ECON Q6 midterm 2

1. Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift a. demand, raising both the equilibrium price and quantity in the market for artificially sweetened beverages. b. demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages. c. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages. d. supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages.

c

45. Which of the following is not a rationing mechanism used by landlords in cities with rent control? a. Waiting lists b. Race c. Price d. Bribes

c

The burden of a luxury tax usually falls a. more on the rich than on the middle class. b. more on the poor than on the rich. c. more on the middle class than on the rich. d. equally on the rich, the middle class, and the poor.

c

17. Which of the following is not correct? a. Taxes levied on sellers and taxes levied on buyers are not equivalent. b. A tax places a wedge between the price that buyers pay and the price that sellers receive. c. The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or sellers. d. In the new after-tax equilibrium, buyers and sellers share the burden of the tax.

a

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

d

57. 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

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. there will be a surplus in the market. d. there will be a shortage in the market.

a

Suppose that in a particular market, the supply curve is highly inelastic and the demand curve is highly elastic. If a tax is imposed in this market, then the a. sellers will bear a greater burden of the tax than the buyers. b. buyers will bear a greater burden of the tax than the sellers. c. buyers and sellers are likely to share the burden of the tax equally. d. 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.

a

The imposition of a binding price ceiling on a market causes a. quantity demanded to be greater than quantity supplied. b. quantity demanded to be less than quantity supplied. c. quantity demanded to be equal to quantity supplied. d. the price of the good to be greater than its equilibrium price.

a

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling is established, a. a larger quantity of the good is demanded. b. a smaller quantity of the good is demanded. c. a larger quantity of the good is supplied. d. the price rises above the previous equilibrium.

a

2. Which of the following statements is correct? a. A tax levied on buyers will never be partially paid by sellers. b. Who bears the burden of a tax depends on the price elasticities of supply and demand. c. Government can decide who ultimately pays a tax. d. A tax levied on sellers always will be passed on completely to buyers.

b

50. In the market for apartments, rent control causes the quantity supplied a. and quantity demanded to fall. b. to fall and quantity demanded to rise. c. to rise and quantity demanded to fall. d. and quantity demanded to rise.

b

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. imposed to make sure everyone can earn a fair wage.

b

A tax on the buyers of smart watches encourages a. sellers to supply a smaller quantity at every price. b. buyers to demand a smaller quantity at every price. c. sellers to supply a larger quantity at every price. d. buyers to demand a larger quantity at every price.

b

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

b

To say that a price ceiling is nonbinding is to say that the price ceiling a. results in a surplus. b. is set above the equilibrium price. c. causes quantity demanded to exceed quantity supplied. d. is set below the equilibrium price.

b

When a tax is placed on the sellers of a product, buyers pay a. more, and sellers receive more than they did before the tax. b. more, and sellers receive less than they did before the tax. c. less, and sellers receive more than they did before the tax. d. less, and sellers receive less than they did before the tax.

b

Which of the following is correct? a. Rent control and the minimum wage are both examples of price ceilings. b. Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor. c. Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling. d. Rent control and the minimum wage are both examples of price floors.

b

. Which of the following causes the price paid by buyers to be different than the price received by sellers? a. Binding price floor b. Binding price ceiling c. Tax on the good d. Nonbinding price control

c

40. Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the a. demand curve for physicals shifts to the right. b. supply curve for physicals shifts to the left. c. quantity demanded of physicals increases, and the quantity supplied of physicals decreases. d. number of physicals performed stays the same.

c

51. If the government wants to reduce the burning of fossil fuels, it should impose a tax on a. only the buyers of gasoline. b. only the sellers of gasoline. c. either buyers or sellers of gasoline. d. whichever side of the market is less elastic.

c

61. The presence of a price control in a market for a good or service usually is an indication that a. an insufficient quantity of the good or service was being produced in that market to meet the public's need. b. the usual forces of supply and demand were not able to establish an equilibrium price in that market. c. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. d. policymakers correctly believed that price controls would generate no inequities of their own once imposed.

c

A $1.39 tax levied on the buyers of elderberry juice will shift the demand curve a. upward by exactly $1.39. b. upward by less than $1.39. c. downward by exactly $1.39. d. downward by less than $1.39.

c

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

c

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

c

If a binding price floor is imposed on the drone market, then a. the demand for drones will decrease. b. the supply of drones will increase. c. a surplus of drones will develop. d. a shortage of drones will develop.

c

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

c

If a tax is levied on the sellers of fish, then a. buyers will bear the entire burden of the tax. b. sellers will bear the entire burden of the tax. c. buyers and sellers will share the burden of the tax. d. the government will bear the entire burden of the tax.

c

If the government levies a $700 tax per motorcycle on sellers of motorcycles, then the price paid by buyers of motorcycles would a. increase by more than $700. b. increase by exactly $700. c. increase by less than $700. d. decrease by an indeterminate amount.

c

If the government removes a tax on a good, then the price paid by buyers will a. increase, and the price received by sellers will increase. b. increase, and the price received by sellers will decrease. c. decrease, and the price received by sellers will increase. d. decrease, and the price received by sellers will decrease.

c

Suppose the equilibrium price of a stick of deodorant is $4, and the government imposes a price floor of $5 per stick. As a result of the price floor, the a. demand curve for deodorant shifts to the left. b. supply curve for deodorant shifts to the right. c. quantity demanded of deodorant decreases, and the quantity of deodorant that firms want to supply increases. d. quantity supplied of deodorant stays the same.

c

Under rent control, landlords can cease to be responsive to tenants' concerns about the quality of the housing because a. with rent control, the government guarantees landlords a minimum level of profit. b. they become resigned to the fact that many of their apartments are going to be vacant at any given time. c. with shortages and waiting lists, they have no incentive to maintain and improve their property. d. with rent control, it becomes the government's responsibility to maintain rental housing.

c

Which of the following is not a result of rent control? a. Fewer new apartments offered for rent b. Less maintenance provided by landlords c. Bribery d. Higher quality housing

d

18. 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

53. When a tax is placed on the sellers of cell phones, the size of the cell phone market a. and the effective price received by sellers both increase. b. increases, but the effective price received by sellers decreases. c. decreases, but the effective price received by sellers increases. d. and the effective price received by sellers both decrease.

d

56. You receive a paycheck from your employer, and your pay stub indicates that $300 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct? a. You will owe $300 per paycheck to pay the FICA tax for the remainder of the fiscal year regardless of your wages. b. Your employer is required by law to pay $150 to match half the $300 deducted from your check. c. This type of tax is an example of a sales tax. d. The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee.

d

A price floor is a. a legal maximum on the price at which a good can be sold. b. often imposed when buyers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. c. a source of efficiency in a market. d. a legal minimum on the price at which a good can be sold.

d

A tax on the sellers of coffee will increase the price of coffee paid by buyers, a. increase the effective price of coffee received by sellers, and increase the equilibrium quantity of coffee. b. increase the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee. c. decrease the effective price of coffee received by sellers, and increase the equilibrium quantity of coffee. d. decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee.

d

When a tax is placed on the buyers of lemonade, the a. sellers bear the entire burden of the tax. b. buyers bear the entire burden of the tax. c. burden of the tax will always be equally divided between the buyers and the sellers. d. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

d