Question 1

Figure 6-2 
-Refer to Figure 6-2. The price ceiling

Accepted Answer

A)   causes a shortage of 40 units.
B)   is not binding, because it is set above the equilibrium price.
C)   causes a shortage of 45 units.
D)   causes a shortage of 85 units.E) B) and C)
F) C) and D)

Question 2

A binding price floor will reduce a firm's total revenue

Accepted Answer

A)   always.
B)   when demand is elastic.
C)   when demand is inelastic.
D)   never.E) All of the above
F) A) and B)

Question 3

Which of the following would be the least likely result of a binding price ceiling imposed on the market for rental cars?

Accepted Answer

A)   an accumulation of dirt in the interior of rental cars
B)   poor engine maintenance in rental cars
C)   free gasoline given to people as an incentive to a rent a car
D)   slow replacement of old rental cars with newer onesE) B) and D)
F) None of the above

Question 4

Figure 6-9 
-Refer to Figure 6-9. A price ceiling set at

Accepted Answer

A)   $4 will be binding and will result in a shortage of 8 units.
B)   $4 will be binding and will result in a shortage of 16 units.
C)   $7 will be binding and will result in a surplus of 4 units.
D)   $7 will be binding and will result in a surplus of 8 units.E) C) and D)
F) A) and C)

Question 5

Figure 6-31 
-Refer to Figure 6-31. If the government set a price ceiling at $9, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

There woul...

Question 6

Which of the following is not correct?

Accepted Answer

A)   Economists have two roles: scientist and policy adviser.
B)   As scientists, economists develop and test theories to explain the world around them.
C)   Economic policies rarely have effects that their architects did not intend or anticipate.
D)   As policy advisers, economists use their theories to help change the world for the better.E) B) and C)
F) A) and D)

Question 7

A tax on sellers increases the quantity of the good sold in the market.

Accepted Answer

A) True 
 B)False

Question 8

A tax burden falls more heavily on the side of the market that is less elastic.

Accepted Answer

A) True 
 B)False

Question 9

Figure 6-13
This figure shows the market demand and market supply curves for good X. 
-Refer to Figure 6-13. Which of the following statements is correct?

Accepted Answer

A)   A price ceiling set at $6 would be binding, but a price ceiling set at $4 would not be binding.
B)   A price floor set at $4 would be binding, but a price ceiling set at $4 would not be binding.
C)   A price ceiling set at $3.50 would result in a surplus.
D)   A price floor set at $6.50 would result in a surplus.E) B) and C)
F) A) and D)

Question 10

The burden that results from a tax on yachts falls more heavily on the buyers of yachts than on the sellers of yachts.

Accepted Answer

A) True 
 B)False

Question 11

Figure 6-25 
-Refer to Figure 6-25. The burden of the tax on sellers is

Accepted Answer

A)   $1 per unit.
B)   $1.50 per unit.
C)   $2 per unit.
D)   $3 per unit.E) B) and D)
F) B) and C)

Question 12

Minimum wage laws

Accepted Answer

A)   may encourage some teenagers to drop out and take jobs.
B)   create labor shortages.
C)   have the greatest impact in the market for skilled labor.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 13

If the demand curve is very elastic and the supply curve is very inelastic 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

Question 14

Figure 6-13
This figure shows the market demand and market supply curves for good X. 
-Refer to Figure 6-13. Which of the following statements is not correct?

Accepted Answer

A)   A price ceiling set at $4 would be binding, but a price ceiling set at $6 would not be binding.
B)   A price floor set at $7 would be binding, but a price floor set at $4 would not be binding.
C)   A price ceiling set at $3.50 would result in a surplus.
D)   A price floor set at $6.50 would result in a surplus.E) A) and C)
F) B) and C)

Question 15

The minimum wage, if it is binding, raises the incomes of

Accepted Answer

A)   no workers.
B)   only those workers who cannot find jobs.
C)   only those workers whose jobs would pay less than the minimum wage if it didn't exist.
D)   all workers.E) None of the above
F) All of the above

Question 16

Figure 6-7 
-Refer to Figure 6-7. Which of the following price controls would cause a shortage of 20 units of the good?

Accepted Answer

A)   a price ceiling set at $6
B)   a price ceiling set at $5
C)   a price floor set at $9
D)   a price floor set at $8E) A) and B)
F) B) and C)

Question 17

Figure 6-16 
-Refer to Figure 6-16. In this market, a minimum wage of $2.75 creates a labor

Accepted Answer

A)   shortage of 2,250 workers.
B)   shortage of 4,500 workers.
C)   surplus of 2,250 workers.
D)   neither a labor shortage nor surplus.E) All of the above
F) A) and D)

Question 18

Policymakers use taxes

Accepted Answer

A)   to raise revenue for public purposes but not to influence market outcomes.
B)   both to raise revenue for public purposes and to influence market outcomes.
C)   when they realize that price controls alone are insufficient to correct market inequities.
D)   only in those markets in which the burden of the tax falls clearly on the sellers.E) All of the above
F) A) and B)

Question 19

A large majority of economists favor eliminating the minimum wage.

Accepted Answer

A) True 
 B)False

Question 20

One common example of a price floor is the minimum wage.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

A binding price floor will reduce a firm's total revenue

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Figure 6-9 -Refer to Figure 6-9. A price ceiling set at

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A tax burden falls more heavily on the side of the market that is less elastic.

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A tax on sellers increases the quantity of the good sold in the market.

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If the demand curve is very elastic and the supply curve is very inelastic 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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Which of the following would be the least likely result of a binding price ceiling imposed on the market for rental cars?

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A large majority of economists favor eliminating the minimum wage.

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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. Which of the following statements is not correct?

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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. Which of the following statements is correct?

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The minimum wage, if it is binding, raises the incomes of

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Figure 6-2 -Refer to Figure 6-2. The price ceiling

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Figure 6-7 -Refer to Figure 6-7. Which of the following price controls would cause a shortage of 20 units of the good?

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Which of the following is not correct?

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Minimum wage laws

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One common example of a price floor is the minimum wage.

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The burden that results from a tax on yachts falls more heavily on the buyers of yachts than on the sellers of yachts.

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Policymakers use taxes

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Figure 6-31 -Refer to Figure 6-31. If the government set a price ceiling at $9, would there be a shortage or surplus, and how large would be the shortage/surplus?

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Figure 6-25 -Refer to Figure 6-25. The burden of the tax on sellers is

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Figure 6-16 -Refer to Figure 6-16. In this market, a minimum wage of $2.75 creates a labor

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