ABE 204 Exam 2 (chapter 6)

A tax on sellers increases supply.

false

A binding minimum wage creates unemployment.

true

The minimum wage is an example of a. a price ceiling. b. a price floor. c. a wage subsidy. d. a tax

B

A tax on buyers shifts the demand curve and the supply curve.

false

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 is 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

If a price floor is not binding, then a. the equilibrium price is above the price floor. b. the equilibrium price is below the price floor. c. it has no legal enforcement mechanism. d. more than one of the above is correct.

A

If a tax is imposed on a market with inelastic demand and elastic supply, then a. buyers will bear most of the burden of the tax. b. sellers will bear most of the burden of the tax. c. the burden of the tax will be shared equally between buyers and sellers. d. it is impossible to determine how the burden of the tax will be shared.

A

If a tax is levied on the sellers of a product, then the supply curve a. will shift up. b. will shift down. c. will become flatter. d. will not shift.

A

In which of these cases will the tax burden fall most heavily on buyers of the good? a. the demand curve is relatively steep and the supply curve is relatively flat. b. the demand curve is relatively flat and the supply curve is relatively steep. c. the demand curve and the supply curve are both relatively flat. d. the demand curve and the supply curve are both relatively steep.

A

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

A

The imposition of a binding price ceiling on a market causes quantity demanded to be a. greater than quantity supplied. b. less than quantity supplied. c. equal to quantity supplied. d. both (a) and (b) are possible.

A

When a tax is imposed on the sellers of a good, the supply curve shifts a. upward by the amount of the tax. b. downward by the amount of the tax. c. upward by less than the amount of the tax. d. downward by less than the amount of the tax.

A

A price ceiling is a. often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. b. a legal maximum on the price at which a good can be sold. c. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. d. all of the above are correct.

B

A price floor will be binding only if it is set a. equal to the equilibrium price. b. above the equilibrium price. c. below the equilibrium price. d. either above or below the equilibrium price.

B

A tax o buyers will a. shift the demand curve upwards by the amount of the tax. b. shift the demand curve downwards by the amount of the tax. c. shift the supply curve upwards by the amount of the tax. d. shift the supply curve downwards by the amount of the tax.

B

If a nonbinding price floor is imposed on a market, then a. the quantity sold in the market will decrease. b. the quantity sold in the market will stay the same. c. the price in the market will increase. d. the price in the market will decrease.

B

If a tax is levied on the buyers of a product, then the demand curve a. will not shift. b. will shift down. c. will shift up. d. will become flatter.

B

If a tax is levied on the buyers of a product, then there will be a(n) a. upward shift of the demand curve. b. downward shift of the demand curve. c. movement up and to the left along the demand curve. d. movement down and to the right along the demand curve.

B

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 a. the buyers will bear a greater burden of the tax than the sellers. b. the sellers will bear a greater burden of the tax than the buyers. c. the buyers and sellers are likely to share the burden of the tax equally. d. the buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information.

B

A price ceiling will be binding only if it is set a. equal to the equilibrium price. b. above the equilibrium price. c. below the equilibrium price. d. either above or below the equilibrium price.

C

A surplus results when a. a nonbinding price floor is imposed on a market. b. a nonbinding price floor is removed from a market. c. a binding price floor is imposed on a market. d. a binding price floor is removed from a market.

C

An outcome that can result from either a price ceiling or a price floor is a. a surplus in the market. b. a shortage in the market. c. a nonbinding price control. d. long lines of frustrated buyers.

C

Which of the following causes the price paid by buyers to be different than the price received by sellers? a. a binding price floor. b. a binding price ceiling. c. a tax on the good. d. more than one of the above is correct.

C

Which of the following statements is correct concerning the burden of a tax? a. buyers bear the entire burden of the tax. b. sellers bear the entire burden of the tax. c. buyers and sellers share the burden of the tax. d. we have to know whether it is the buyers or the sellers that are required to pay the tax to the government in order to make this determination.

C

A legal maximum on the price at which a good can be sold is called a price a. floor b. subsidy c. support d. ceiling

D

If a price ceiling is not binding, then a. there will be a surplus in the market. b. there will be a shortage in the market. c. the market will be less efficient than it would be without the price ceiling. d. there will be no effect on the market price or quantity sold.

D

If a tax is levied on the sellers of a product, then the demand curve a. will shift down. b. will shift up. c. will become flatter. d. will not shift.

D

The goal of rent control is to a. facilitate controlled economic experiments in urban areas. b. help landlords by assuring them a low vacancy rate for their apartments. c. help the poor by assuring them an adequate supply of apartments. d. help the poor by making housing more affordable.

D

A price ceiling is a legal minimum on the price at which a good or service can be sold.

false

Because supply and demand are inelastic in the short run, the initial shortage caused by rent control is large.

false

Buyers and sellers always share the burden of a tax equally.

false

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

false

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

false

Who bears the majority of a tax burden depends on whether the tax is placed on the buyers or the sellers.

false

A price ceiling set above the equilibrium price is not binding.

true

A price floor is a legal minimum on the price at which a good or service can be sold.

true

A price floor set above the equilibrium price causes a surplus in the market.

true

A tax on buyers decreases demand.

true

A tax on buyers decreases the quantity of the good sold in the market.

true

A tax on sellers and an increase in input prices affect the supply curve in the same way.

true

If a price ceiling is not binding, then it will have no effect on the market.

true

One common example of a price floor is the minimum wage.

true

Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

true

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers and sellers.

true

The goal of rent control is to help the poor by making housing more affordable.

true

The tax burden falls more heavily on the side of the market that is more inelastic.

true

The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.

true

The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or sellers.

true

To be binding, a price floor must be set above the equilibrium price.

true

Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.

true