Chapter 6 Econ
The government has imposed a price ceiling on sliced sandwich bread. What event could transform the price ceiling from one that is binding to one that is not binding?
A decrease in the price of unsliced bread, which people consider a substitute for sliced bread
The federal government uses the revenue from the FICA (Federal Insurance Contribution Act) tax to pay for
Social Security and Medicare
Suppose the government has imposed a price floor on cellular phones. Which of the following events could transform the price floor from one that is binding to one that is not binding?
Traditional land line phones become more expensive
You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA (Social Security/Medicare) tax. Given this information what is a true statement?
Your employer is required by law to pay $400 to match the $400 deducted from your check
A binding minimum wage
alters both the quantity demanded and quantity supplied of labor.
Suppose that in a particular market, the supply curve is highly elastic and the demand 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
A $5 tax levied on the buyers of pants will cause the
demand curve for pants to shift down by $5
A tax burden
falls more heavily on the side of the market that is less elastic
If the government removes a binding price ceiling from a market, then the price received by sellers will
increase, and the quantity sold in the market will increase
The quantity sold in a market will increase if the government
increases a binding price ceiling in that market, decreases a tax on the good sold in that market, decreases a binding price floor in that market.
A nonbinding price ceiling
is set at a price above the equilibrium price
Minimum-wage laws dictate the
lowest price employers may pay for labor
One disadvantage of government subsidies over price controls is that subsidies
make higher taxes necessary
The minimum wage, if it is binding, raises the incomes of
only those workers whose jobs would pay less than the minimum wage if it didn't exist
The long-run effects of rent controls are a good illustration of the principle that
people respond to incentives
Which of the following is not a rationing mechanism used by landlords in cities with rent control?
price
A tax imposed on the sellers of a good will raise the
price paid by buyers and lower the equilibrium quantity
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,
quantity supplied increases, quantity demanded decreases, and there is a surplus
A tax imposed on buyers of a good will
raise the price buyers pay and lower the effective price sellers receive
A tax imposed on the sellers of a good will
raise the price buyers pay and lower the effective price sellers receive
Rent control policies tend to cause
relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run
If the minimum wage exceeds the equilibrium wage, then
the quantity supplied of labor will exceed the quantity demanded
If a tax is levied on the sellers of a product, then there will be a(n)
upward shift of the supply curve
