Question 1

Figure 6-1
Panel a)  Panel b) 
  
-Refer to Figure 6-1. A binding price ceiling is shown in

Accepted Answer

A)   panel a)  only.
B)   panel b)  only.
C)   both panel a)  and panel b) .
D)   neither panel a)  nor panel b) .E) A) and B)
F) A) and D)

Question 2

Which of the following was not a result of the luxury tax imposed by Congress in 1990?

Accepted Answer

A)   The larger part of the tax burden fell on sellers.
B)   A larger part of the tax burden fell on the middle class than on the rich.
C)   Even the wealthy demanded fewer luxury goods.
D)   The tax was never repealed or even modified.E) None of the above
F) A) and D)

Question 3

A price ceiling is always a binding price control, whereas a price floor may be either binding or not binding.

Accepted Answer

A) True 
 B)False

Question 4

A tax burden falls more heavily on the side of the market that

Accepted Answer

A)   has a fewer number of participants.
B)   is more inelastic.
C)   is closer to unit elastic.
D)   is less inelastic.E) B) and C)
F) B) and D)

Question 5

Scenario 6-2
Suppose demand for a product is given by the equation  and supply for the product is given by the equation 
-Refer to Scenario 6-2. What are the equilibrium price and equilibrium quantity in the market for this product?

Accepted Answer

The equilibrium pric...

Question 6

Table 6-2
 
-Refer to Table 6-2. A price floor set at $5 will

Accepted Answer

A)   be binding and will result in a surplus of 50 units.
B)   be binding and will result in a surplus of 250 units.
C)   be binding and will result in a surplus of 300 units.
D)   not be binding.E) A) and C)
F) All of the above

Question 7

If a tax is levied on the buyers of dog food, then

Accepted Answer

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.E) All of the above
F) A) and B)

Question 8

Figure 6-5 
-Refer to Figure 6-5. Suppose the market is initially in equilibrium. Then the government imposes a price control, as represented by the horizontal line on the graph. If the price control is a price floor, then the price control

Accepted Answer

A)   causes the quantity demanded to decrease by 50 units, relative to the initial equilibrium.
B)   causes the quantity supplied to increase by 40 units, relative to the initial equilibrium.
C)   results in some firms being more successful than others in selling their goods.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 9

If a tax is levied on the buyers of a product, then the demand curve will

Accepted Answer

A)   not shift.
B)   shift down.
C)   shift up.
D)   become flatter.E) B) and C)
F) B) and D)

Question 10

A tax of $1 on buyers always decreases the equilibrium price by $1.

Accepted Answer

A) True 
 B)False

Question 11

A price floor is

Accepted Answer

A)   a legal minimum on the price at which a good can be sold.
B)   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 floor.
C)   a source of inefficiency in a market.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 12

Figure 6-4 
-Refer to Figure 6-4. Which of the following statements is not correct?

Accepted Answer

A)   When the price is $10, quantity supplied equals quantity demanded.
B)   When the price is $6, there is a surplus of 8 units.
C)   When the price is $12, there is a surplus of 4 units.
D)   When the price is $16, quantity supplied exceeds quantity demanded by 12 units.E) C) and D)
F) A) and B)

Question 13

At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers want to sell.

Accepted Answer

A) True 
 B)False

Question 14

Figure 6-18
The vertical distance between points A and B represents the tax in the market. 
-Refer to Figure 6-18. The price that buyers pay after the tax is imposed is

Accepted Answer

A)   $8.
B)   $10.
C)   $16.
D)   $24.E) All of the above
F) None of the above

Question 15

Since half of the FICA tax is paid by firms and the other half is paid by workers, the burden of the tax must fall equally on firms and workers.

Accepted Answer

A) True 
 B)False

Question 16

Figure 6-22 
-Refer to Figure 6-22. The price paid by buyers after the tax is imposed is

Accepted Answer

A)   $3.00.
B)   $3.50.
C)   $5.00.
D)   $6.00.E) A) and D)
F) A) and C)

Question 17

The tax burden will fall most heavily on buyers of the good when the demand curve

Accepted Answer

A)   is relatively steep, and the supply curve is relatively flat.
B)   is relatively flat, and the supply curve is relatively steep.
C)   and the supply curve are both relatively flat.
D)   and the supply curve are both relatively steep.E) B) and C)
F) All of the above

Question 18

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

Accepted Answer

A)   demand curve will shift upward by $20, and the effective price received by sellers will increase by $20.
B)   demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20.
C)   supply curve will shift downward by $20, and the price paid by buyers will decrease by $20.
D)   supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20.E) None of the above
F) B) and C)

Question 19

A tax levied on the sellers of blueberries

Accepted Answer

A)   increases sellers' costs, reduces profits, and shifts the supply curve up.
B)   increases sellers' costs, reduces profits, and shifts the supply curve down.
C)   decreases sellers' costs, increases profits, and shifts the supply curve up.
D)   decreases sellers' costs, increases profits, and shifts the supply curve down.E) B) and D)
F) A) and B)

Question 20

If the demand curve is very inelastic and the supply curve is very elastic in a market, then the sellers will bear a greater burden of a tax imposed on the market, even if the tax is imposed on the buyers.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

Figure 6-4 -Refer to Figure 6-4. Which of the following statements is not correct?

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If the demand curve is very inelastic and the supply curve is very elastic in a market, then the sellers will bear a greater burden of a tax imposed on the market, even if the tax is imposed on the buyers.

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A tax burden falls more heavily on the side of the market that

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Which of the following was not a result of the luxury tax imposed by Congress in 1990?

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Figure 6-1 Panel a) Panel b) -Refer to Figure 6-1. A binding price ceiling is shown in

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The tax burden will fall most heavily on buyers of the good when the demand curve

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A price ceiling is always a binding price control, whereas a price floor may be either binding or not binding.

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A price floor is

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Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

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Figure 6-5 -Refer to Figure 6-5. Suppose the market is initially in equilibrium. Then the government imposes a price control, as represented by the horizontal line on the graph. If the price control is a price floor, then the price control

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If a tax is levied on the buyers of a product, then the demand curve will

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Table 6-2 -Refer to Table 6-2. A price floor set at $5 will

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Scenario 6-2 Suppose demand for a product is given by the equation and supply for the product is given by the equation -Refer to Scenario 6-2. What are the equilibrium price and equilibrium quantity in the market for this product?

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Figure 6-18 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-18. The price that buyers pay after the tax is imposed is

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At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers want to sell.

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Since half of the FICA tax is paid by firms and the other half is paid by workers, the burden of the tax must fall equally on firms and workers.

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A tax levied on the sellers of blueberries

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A tax of $1 on buyers always decreases the equilibrium price by $1.

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Figure 6-22 -Refer to Figure 6-22. The price paid by buyers after the tax is imposed is

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If a tax is levied on the buyers of dog food, then

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The equilibrium pric...
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