ECON 101 - CH 6 Questions
When a tax is placed on the sellers of a product, the
All of the above are correct: size of the market decreases, effective price received by sellers decrease and the price paid by buyers increases, supply of the product decreases
Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct?
All of the above are correct: this tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity, the price paid by buyers is $0.30 per drink more than it was before the tax, forty percent of the burden of the tax falls on sellers
The mayor of Workerville proposes a local payroll tax to fund a new water park for the city. The mayor proposes to collect half the tax from workers and half the tax from firms. Workers will bear
All of the above are possible: an equal share of the tax in comparison to firms, a greater share of the tax in comparison to firms, a smaller share of the tax in comparison to firms
Which of the following is correct?
Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor.
Which of the following would not interfere with market equilibria?
a non-binding price floor
A price ceiling will be binding only if it is set
below the equilibrium price.
A tax on the buyers of cereal will increase the price of cereal paid by buyers,
decrease the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal.
If the government removes a tax on a good, then the price paid by buyers will
decrease, and the price received by sellers will increase.
The minimum wage
does not apply to unpaid internships.
If the government wants to reduce the burning of fossil fuels, it should impose a tax on
either buyers or sellers of gasoline.
A minimum wage that is set below a market's equilibrium wage will
have no impact on employment.
The goal of rent control is to
help the poor by making housing more affordable.
If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would
increase by less than $1,000.
If the government removes a tax on a good, then the quantity of the good sold will
increase.
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
sellers will bear a greater burden of the tax than the buyers.
Rent control
serves as an example of a price ceiling.
The term tax incidence refers to
the distribution of the tax burden between buyers and sellers.
A key lesson from the payroll tax is that the
true burden of a tax cannot be legislated.
Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because
with shortages and waiting lists, they have no incentive to maintain and improve their property.
When a tax is placed on the buyers of cell phones, the size of the cell phone market
and the effective price received by sellers both decrease.
When a tax is placed on the sellers of cell phones, the size of the cell phone market
and the effective price received by sellers both decrease.
Policymakers use taxes
both to raise revenue for public purposes and to influence market outcomes.
Under rent control, bribery is a mechanism to
bring the total price of an apartment (including the bribe) closer to the equilibrium price.
When a tax is placed on the buyers of lemonade, the
burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.
When a tax is placed on the sellers of energy drinks, the
burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.
A tax on the buyers of cameras encourages
buyers to demand a smaller quantity at every price.
To say that a price floor is binding is to say that the price floor
causes quantity supplied to exceed quantity demanded.
A legal maximum on the price at which a good can be sold is called a price
ceiling.
Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $20 per ticket, then the
demand curve will shift upward by $30, and the price paid by buyers will decrease by less than $30.
The tax burden will fall most heavily on sellers of the good when the demand curve
is relatively flat, and the supply curve is relatively steep.
Minimum-wage laws dictate the
lowest price employers may pay for labor.
When a tax is placed on the buyers of a product, buyers pay
more and sellers receive less than they did before the tax.
If the government removes a $2 tax on buyers of cigars and imposes the same $2 tax on sellers of cigars, then the price paid by buyers will
not change, and the price received by sellers will not change.
Which of the following is correct? Price controls
often hurt those they are designed to help.
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.
A legal minimum on the price at which a good can be sold is called a
price floor.