Chapter 6- multiple choice questions

A 1 dollar unit tax levied on consumers of a good is equivalent to: A. A 1 dollar unit tax levied on producers of the good B. A 1 dollar per unit subsidy paid to produces of the good C. A price floor that raises the good's price by 1 dollar per unit D. A price ceiling that raises the good's price by 1 dollar per unit

A. A 1 dollar unit tax levied on producers of the good

Which of the following takes place when a tax is placed on a good? A. An increase in the price buyers pay, a decrease in the price sellers receive and a decrease in the quantity sold B. An increase in the price buyers pay, a decrease in the price sellers receive and an increase in the quantity sold C. A decrease in the price buyers pay, an increase in the price sellers receive and a decree in the quantity sold D. A decrease in the price buyers pay, and increase in the price sellers receive and an increase in the quantity sold

A. An increase in the price buyers pay, a decrease in the price sellers receive and a decrease in the quantity sold

The surplus caused by a binding price floor will be greatest if: A. Both supply and demand are elastic B. Both supply and demand are inelastic C. Supply is inelastic and demand is elastic D. Demand is inelastic and supply is elastic

A. Both supply and demand are elastic

The burden of a tax falls more heavily on the buyers in a market when A. Demand is inelastic and supply is elastic B. Demand is elastic and supply is inelastic C. Both supply and demand are elastic D. Both supply and demand are inelastic

A. Demand is inelastic and supply is elastic

A tax placed on a good that is necessity for consumers will likely generate a tax burden that A. Falls more heavily on buyers B. Falls more heavily on sellers C. Is evenly distribute between buyers and sellers D. Falls entirely on sellers

A. Falls more heavily on buyers

A binding price ceiling creates: A. Shortage B. Surplus C. equilibrium D. A shortage or as purls depending on whether the price ceiling is set above or below the equilibrium price

A. Shortage

Which of the following would increase quantity supplied, decrease quantity demanded and increase the price that consumers pay? A. The imposition of a binding price floor B. The removal of a binding price floor C. The passage of a tax levied on producers D. The repeal of a tax leveled on producers

A. The imposition of a binding price floor

For a price ceiling to be a binding constraint on the market, the government must set it: A. Above the equilibrium price B. Below the equilibrium price C. Precisely at the equilibrium price D. At any price because all price ceilings are binding constraints

B. Below the equilibrium price

The burden of a tax falls more heavily on the sellers in a market when A. Demand is inelastic and supply is elastic B. Demand is elastic and supply is inelastic C. Both supply and demand are elastic D. Both supply and demand are inelastic

B. Demand is elastic and supply is inelastic

For which of the following products would the burden of a tax likely fall more heavily in the sellers? A. Food B. Entertainment C. Clothing D. Housing

B. Entertainment

A price floor: A. Sets a legal maximum on a price at which a good can be sold B. Sets a legal minimum on the price at which good can be sold C. Always determines the price at which a good must be sold D. Is not a binding constraint if it set above the equilibrium price

B. Sets a legal minimum on the price at which a good can be sold

Within the supply and demand model, a tax collected from the buyers of a good shifts the: A. Demand curve upward by the size of the tax per unit B. Demand curve downward by the size of the tax per unit C. Supply curve upward by the size of the tax per unit D. Supply curve downward by the size of the tax per unit

B. The demand curve downward by the size of the tax per unit

Studies show that a 10% increase in the minimum wage will: A. Decreases teenage employment by about 10- 15 percent B. Increases teenage employment by about 10-15 percent C. Decreases teenage employment by about 1-3 percent D. Increases teenage employment by about 1-3 percent

C. Decrease the teenage employment by about 1-3 percent

In a market with a binding price ceiling, an increase in the ceiling will ________________ the quantity supplied, _______________ the quantity demanded and reduce the _______________. A. Increase, Decrease, Surplus B. Decrease, Increase, Surplus C. Increase, Decrease, Shortage D. Decrease, Increase, Shortage

C. Increase, Decrease, Shortage

Which of the following is an example of a price floor? A. Rent controls B. Restricting gasoline price to 2.00 per gallon when the equilibrium price is 3.00 dollars per gallon C. Minium wage D. All of the above are price floors

C. Minimum wage

Within the supply and demand model, a tax collected from the sellers of a good shifts the: A. Demand curve upward by the size of the tax per unit B. Demand curve downward by the size of the tax per unit C. Supply curve upward by the size of the tax per unit D. Supply curve downward by the size of the tax per unit

C. Supply curve upward by the size of the tax per unit

Which side of the market is more likely to lobby government for a price floor? A. Neither buyers nor sellers desire price floors B. Both buyers and sellers desire price floors C. The sellers D. The buyers

C. The sellers

When a tax is collected from the buyers in a market: A. The buyers bear the burden of the tax B. The sellers bear the burden of the tax C. The tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers D. The tax burden falls most heavily on the buyers

C. The tax burden on the buyers and sellers is the same an equivalent tax collected from the sellers

Which of the following statements is true if the government places a price ceiling on gasoline at 4.00 per gallon and the equilibrium price is 3.00 per gallon? A. There will be a shortage of gasoline B. There will be a supply of gasoline C. A significant increase in the supply of gasoline could cause the price ceiling to become a binding constraint D. A significant increase in the demand of gasoline could cause the price ceiling to become a binding constraint

D. A significant increase in the demand of gasoline could cause the price celling to become a binding constraint

When the government imposes a binding price floor, it causes: A. The supply curve to shift to the left B. The demand curve to shift to the right C. A shortage of the good to develop D. A surplus of the good to develop

D. A surplus of the good to develop

A tax of 1.00 per gallon on gasoline: A. Increases the price the buyers pay by 1.00 per gallon B. Decrease the price the sellers receive by 1.00 per gallon C. Increases the price the buyers pay by 0.50 and reduces the price sellers received by 0.50 D. Places a tax wedge of 1.00 between the price buyers pay and the price the sellers receive

D. Places a tax wedge of 1.00 between the price buyers pay and the price the sellers receive

When a good is taxed, the burden of the tax falls mainly on consumers if: A. The tax is levied on consumers B. The tax is revived on producers C. Supply is inelastic and demand is elastic D. Supply is elastic and demand is inelastic

D. Supply is elastic and demand is inelastic

Which of the following statements about the burden of a tax is correct? A. The tax burden generated from a tax placed on a good consumers perceive to be a necessity will fall most heavily in the sellers of the good B. The tax burden falls most heavily on the side of the market (buyers or sellers) that is most willing to leave the market when price movements are unfavorable to them C. The burden of a tax lands on the side of the market (buyers or sellers) from which it is collected D. The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and nit not determined by legislation

D. The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and nit not determined by legislation

Suppose the equilibrium price for apartments is 800 dollars per month and the government imposes rent controls of 500 dollars. Which of the following is unlikely to occur as a result of the rent control? A. There will be a shortage for housing. B. Landlords may discriminate among apartment renters. C. Landlords may be offered bribes to rent apartments D. The quality of apartments will improve E. There may be a long lines of buyers waiting for apartments

D. The quality of apartments will improve

Which of the following would increase quantity supplied, increase quantity demanded and decrease the price that consumers pay? A. The imposition of a binding price floor B. The removal of binding price floor C. The passage of at ax levied don producers D. The repeal of a tax levied on producers

D. The repeal of a tax levied on producers

Which of the following statements about a binding price ceiling is true? A. The surplus created by the price ceiling is greater in the short run than in the long run B. The surplus created by the price ceiling is greater in the long run than in the short run C. The shortage created by the price ceiling is greater in these short run than in the long run D. The shortage created by the price ceiling is greater in the long run than in the short run

D. The shortage created by the price ceiling is greater in the long run than in the short run