Review Questions: Chapter 6

$24

Andrew is a buyer of the good. taking the tax into account, how much does Andrew effectively to pay to acquire one unit of the good 41

1 & 3

a binding price floor 1. causes a surplus 2. causes a shortage 3. is set at a price above the equilibrium price 4. is set at a price below the equilibrium price

panel b only

a binding price floor is shown in 23

ceiling

a legal maximum on the price at which a good can be sold is called a price

floor

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

panel a only

a nonbinding price floor is shown in 24

below the equilibrium price

a price ceiling will be binding only if it is set

all of the above are correct

a price floor

effective price received by sellers and lower the equilibrium quantity

a tax imposed on the sellers of a good will lower the

price paid by buyers and lower the equilibrium quantity

a tax imposed on the sellers of a good will raise the

smaller quantity of the good is bought and sold

after a binding price floor becomes effective, a

quantity sold in the market will stay the same

if a nonbinding price ceiling is imposed on a market, then the

the equilibrium price is below the price ceiling

if a price ceiling is not binding, then

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

if a price ceiling is not binding, then

the equilibrium price is above the price floor

if a price floor is not binding, then 18

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

if a price floor is not binding, then 19

buyers will bear most of the burden of the tax

if a tax is imposed on a market with inelastic demand and elastic supply, then

a shortage of 60 units of the good

if the govt imposes a price ceiling of $2 on this market, then there will be 27

a surplus of 30 units of the good

if the govt imposes a price floor of $5 on this market, then there will be

price adjusts until quantity demanded equals quantity supplied

in a competitive marker free of govt regulation

equilibrium in the market

in a panel a, there will be 26

a surplus of wheat

in panel b, there will be 25

market b

in which market will the majority of the tax burden fall on buyers 37

when policymakers believe that the market price of a good or service is unfair to buyers or sellers

price controls are usually enacted

sellers will bear a greater burden of the tax than the buyers

suppose that in a particular market, the demand curve is highly elastic, and the supply curve is highly inelastic. if a tax is imposed in this market, then the

buyers will bear a greater burden of the tax than the sellers

suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic and the demand curve is highly inelastic. if a tax is imposed in this market, then the

between $10 and $20

suppose that the demand for digital cameras is elastic, and the supply of digital cameras inelastic. a tax of $20 per camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by

less than $1

suppose that the demand for lava lamps is elastic, and the supply of dig is inelastic. a tax of $2 per lamp levied on lava lamps will increase the price paid by buyers of lava lamps by

between $0.50 and $1

suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. a tax od $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

quantity demanded of physicals increases, and the quantity supplied of physicals decreases

suppose the equilibrium price of a physical examination by a doctor is $200 and the govt imposes a price ceiling of $150 per physical. as a result of the price ceiling, the

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

suppose the equilibrium price of a tube of toothpaste is $2, and the govt imposes a price floor of $3 per tube. as a result of the price floor, the

a shortage of treadmills will develop

suppose the govt wants to encourage americans to exercise more, so it imposes a binding price ceiling on

depends on the elasticities of supply and demand

tax incidence

$14

the amount of the tax per unit is 34

$10

the effective price that sellers receive after the tax is imposed is 33

all of the above are correct

the incidence of a tax falls more heavily on

$8

the per-unit burden of the tax on buyers 35

$6

the per-unit burden of the tax on buyers of the good is 40

$6

the per-unit burden of the tax on sellers is 36

policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers

the presence of a price control in a market for a good or service usually is an indication that

shortage of 85 units

the price causes a

all off the above are correct

the price ceiling

makes it necessary for sellers to ration the good

the price ceiling

demanded to exceed quantity supplied by 85 units

the price ceiling causes quantity

all of the above are correct

the price of the good would continue to serve as the rationing mechanism if 29

$24

the price paid by buyers after the tax is imposed is 39

$24

the price that buyers pay after the tax is imposed is 32

is relatively steep, and the supply curve is relatively flat

the tax burden will fall most heavily on buyers of the good when the demand curve

$8

what is the amount of the tax per unit 38

price ensure an equal distribution of goods and services among consumers

which of the following is not a function of prices in a market system