Question 1

Tax incidence

Accepted Answer

A)   depends on the legislated burden.
B)   is entirely random.
C)   depends on the elasticities of supply and demand.
D)   falls entirely on buyers or entirely on sellers.E) A) and B)
F) A) and C)

Question 2

The Earned Income Tax Credit is an example of a

Accepted Answer

A)   minimum-wage law.
B)   price ceiling.
C)   wage subsidy.
D)   rent subsidy.E) B) and D)
F) A) and C)

Question 3

Most labor economists believe that the supply of labor is

Accepted Answer

A)   less elastic than the demand,and,therefore,firms bear most of the burden of the payroll tax.
B)   less elastic than the demand,and,therefore,workers bear most of the burden of the payroll tax.
C)   more elastic than the demand,and,therefore,workers bear most of the burden of the payroll tax.
D)   more elastic than the demand,and,therefore,firms bear most of the burden of the payroll tax.E) A) and D)
F) A) and C)

Question 4

Figure 6-15 
-Refer to Figure 6-15.Suppose a tax of $2 per unit is imposed on this market.How much will buyers pay per unit after the tax is imposed?

Accepted Answer

A)   $3
B)   between $3 and $5
C)   between $5 and $7
D)   $7E) None of the above
F) B) and C)

Question 5

The long-run effects of rent controls are a good illustration of the principle that

Accepted Answer

A)   society faces a short-run tradeoff between unemployment and inflation.
B)   the cost of something is what you give up to get it.
C)   people respond to incentives.
D)   government can sometimes improve on market outcomes.E) B) and C)
F) None of the above

Question 6

Which of the following is correct?

Accepted Answer

A)   Workers determine the supply of labor,and firms determine the demand for labor.
B)   Workers determine the demand for labor,and firms determine the supply of labor.
C)   The labor market is a single market for all different types of workers.
D)   The price of the product produced by labor adjusts to balance the supply of labor and the demand for labor.E) A) and B)
F) B) and D)

Question 7

A tax on the buyers of cereal will increase the price of cereal paid by buyers,

Accepted Answer

A)   decrease the effective price of cereal received by sellers,and decrease the equilibrium quantity of cereal.
B)   decrease the effective price of cereal received by sellers,and increase the equilibrium quantity of cereal.
C)   increase the effective price of cereal received by sellers,and decrease the equilibrium quantity of cereal.
D)   increase the effective price of cereal received by sellers,and increase the equilibrium quantity of cereal.E) C) and D)
F) A) and C)

Question 8

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) A) and D)
F) None of the above

Question 9

One disadvantage of government subsidies over price controls is that subsidies

Accepted Answer

A)   prevent the attainment of equilibrium in the markets in which they are imposed.
B)   make higher taxes necessary.
C)   are always unfair to those with low incomes.
D)   cause unemployment.E) A) and D)
F) B) and C)

Question 10

Figure 6-9 
-Refer to Figure 6-9.At which price would a price ceiling be nonbinding?

Accepted Answer

A)   $2
B)   $3
C)   $4
D)   $6E) A) and B)
F) A) and C)

Question 11

Price floors are typically imposed to benefit buyers.

Accepted Answer

A) True 
 B)False

Question 12

The tax burden falls more heavily on the side of the market that is more inelastic.

Accepted Answer

A) True 
 B)False

Question 13

One common example of a price ceiling is rent control.

Accepted Answer

A) True 
 B)False

Question 14

Figure 6-6 
-Refer to Figure 6-6.If the government imposes a price ceiling of $12 on this market,then there will be

Accepted Answer

A)   no shortage.
B)   a shortage of 10 units.
C)   a shortage of 20 units.
D)   a shortage of 40 units.E) B) and D)
F) B) and C)

Question 15

Suppose that the demand for lava lamps is elastic,and the supply of lava lamps is inelastic.A tax of $2 per lamp levied on lava lamps will increase the price paid by buyers of lava lamps by

Accepted Answer

A)   less than $1.
B)   $1.
C)   between $1 and $2.
D)   $2.E) All of the above
F) A) and D)

Question 16

Suppose there is currently a tax of $50 per ticket on airline tickets.Buyers 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) A) and C)
F) None of the above

Question 17

In a free market,the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

Accepted Answer

A) True 
 B)False

Question 18

When a tax is imposed on the buyers of a good,the demand curve shifts

Accepted Answer

A)   upward by the amount of the tax.
B)   downward by the amount of the tax.
C)   upward by less than the amount of the tax.
D)   downward by less than the amount of the tax.E) B) and C)
F) All of the above

Question 19

Lawmakers designed the burden of the FICA payroll tax to be split evenly between workers and firms.Labor economists believe that

Accepted Answer

A)   lawmakers may have actually achieved their goal because statistics show that the tax burden is currently equally divided.
B)   the tax raises too little revenue for the government,so it should be eliminated.
C)   firms bear most of the burden of the tax.
D)   workers bear most of the burden of the tax.E) C) and D)
F) B) and C)

Question 20

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200,and the government imposes a price ceiling of $150 per physical.As a result of the price ceiling,the

Accepted Answer

A)   demand curve for physicals shifts to the right.
B)   supply curve for physicals shifts to the left.
C)   quantity demanded of physicals increases,and the quantity supplied of physicals decreases.
D)   number of physicals performed stays the same.E) A) and D)
F) A) and C)

Exam 6: Supply,demand,and Government Policies

Price floors are typically imposed to benefit buyers.

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One common example of a price ceiling is rent control.

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The Earned Income Tax Credit is an example of a

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Figure 6-6 -Refer to Figure 6-6.If the government imposes a price ceiling of $12 on this market,then there will be

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Tax incidence

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Suppose there is currently a tax of $50 per ticket on airline tickets.Buyers 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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Most labor economists believe that the supply of labor is

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In a free market,the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

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The tax burden falls more heavily on the side of the market that is more inelastic.

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Which of the following is correct?

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A tax on the buyers of cereal will increase the price of cereal paid by buyers,

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One disadvantage of government subsidies over price controls is that subsidies

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Lawmakers designed the burden of the FICA payroll tax to be split evenly between workers and firms.Labor economists believe that

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Suppose that the demand for lava lamps is elastic,and the supply of lava lamps is inelastic.A tax of $2 per lamp levied on lava lamps will increase the price paid by buyers of lava lamps by

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When a tax is imposed on the buyers of a good,the demand curve shifts

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The long-run effects of rent controls are a good illustration of the principle that

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Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200,and the government imposes a price ceiling of $150 per physical.As a result of the price ceiling,the

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Figure 6-15 -Refer to Figure 6-15.Suppose a tax of $2 per unit is imposed on this market.How much will buyers pay per unit after the tax is imposed?

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

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Figure 6-9 -Refer to Figure 6-9.At which price would a price ceiling be nonbinding?

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