Micro-Economics Problem Set #6

A shortage results when a. a binding price ceiling is imposed. b. a binding price floor is imposed. c. a price ceiling is imposed but it is not binding. d. a price floor is imposed but it is not binding.

A

A tax imposed on the sellers of a good will a. raise the price paid by buyers and lower the equilibrium quantity. b. raise the price paid by buyers and raise the equilibrium quantity. c. raise the effective price received by sellers and raise the equilibrium quantity. d. raise the effective price received by sellers and lower the equilibrium quantity.

A

Buyers of a good bear the larger share of the tax burden when a tax is placed on a product for which a. the supply is more elastic than the demand. b. the demand in more elastic than the supply. c. the tax is placed on the sellers of the product. d. the tax is placed on the buyers of the product.

A

Refer to Figure 6-12. In which market will the majority of the tax burden fall on the seller? a. market (a) b. market (b) c. market (c) d. All of the above are correct.

A

Refer to Figure 6-14. The effective price that buyers will pay after the tax is imposed is a. $24. b. $16. c. $10. d. $8.

A

Refer to Figure 6-2. In which of the following cases would sellers have to develop a rationing mechanism? a. A price ceiling is set at $8. b. A price ceiling is set at $12. c. A price floor is set at $8. d. A price floor is set at $10.

A

When a tax is imposed on tea and buyers of tea are required to send in the tax payments to the government, a. buyers of tea and sellers of tea both are made worse off. b. buyers of tea are made worse off and the well-being of sellers is unaffected. c. buyers of tea are made worse off and sellers of tea are made better-off. d. the well-being of both buyers of tea and sellers of tea is unaffected.

A

When government imposes a price ceiling or a price floor in a market, a. price no longer serves as a rationing device. b. efficiency in the market is enhanced. c. shortages and surpluses are eliminated. d. buyers and sellers both become better off.

A

At a minimum wage that exceeds the equilibrium wage, a. the quantity demanded of labor will exceed the quantity supplied. b. the quantity supplied of labor will exceed the quantity demanded. c. the minimum wage will not be binding. d. the market for skilled workers is affected, but the market for unskilled workers remains unaffected.

B

Over time, housing shortages caused by rent control a. increase, because the demand for, and supply of, housing are less elastic in the long run. b. increase, because the demand for, and supply of, housing are more elastic in the long run. c. decrease, because the demand for, and supply of, housing are less elastic in the long run. d. decrease, because the demand for, and supply of, housing are more elastic in the long run.

B

Price controls are usually enacted a. as a means of raising revenue for public purposes. b. when policymakers believe that the market price of a good or service is unfair to buyers or sellers. c. when policymakers detect inefficiencies in a market. d. All of the above are correct.

B

Refer to Figure 6-14. The amount of the tax per unit is a. $16. b. $14. c. $8. d. $6.

B

The minimum wage, if it is binding, lowers the incomes of a. no workers. b. only those workers who cannot find jobs. c. only those workers who have jobs. d. all workers.

B

Under rent control, tenants can expect a. lower rent and higher quality housing. b. lower rent and lower quality housing. c. higher rent and a shortage of rental housing. d. higher rent and a surplus of rental housing.

B

Which of the following is the most correct statement about tax burdens? a. A tax burden falls most heavily on the side of the market that is more elastic. b. A tax burden falls most heavily on the side of the market that is less elastic. c. A tax burden falls most heavily on the side of the market that is closer to unit elastic. d. A tax burden is distributed independently of relative elasticities of supply and demand.

B

Which of the following statements is true? a. A tax levied on buyers will never be even partially paid by sellers. b. Who actually pays a tax depends on the price elasticities of supply and demand. c. Government can decide who actually pays a tax. d. A tax levied on sellers always will be passed on completely to buyers.

B

A tax on the buyers of coffee will a. increase the effective price of coffee paid by buyers, increase the price of coffee received by sellers, and increase the equilibrium quantity of coffee. b. decrease the effective price of coffee paid by buyers, increase the price of coffee received by sellers, and decrease the equilibrium quantity of coffee. c. increase the effective price of coffee paid by buyers, decrease the price of coffee received by sellers, and decrease the equilibrium quantity of coffee. d. increase the effective price of coffee paid by buyers, decrease the price of coffee received by sellers, and increase the equilibrium quantity of coffee

C

Refer to Figure 6-14. The effective price that sellers receive after the tax is imposed is a. $24. b. $14. c. $10. d. $8.

C

The burden of a luxury tax falls a. more on the rich than on the middle class. b. more on the poor than on the middle class. c. more on the middle class than on the rich. d. equally on the rich, the middle class, and the poor.

C

The demand for salt is inelastic and the supply of salt is elastic. The demand for caviar is elastic and the supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall on a. sellers of salt and the buyers of caviar. b. sellers of salt and the sellers of caviar. c. buyers of salt and the sellers of caviar. d. buyers of salt and the buyers of caviar.

C

A legal maximum price at which a good can be sold is a price a. floor. b. stabilization. c. support. d. ceiling.

D

Opponents of the minimum wage point out that the minimum wage a. encourages teenagers to drop out of school. b. prevents some workers from getting needed on-the-job training. c. contributes to the problem of unemployment. d. All of the above are correct.

D

Refer to Figure 6-2. If the government imposes a price ceiling of $8 in this market, the result would be a a. surplus of 10. b. surplus of 20. c. shortage of 10. d. shortage of 20.

D

Which of the following is not a result of government-imposed rent control? a. fewer new apartments offered for rent b. less maintenance provided by landlords c. bribery d. higher quality housing

D

Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price

False

Economists use the term tax incidence to refer to who is legally responsible for paying the tax.

False

If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50, the price ceiling is a binding constraint on the market.

False

If a tax is imposed on the buyers of a product, the tax burden will fall entirely on the buyers.

False

The incidence of a tax depends on whether the tax is levied on buyers or sellers.

False

A binding minimum wage in a competitive labor market creates unemployment.

True

A government-imposed tax on a market shrinks the size of the market.

True

A tax on golf clubs will cause buyers of golf clubs to pay a higher price, and the equilibrium quantity will decrease.

True

If a price ceiling is below equilibrium price, the quantity demanded will exceed the quantity supplied

True

In general, a tax burden falls more heavily on the side of the market that is more inelastic.

True

Lawmakers can decide whether the buyers or the sellers must send a tax to the government, but they cannot legislate the true burden of a tax.

True

Rent control may lead to lower rents for those who find housing, but the quality of the housing may also be lower.

True