Chapter 6

Which of the following statements is true if the government places a price ceiling on petrol at €1.50 per litre and the equilibrium price is €1.00 per litre?

A significant increase in the demand for petrol could cause the price ceiling to become a binding constraint.

Which of the following workers would be most likely to find it more difficult to get a job after a rise in the minimum wage rate?

A teenage worker with few qualifications.

Which side of the market is more likely to lobby government for a price floor?

Both buyers and sellers desire a price floor.

Suppose the equilibrium price for apartments is €500 per month and the government imposes rent controls of €250. Which of the following is unlikely to occur as a result of the rent controls?

The quality of apartments will improve.

Which of the following statements about a binding price ceiling is true?

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

Which of the following statements about the burden of a tax is correct?

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 unfavourable to them.

A binding price ceiling creates

a shortage.

Which of the following takes place when a tax is placed a good?

an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold

For a price ceiling to be a binding constraint on the market, the government must set it

below the equilibrium price.

The surplus caused by a binding price floor will be greatest if

both supply and demand are elastic

The burden of a tax falls more heavily on the sellers in a market when

demand is elastic and supply is inelastic.

The burden of a tax falls more heavily on the buyers in a market when

demand is inelastic and supply is elastic.

A tax placed on a good that is a necessity for consumers will likely generate a tax burden that

falls more heavily on buyers.

A tax of €1.00 per litre on petrol

places a tax wedge of €1.00 between the price the buyers pay and the price the sellers receive.

A price floor

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 sellers of a good shifts the

supply curve upward by the size of the tax per unit.

Which of the following is an example of a price floor?

the minimum wage

When a tax is collected from the buyers in a market,

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

Within the supply and demand model, a tax collected from the buyers of a good shifts the

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

For which of the following products would the burden of a tax likely fall more heavily on the sellers?

entertainment