Question 1

The federal government uses the revenue from the FICA (Federal Insurance Contribution Act)  tax to pay for

Accepted Answer

A)   unemployment compensation.
B)   the salaries of members of Congress.
C)   Social Security and Medicare.
D)   housing subsidies for low-income people.E) All of the above
F) C) and D)

Question 2

Figure 6-30
Panel (a)  Panel (b)    Panel (c)  
-Refer to Figure 6-30. In which market will the majority of the tax burden fall on buyers?

Accepted Answer

A)   the market shown in panel (a) .
B)   the market shown in panel (b) .
C)   the market shown in panel (c) .
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 3

Which of the following statements about the effects of rent control is correct?

Accepted Answer

A)   The short-run effect of rent control is a surplus of apartments, and the long-run effect of rent control is a shortage of apartments.
B)   The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments.
C)   In the long run, rent control leads to a shortage of apartments and an improvement in the quality of available apartments.
D)   The effects of rent control are very noticeable to the public in the short run because the primary effects of rent control occur very quickly.E) None of the above
F) A) and D)

Question 4

A tax imposed on the buyers of a good will raise the

Accepted Answer

A)   price paid by buyers and lower the equilibrium quantity.
B)   price paid by buyers and raise the equilibrium quantity.
C)   effective price received by sellers and lower the equilibrium quantity.
D)   effective price received by sellers and raise the equilibrium quantity.E) A) and B)
F) None of the above

Question 5

Suppose buyers of vodka are required to send $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct?

Accepted Answer

A)   This tax causes the demand curve for vodka to shift downward by $5.00 at each quantity of vodka.
B)   The price paid by buyers is $2.00 per bottle more than it was before the tax.
C)   Sixty percent of the burden of the tax falls on sellers.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Question 6

A tax on the buyers of cameras encourages

Accepted Answer

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

Question 7

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) A) and C)

Question 8

Other than OPEC, the shortage of gasoline in the U.S. in the 1970s could also be blamed on

Accepted Answer

A)   a sharp increase in the demand for gasoline that was brought on by the Vietnam War.
B)   the government's policy of maintaining a price ceiling on gasoline.
C)   an indifference among U.S. consumers toward conservation.
D)   the lack of substitutes for crude oil.E) B) and D)
F) C) and D)

Question 9

Under rent control, bribery is a mechanism to

Accepted Answer

A)   bring the total price of an apartment (including the bribe)  closer to the equilibrium price.
B)   allocate housing to the poorest individuals in the market.
C)   force the total price of an apartment (including the bribe)  to be less than the market price.
D)   allocate housing to the most deserving tenants.E) None of the above
F) All of the above

Question 10

Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

Accepted Answer

A)   An increase in the price of flour, which is used to make bread.
B)   A decrease in the price of lunch meat.
C)   A decease in the price of unsliced bread, which people consider as a substitute for sliced bread.
D)   An decrease in the price of peanut butter and jelly.E) A) and C)
F) B) and D)

Question 11

An example of a price floor is

Accepted Answer

A)   the regulation of gasoline prices in the U.S. in the 1970s.
B)   rent control.
C)   the minimum wage.
D)   any restriction on price that leads to a shortage.E) C) and D)
F) B) and D)

Question 12

Figure 6-21 
-Refer to Figure 6-21. The price that buyers pay after the tax is imposed is

Accepted Answer

A)   $8.00.
B)   $9.00.
C)   $10.50.
D)   $12.00.E) None of the above
F) All of the above

Question 13

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 ceiling of $4 on this market, then there will be

Accepted Answer

A)   no shortage.
B)   a shortage of 5 units.
C)   a shortage of 10 units.
D)   a shortage of 20 units.E) C) and D)
F) A) and B)

Question 14

A $5 tax levied on the buyers of pants will cause the

Accepted Answer

A)   supply curve for pants to shift down by $5.
B)   supply curve for pants to shift up by $5.
C)   demand curve for pants to shift down by $5.
D)   demand curve for pants to shift up by $5.E) A) and B)
F) A) and C)

Question 15

Suppose the government has imposed a price floor on cellular phones. Which of the following events could transform the price floor from one that is binding to one that is not binding?

Accepted Answer

A)   Cellular phones become less popular.
B)   Traditional land line phones become more expensive.
C)   The components used to produce cellular phones become less expensive.
D)   Firms expect the price of cellular phones to fall in the future.E) A) and B)
F) B) and D)

Question 16

Economic policies often have effects that their architects did not intend or anticipate.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)   shift down.
B)   shift up.
C)   become flatter.
D)   not shift.E) B) and D)
F) All of the above

Question 18

If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax on buyers of gasoline, then the price paid by buyers will

Accepted Answer

A)   increase, and the price received by sellers will increase.
B)   increase, and the price received by sellers will not change.
C)   not change, and the price received by sellers will increase.
D)   not change, and the price received by sellers will not change.E) B) and D)
F) A) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

The federal government uses the revenue from the FICA (Federal Insurance Contribution Act) tax to pay for

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A $5 tax levied on the buyers of pants will cause the

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A tax imposed on the buyers of a good will raise the

Correct AnswerverifiedShow Answer

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

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Suppose buyers of vodka are required to send $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct?

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Other than OPEC, the shortage of gasoline in the U.S. in the 1970s could also be blamed on

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An example of a price floor is

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One disadvantage of government subsidies over price controls is that subsidies

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Suppose the government has imposed a price floor on cellular phones. Which of the following events could transform the price floor from one that is binding to one that is not binding?

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Under rent control, bribery is a mechanism to

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Figure 6-30 Panel (a) Panel (b) Panel (c) -Refer to Figure 6-30. In which market will the majority of the tax burden fall on buyers?

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A tax on the buyers of cameras encourages

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Figure 6-21 -Refer to Figure 6-21. The price that buyers pay after the tax is imposed is

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Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

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Economic policies often have effects that their architects did not intend or anticipate.

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

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If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax on buyers of gasoline, then the price paid by buyers will

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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 ceiling of $4 on this market, then there will be

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

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Which of the following statements about the effects of rent control is correct?

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