers because they receive higher wages than they would otherwise.

false

a 10% increase in the minimum wage causes a 10% reduction in teenage employment.

false: causes 1 to 3 percent reduction in employment

a price floor in a market always creates a surplus in that market.

false: creates a surplus only is the floor is set above the equilibrium price

if the equilibrium price of gas is $3.00 per gallon and the government places a price ceiling on gas of $4.00 per gallon, the result will be a shortage of gas.

false: price ceiling set above equilibrium price is not binding

a price ceiling set below the equilibrium price causes a surplus.

false: shortage

the government can choose to place the burden of a tax on the buyers in a market by collecting the tax from the buyers rather than the sellers.

false: the burden of a tax is determined by the relative elasticities of supply and demand

when we use the model of supply and demand to analyze a tex collected from the buyers, we shift the demand curve upward by the size of the tax.

false: we shift the demand curve downward by the size of the tax

a $10 tax on baseball gloves will always raise the price that the buyers pay for baseball gloves by $10.

false: the difference between what the sellers receive and the buyers pay will be $10, but the price received by the sellers usually will fall some so the price paid by the buyers will rise by less than $10.

example of price floor?

minimum wage

a tax of $1.00 per gallon on gas?

places a tax wedge of $1.00 between the price the buyers pay and the price the sellers receive

a price floor?

sets a legal minimum on the price at which a good can be sold

a binding price ceiling creates?

shortage

what is true about a binding price ceiling?

shortage created by the price ceiling is greater in the long run than in the short run

within the supply and demand model, a tax collected from the sellers of a good shifts the?

supply curve upward by the size of the tax per unit

Suppose the equilibrium price for apartments is $800 per month and the government imposes rent controls of $500. Which of the following is unlikely to occur as a result of the rent controls?

the quality of apartments will improve

which side of the market is more likely to lobby government for a price floor?

the sellers

when a tax is collected from the buyers in a market?

the tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers

a price ceiling that is not a binding constraint today cause a shortage in the future if demand were to increase and raise the equilibrium price above the fixed price ceiling.

true

a price floor set above equilibrium price is a binding constraint.

true

a tax collected from buyers has an equivalent impact to a same size tax collected from sellers.

true

a tax creates a tax wedge between a buyer and a seller. this causes the price paid by the buyer to rise, the price received by the seller to fall, and the quantity sold to fall.

true

if medicine is a necessity, the burden of a tax on medicine will likely land more heavily on the buyers of medicine.

true

the shortage of housing caused by a binding rent control is likely to be more severe in the long run where compared to the short run.

true

the ultimate burden of a tax lands most heavily on the side of the market that is less elastic.

true


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