Econ Chapter 6 Final Exam

Refer to Table 6-1. Suppose the government imposes a price floor of $30 on this market. What will be the size of the surplus in this market?

0 units

Refer to Table 6-1. Suppose the government imposes a price ceiling of $40 on this market. What will be the size of the shortage in this market?

1200 units

price ceiling

A legal maximum on the price at which a good can be sold (rent control)

price floor

A legal minimum on the price at which a good can be sold (minimum wage)

Rent control can cause...

a decline in the quality of housing available for rent, the development of a black market to allocate apartments to renters and longer search times for renters attempting to find an apartment

What does not interfere with market equilibrium?

a non-binding price floor

A binding minimum wage

alters both the quantity demanded and quantity supplied of labor.

Refer to Table 6-2. A price ceiling set at $5 will

be binding and will result in a shortage of 250 units.

Refer to Table 6-2. A price floor set at $20 will

binding at 125 units

Refer to Figure 6-4. A government-imposed price of $12 in this market is an example of a

binding price floor that creates a surplus

who shares the tax burden?

buyers and sellers

To say that a price floor is binding is to say that the price floor

causes quantity supplied to exceed quantity demanded.

When a binding price floor is imposed on a market,

price no longer serves as a rationing device

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases.

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20.

Buyers of a good bear the larger share of the tax burden when the

supply is more elastic than the demand for the product.

when the government levies a tax on a good...

the equilibrium quantity of the good falls

If a price floor is not binding, then

there will be no effect on the market price or quantity sold.

One common example of a price ceiling is rent control.

true

Refer to Figure 6-30. In which market will the majority of the tax burden fall on sellers?

panel A

If the government removes a tax on a good, then the price paid by buyers will

decrease, and the price received by sellers will increase.

A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied.

false

If the government levies a $5 tax per ticket on buyers of NFL game tickets, then the price paid by buyers of NFL game tickets would

increase by less than $5