Question 1

Most economists are in favor of price controls as a way of allocating resources in the economy.

Accepted Answer

A) True 
 B)False

Question 2

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) B) and C)
F) A) and B)

Question 3

Figure 6-5 
-Refer to Figure 6-5. Suppose the market is initially in equilibrium. Then the government imposes a price control, as represented by the solid horizontal line on the graph. If the price control is a price floor, then the price control

Accepted Answer

A)  causes the quantity demanded to decrease by 50 units, relative to the initial equilibrium.
B)  causes the quantity supplied to increase by 40 units, relative to the initial equilibrium.
C)  means that some firms will not be able to sell all that they want
D)  All of the above are correct.E) A) and D)
F) A) and C)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 floor of $3 on this market, then there will be

Accepted Answer

A)  no surplus.
B)  a surplus of 10 units.
C)  a surplus of 15 units.
D)  a surplus of 20 units.E) All of the above
F) A) and B)

Question 6

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) A) and C)
F) A) and B)

Question 7

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) A) and C)
F) A) and B)

Question 8

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

Accepted Answer

A)  $8
B)  $7
C)  $6
D)  $9E) A) and D)
F) None of the above

Question 9

If the supply curve is more price elastic than the demand curve in a particular market, will the buyers or the sellers bear a larger burden of a per-unit tax imposed on the market?

Accepted Answer

The buyers will bear...

Question 10

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

Accepted Answer

A)  shift the supply curve upward by less than 50 cents.
B)  raise the equilibrium price by 50 cents.
C)  create a 50-cent tax burden each for buyers and sellers.
D)  discourage market activity.E) A) and B)
F) A) and C)

Question 11

Figure 6-6 
-Refer to Figure 6-6. Which of the following price ceilings would be binding in this market?

Accepted Answer

A)  $8
B)  $6
C)  $12
D)  $10E) B) and C)
F) A) and D)

Question 12

The rationing mechanisms that develop under binding price ceilings are usually inefficient.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Does a binding price ceiling result in a shortage or a surplus in the market?

Accepted Answer

A binding price ceil...

Question 15

Figure 6-15 
-Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at

Accepted Answer

A)  any price below $3.
B)  a price between $2 and $3.
C)  a price between $3 and $4.
D)  any price above $3.E) A) and B)
F) B) and C)

Question 16

If a tax is levied on the sellers of a product, then the supply curve will

Accepted Answer

A)  shift up.
B)  shift down.
C)  become flatter.
D)  not shift.E) B) and C)
F) C) and D)

Question 17

Figure 6-3
Panel (a) 
Panel (b)   
-Refer to Figure 6-3. A nonbinding price floor is shown in

Accepted Answer

A)  both panel (a)  and panel (b) .
B)  panel (a)  only.
C)  panel (b)  only.
D)  neither panel (a)  nor panel (b) .E) C) and D)
F) A) and B)

Question 18

In the housing market, supply and demand are

Accepted Answer

A)  more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run.
B)  more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.
C)  more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run.
D)  more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.E) B) and C)
F) All of the above

Question 19

Figure 6-36 
-Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer bears $2 of the tax burden.

Accepted Answer

A) True 
 B)False

Question 20

If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a shortage of labor will exist.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

Most economists are in favor of price controls as a way of allocating resources in the economy.

Correct AnswerverifiedShow Answer

Figure 6-36 -Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer bears $2 of the tax burden.

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Does a binding price ceiling result in a shortage or a surplus in the market?

Correct AnswerverifiedA binding price ceil...View AnswerShow Answer

If the supply curve is more price elastic than the demand curve in a particular market, will the buyers or the sellers bear a larger burden of a per-unit tax imposed on the market?

Correct AnswerverifiedThe buyers will bear...View AnswerShow Answer

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

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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 floor of $3 on this market, then there will be

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The rationing mechanisms that develop under binding price ceilings are usually inefficient.

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

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If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a shortage of labor will exist.

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

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Figure 6-5 -Refer to Figure 6-5. Suppose the market is initially in equilibrium. Then the government imposes a price control, as represented by the solid horizontal line on the graph. If the price control is a price floor, then the price control

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

Correct AnswerverifiedShow Answer

If a tax is levied on the sellers of a product, then the supply curve will

Correct AnswerverifiedShow Answer

Figure 6-6 -Refer to Figure 6-6. Which of the following price ceilings would be binding in this market?

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Figure 6-15 -Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at

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In the housing market, supply and demand are

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

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Figure 6-3 Panel (a) Panel (b) -Refer to Figure 6-3. A nonbinding price floor is shown in

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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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A binding price ceil...
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The buyers will bear...
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