Econ 101 Chapter 6 Supply Demand and Government Policies

The price paid by buyers in a market will increase if the government (i) increases a binding price floor in that market.(ii)increases a binding price ceiling in that market.(iii)decreases a tax on the good sold in that market. A. (i), (ii), and (iii) B. (iii) only C. (i) and (ii) only D. (ii) only

C. (i) and (ii) only

A nonbinding price ceiling (i) causes a surplus.(ii)causes a shortage.(iii)is set at a price above the equilibrium price.(iv)is set at a price below the equilibrium price. A. (i) and (iii) only B. (iii) only C. (ii) and (iv) only D. (i) only

B. (iii) only

The Federal Insurance Contribution Act (FICA) tax is an example of a(n) A. farm subsidy. B. payroll tax. C. income subsidy. D. sales tax.

B. payroll tax

Refer to Figure 6-6. Which of the following price ceilings would be binding in this market? A. $14 B. $10 C. $12 D. $8

D. $8

Refer to Figure 6-22. The burden of the tax on sellers is A. $1 per unit. B. $1.50 per unit. C. $3 per unit. D. $2 per unit.

A. $1 per unit

A price floor is binding when it is set A. above the equilibrium price, causing a surplus. B. below the equilibrium price, causing a surplus. C. below the equilibrium price, causing a shortage. D. above the equilibrium price, causing a shortage.

A. above the equilibrium price, causing a surplus

A binding minimum wage A. alters both the quantity demanded and quantity supplied of labor. B. affects only the quantity of labor demanded; it does not affect the quantity of labor supplied. C. causes only temporary unemployment because the market will adjust and eliminate any temporary surplus of workers. D. has no effect on the quantity of labor demanded or the quantity of labor supplied.

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

Refer to Figure 6-11. If the government imposes a price floor at $9, it would be A. binding if market demand is Demand A and non-binding if market demand is Demand B. B. non-binding if market demand is Demand A or Demand B. C. binding if market demand is Demand A or Demand B. D. non-binding if market demand is Demand A and binding if market demand is Demand B.

A. binding id the market demand is Demand A and non-binding if market demand is Demand B

The minimum wage A. does not apply to unpaid internships. B. does not affect the quantity of labor demanded; it only affects the quantity of labor supplied. C. has its greatest impact on middle-aged and immigrant workers. D. is an example of a price ceiling.

A. does not apply to unpaid internships

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective, A. the price rises above the previous equilibrium. B. a smaller quantity of the good is bought and sold. C. a larger quantity of the good is supplied. D. a smaller quantity of the good is demanded.

B. a smaller quantity of the good is bought and sold

The tax incidence A. can be shifted to the buyer by imposing the tax on the buyers of a product in a market. B. is the manner in which the burden of a tax is shared among participants in a market. C. can be shifted to the seller by imposing the tax on the sellers of a product in a market. D. All of the above are correct.

B. in the manner in which the burden of a tax is shared among participants in a market

The long-run effects of rent controls are a good illustration of the principle that A. government can sometimes improve on market outcomes. B. people respond to incentives. C. society faces a short-run tradeoff between unemployment and inflation. D. the cost of something is what you give up to get it.

B. people respond to incentives

A tax on the sellers of cameras encourages A. sellers to supply a larger quantity at every price. B. sellers to supply a smaller quantity at every price. C. buyers to demand a smaller quantity at every price. D. Both a) and b) are correct.

B. sellers to supply smaller quantity at every price????

The incidence of a tax falls more heavily on A. producers than consumers if supply is more inelastic than demand. B. consumers than producers if demand is more inelastic than supply. C. All of the above are correct. D. consumers than producers if supply is more elastic than demand.

C. All of the above are correct

You receive a paycheck from your employer, and your pay stub indicates that $300 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct? A. Your employer is required by law to pay $300 to match the $300 deducted from your check. B. The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee. C. All of the above are correct. D. This type of tax is an example of a payroll tax.

C. All of the above are correct

Which of the following is correct? A. Rent control and the minimum wage are both examples of price ceilings. B. Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling. C. Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor. D. Rent control and the minimum wage are both examples of price floors.

C. Rent Control in an example of a price ceiling, and the minimum wage is an example of a price floor

Which of the following is not correct? A. The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or sellers. B. In the new after-tax equilibrium, buyers and sellers share the burden of the tax. C. Taxes levied on sellers and taxes levied on buyers are not equivalent. D. A tax places a wedge between the price that buyers pay and the price that sellers receive.

C. Taxes levied on sellers and taxes levied on buyers are not equivalent

Refer to Figure 6-15. Suppose a tax of $2 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed? A. $3 B. $7 C. between $5 and $7 D. between $3 and $5

C. between $5 and $7.

Refer to Figure 6-7. Suppose a price floor of $7 is imposed on this market. As a result, A. the quantity of the good demanded decreases by 20 units. B. the supply curve shifts to the left so as to now pass through the point (quantity = 40, price = $7). C. buyers' total expenditure on the good decreases by $20. D. the price of the good continues to serve as the rationing mechanism.

C. buyers total expenditure on the good decreases by $20

Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the A. supply is more inelastic than the demand. B. government has required that buyers remit the tax payments. C. demand is more inelastic than the supply. D. government has required that sellers remit the tax payments.

C. demand is more inelastic than the supply

When a tax is placed on the buyers of a product, buyers pay A. less and sellers receive less than they did before the tax. B. less and sellers receive more than they did before the tax. C. more and sellers receive less than they did before the tax. D. more and sellers receive more than they did before the tax.

C. more and sellers receive less than they did before tax

When a binding price floor is imposed on a market, A. all sellers benefit. B. the quantity demanded at the price floor exceeds the quantity that would have been demanded without the price floor. C. price no longer serves as a rationing device. D. All of the above are correct.

C. price no longer serves as a rationing device

Refer to Figure 6-17. What is the amount of the tax per unit? A. $2 B. $3 C. $1 D. $4

D. $4

Refer to Figure 6-23. How much tax revenue does this tax produce for the government? A. $1120 B. $800 C. $480 D. $600

D. $600

Refer to Figure 6-17. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. Acme is left with how much money? A. $10.50 B. $9.00 C. $12.00 D. $8.00

D. $8.00

A binding minimum wage tends to A. have the greatest impact in the market for teenage labor. B. cause unemployment. C. cause a labor surplus. D. All of the above are correct.

D. All of the above are correct

Which of the following is not correct? A. Economists have two roles: scientist and policy adviser. B. As scientists, economists develop and test theories to explain the world around them. C. As policy advisers, economists use their theories to help change the world for the better. D. Economic policies rarely have effects that their architects did not intend or anticipate.

D. Economic policies rarely have effects that their architects did not intend or anticipate

Long lines A. and discrimination according to seller bias are both inefficient rationing mechanisms because the good does not necessarily go to the buyer who values it most highly. B. and discrimination according to seller bias are both inefficient rationing mechanisms because they both waste buyers' time. C. are an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it most highly, and discrimination according to seller bias is an inefficient rationing mechanism because it wastes buyers' time. D. are an inefficient rationing mechanism because they waste buyers' time, and discrimination according to seller bias is an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it most highly.

D. are an inefficient rationing mechanism because they waste buyers time, and discrimination according to seller bias is an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it most highly

If a nonbinding price ceiling is imposed on a market, then the A. quantity sold in the market will decrease. B. price in the market will decrease. C. price in the market will increase. D. quantity sold in the market will stay the same.

D. quantity sold in the market will stay the same

Suppose that a tax is placed on books. If the sellers pay the majority of the tax, then we know that the A. government has required that sellers remit the tax payments. B. government has required that buyers remit the tax payments. C. demand is more inelastic than the supply. D. supply is more inelastic than the demand.

D. supply is more inelastic than the demand