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Exam 6: Supply, Demand, and Government Policies

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Question 301

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Figure 6-33 -Refer to Figure 6-33. Suppose a $3 per-unit tax is imposed on the sellers of this good. What is the effective price that sellers will receive for the good after the tax is imposed?

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Question 302

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Figure 6-13 This figure shows the market demand and market supply curves for good X. -Refer to Figure 6-13. If the government imposes a price ceiling of $6 on this market, then there will be

A) no shortage.
B) a shortage of 5 units.
C) a shortage of 10 units.
D) a shortage of 20 units.

E) C) and D)
F) None of the above

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Question 303

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Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

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

The primary effect of rent control in the short run is to reduce rents.

The United States is the only country in the world with minimum-wage laws.

Figure 6-7 -Refer to Figure 6-7. For a price ceiling to be binding in this market, it would have to be set at

Figure 6-35 -Refer to Figure 6-35. A price ceiling set at $70 would create a shortage of 40 units.

Scenario 6-1 Suppose that demand in the market for good X is given by the equation and that supply in the market for good X is given by the equation -Refer to Scenario 6-1. If the government set a price floor at $7, would there be a shortage or surplus, and how large would be the shortage/surplus?

Figure 6-19 -Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

If the government levies a $0.25 tax per MP3 music file downloaded on buyers of MP3 music files, then the price received by sellers of MP3 music files would

You have responsibility for economic policy in the country of Freedonia. Recently, the neighboring country of Sylvania has cut off all exports of oranges to Freedonia. George, who is one of your advisors, says that the best way to avoid a shortage of oranges is to take no action at all. Charles, another one of your advisors, argues that without a binding price floor, a shortage will certainly develop. Otto, a third advisor, suggests that you should impose a binding price ceiling in order to avoid a shortage of oranges. Which of your three advisors is most likely to have studied economics?

When a binding price floor is imposed on a market for a good, some people who want to sell the good cannot do so.

Buyers and sellers rarely share the burden of a tax equally.

Consider the market for gasoline. Buyers

When a tax is placed on the buyers of a product, the

Scenario 6-1 Suppose that demand in the market for good X is given by the equation and that supply in the market for good X is given by the equation -Refer to Scenario 6-1. If the government set a price ceiling at $8, would there be a shortage or surplus, and how large would be the shortage/surplus?

Price ceilings are typically imposed to benefit sellers.

Figure 6-18 The vertical distance between points A and B represents the tax in the market. -Refer to Figure 6-18. The per-unit burden of the tax on sellers is

Table 6-2 -Refer to Table 6-2. A price floor set at $20 results in