Question 1

Suppose the government imposes a 30-cent tax on the sellers of soft drinks. Which of the following is not correct? The tax would

Accepted Answer

A) shift the supply curve upward by 30 cents. 
B) raise the equilibrium price by 30 cents. 
C) reduce the equilibrium quantity. 
D) discourage market activity. 
A) shift the supply curve upward by 30 cents. 
B) raise the equilibrium price by 30 cents. 
C) reduce the equilibrium quantity. 
D) discourage market activity. B

Question 2

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?

Accepted Answer

A) George 
B) Charles 
C) Otto 
D) Apparently, all three advisors have studied economics, but their views on positive economics are different. 
A) George 
B) Charles 
C) Otto 
D) Apparently, all three advisors have studied economics, but their views on positive economics are different. A

Question 3

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

Accepted Answer

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

Question 4

FICA is an example of a payroll tax, which is a tax on the wages that firms pay their workers.

Accepted Answer

A) True 
 B)False

Question 5

Figure 6-15  
-Refer to Figure 6-15. Suppose a price ceiling of $2 is imposed on this market. As a result,

Accepted Answer

A) the quantity of the good supplied decreases by 30 units. 
B) the demand curve shifts to the left so as to now pass through the point (quantity = 30, price = $2). 
C) buyers' total expenditure on the good decreases by $75. 
D) buyers' total expenditure on the good falls by $15. 
A) the quantity of the good supplied decreases by 30 units. 
B) the demand curve shifts to the left so as to now pass through the point (quantity = 30, price = $2). 
C) buyers' total expenditure on the good decreases by $75. 
D) buyers' total expenditure on the good falls by $15.

Question 6

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

Accepted Answer

A) The effective price received by sellers is $0.40 per bottle less than it was before the tax. 
B) Sixty percent of the burden of the tax falls on sellers. 
C) This tax causes the demand curve for perfume to shift downward by $1.00 at each quantity of perfume. 
D) All of the above are correct. 
A) The effective price received by sellers is $0.40 per bottle less than it was before the tax. 
B) Sixty percent of the burden of the tax falls on sellers. 
C) This tax causes the demand curve for perfume to shift downward by $1.00 at each quantity of perfume. 
D) All of the above are correct.

Question 7

Figure 6-24  
-Refer to Figure 6-24. Andrew is a buyer of the good. Taking the tax into account, how much does Andrew effectively pay to acquire one unit of the good?

Accepted Answer

A) $16 
B) $18 
C) $24 
D) $26 
A) $16 
B) $18 
C) $24 
D) $26

Question 8

Figure 6-32  
-Refer to Figure 6-32. If the government set a price floor at $70, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price floor set at

Question 9

Who bears the majority of a tax burden depends on whether the tax is placed on the buyers or the sellers.

Accepted Answer

A) True 
 B)False

Question 10

​Whether the minimum wage is a binding price floor always depends upon whether the economy is in a recession.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following causes the price paid by buyers to be different than the price received by sellers?

Accepted Answer

A) a binding price floor 
B) a binding price ceiling 
C) a tax on the good 
D) All of the above are correct. 
A) a binding price floor 
B) a binding price ceiling 
C) a tax on the good 
D) All of the above are correct.

Question 12

If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50, then the price ceiling is a binding constraint on the market.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A price floor set at

Question 14

A large majority of economists favor eliminating the minimum wage.

Accepted Answer

A) True 
 B)False

Question 15

When policymakers set prices by legal decree, they

Accepted Answer

A) are usually following the advice of mainstream economists. 
B) improve the organization of economic activity. 
C) obscure the signals that normally guide the allocation of society's resources. 
D) are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency. 
A) are usually following the advice of mainstream economists. 
B) improve the organization of economic activity. 
C) obscure the signals that normally guide the allocation of society's resources. 
D) are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency.

Question 16

A tax on buyers increases the size of a market.

Accepted Answer

A) True 
 B)False

Question 17

A tax on the buyers of personal computer external hard drives encourages

Accepted Answer

A) sellers to supply a smaller quantity at every price. 
B) buyers to demand a smaller quantity at every price. 
C) buyers to demand a larger quantity at every price. 
D) Both a) and b) are correct. 
A) sellers to supply a smaller quantity at every price. 
B) buyers to demand a smaller quantity at every price. 
C) buyers to demand a larger quantity at every price. 
D) Both a) and b) are correct.

Question 18

Advocates of the minimum wage

Accepted Answer

A) deny that the minimum wage produces any adverse effects. 
B) emphasize the benefits to teenagers of increases in the minimum wage. 
C) emphasize the low annual incomes of those who work for the minimum wage. 
D) All of the above are correct. 
A) deny that the minimum wage produces any adverse effects. 
B) emphasize the benefits to teenagers of increases in the minimum wage. 
C) emphasize the low annual incomes of those who work for the minimum wage. 
D) All of the above are correct.

Question 19

Figure 6-27
This figure shows the market demand and market supply curves for good Z.  
-Refer to Figure 6-27. Suppose a tax of $3 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

Accepted Answer

A) less than 8 units 
B) 8 units 
C) between 8 units and 10 units 
D) greater than 10 units 
A) less than 8 units 
B) 8 units 
C) between 8 units and 10 units 
D) greater than 10 units

Question 20

Table 6-2  
-Refer to Table 6-2. A price ceiling set at $5 results in

Accepted Answer

A) 50 units sold. 
B) 250 units sold. 
C) 300 units sold. 
D) 350 units sold. 
A) 50 units sold. 
B) 250 units sold. 
C) 300 units sold. 
D) 350 units sold.

Exam 6: Supply, Demand, and Government Policies

Suppose the government imposes a 30-cent tax on the sellers of soft drinks. Which of the following is not correct? The tax would

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

FICA is an example of a payroll tax, which is a tax on the wages that firms pay their workers.

Figure 6-15 -Refer to Figure 6-15. Suppose a price ceiling of $2 is imposed on this market. As a result,

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

Figure 6-24 -Refer to Figure 6-24. Andrew is a buyer of the good. Taking the tax into account, how much does Andrew effectively pay to acquire one unit of the good?

Figure 6-32 -Refer to Figure 6-32. If the government set a price floor at $70, would there be a shortage or surplus, and how large would be the shortage/surplus?

Who bears the majority of a tax burden depends on whether the tax is placed on the buyers or the sellers.

​Whether the minimum wage is a binding price floor always depends upon whether the economy is in a recession.

Which of the following causes the price paid by buyers to be different than the price received by sellers?

If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50, then the price ceiling is a binding constraint on the market.

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

A large majority of economists favor eliminating the minimum wage.

When policymakers set prices by legal decree, they

A tax on buyers increases the size of a market.

A tax on the buyers of personal computer external hard drives encourages

Advocates of the minimum wage

Figure 6-27 This figure shows the market demand and market supply curves for good Z. -Refer to Figure 6-27. Suppose a tax of $3 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

Table 6-2 -Refer to Table 6-2. A price ceiling set at $5 results in

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Whether the minimum wage is a binding price floor always depends upon whether the economy is in a recession.