Exam 6: Supply, Demand, and Government Policies

Which of the following statements is correct?

Figure 6-5 -Refer to Figure 6-5. Which of the following statements is not correct?

A tax on golf clubs will cause buyers of golf clubs to pay a higher price, sellers of golf clubs to receive a lower price, and fewer golf clubs to be sold.

Because the supply and demand of housing are inelastic in the short run, the initial shortage caused by rent control is large.

Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

Which of the following is correct?

A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market.

The goal of rent control is to

Minimum-wage laws dictate the lowest wage that firms may pay workers.

Regardless of whether a tax is levied on sellers or buyers, taxes encourage market activity.

A price floor is a legal minimum on the price at which a good or service can be sold.

The tax incidence depends on whether the tax is levied on buyers or sellers.

A tax on buyers decreases the quantity of the good sold in the market.

Figure 6-9 -Refer to Figure 6-9. In this market, a minimum wage of $7 creates a labor

Define a price ceiling.

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

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

States in the U.S. may mandate minimum wages above the federal level.

Lawmakers can decide whether the buyers or the sellers must send a tax to the government, but they cannot legislate the true burden of a tax.

A tax on sellers shifts the supply curve but not the demand curve.