Chapter 6

In a competitive market free of government regulation, A. price adjusts until quantity demanded is less than quantity supplied. B. supply adjusts to meet demand at every price. C. price adjusts until quantity demanded is greater than quantity supplied. D. price adjusts until quantity demanded equals quantity supplied.

If a price ceiling is not binding, then A. the equilibrium price is above the price ceiling. B. the equilibrium price is below the price ceiling. C. it has no legal enforcement mechanism. D. None of the above is correct because all price ceilings must be binding

If a nonbinding price ceiling is imposed on a market, then the A. price in the market will decrease. B. price in the market will increase. C. quantity sold in the market will stay the same. D. quantity sold in the market will decrease.

A shortage results when a A. nonbinding price ceiling is removed from a market. B. binding price ceiling is imposed on a market. C. nonbinding price ceiling is imposed on a market. D. binding price ceiling is removed from a market.

The price ceiling A. is binding. B. causes a shortage. C. causes the quantity demanded to exceed the quantity supplied. D. All of the above are correct.

The price ceiling causes a A. shortage of 45 units. B. surplus of 85 units. C. shortage of 85 units. D. surplus of 40 units.

A price floor will be binding only if it is set A. equal to the equilibrium price. B. either above or below the equilibrium price. C. above the equilibrium price D. below the equilibrium price

If the government removes a binding price floor from a market, then the price paid by buyers will A. decrease, and the quantity sold in the market will increase. B. decrease, and the quantity sold in the market will decrease. C. increase, and the quantity sold in the market will decrease. D. increase, and the quantity sold in the market will increase.

A binding price floor is shown in A. panel (b) only. B. neither panel (a) nor panel (b). C. panel (a) only. D. both panel (a) and panel (b).

In panel (b), there will be A. a shortage of wheat. B. a surplus of wheat. C. equilibrium in the market. D. lines of people waiting to buy wheat.

Which of the following price ceilings would be binding in this market? A. $14 B. $12 C. $8 D. $10

Under the binding price ceiling of $4, what would be the black market price? A. $14 B. $12 C. $16 D. $10

Which of the following statements is not correct? A. A price ceiling set at $9 would result in a surplus. B.A price floor set at $14 would be binding, but a price floor set at $8 would not be binding. C.A price ceiling set at $8 would be binding, but a price ceiling set at $12 would not be binding. D. A price floor set at $11 would result in a surplus.

If the government imposes a price floor of $6 on this market, then there will be A. a surplus of 20 units. B. a surplus of 30 units. C. no surplus. D. a surplus of 40 units.

Over time, housing shortages caused by rent control A.decrease, because the demand for and supply of housing are less elastic in the long run. B.decrease, because the demand for and supply of housing are more elastic in the long run. C.increase, because the demand for and supply of housing are more elastic in the long run. D.increase, because the demand for and supply of housing are less elastic in the long run.

If the minimum wage exceeds the equilibrium wage, then A. there will be no unemployment. B. the minimum wage will not be binding. C. the quantity supplied of labor will exceed the quantity demanded. D. the quantity demanded of labor will exceed the quantity supplied.

A tax on the sellers of coffee mugs A. decreases the size of the coffee mug market. B. may increase, decrease, or have no effect on the size of the coffee mug market. C. has no effect on the size of the coffee mug market. D. increases the size of the coffee mug market.

When a tax is placed on the sellers of a product, buyers pay A. more, and sellers receive more than they did before the tax. B. more, and sellers receive less than they did before the tax. C. less, and sellers receive more than they did before the tax. D. less, and sellers receive less than they did before the tax.

If a tax is levied on the sellers of a product, then the demand curve will A. become flatter. B. shift up. C. not shift. D. shift down.

If a tax is levied on the sellers of a product, then the supply curve will A. shift up. B. become flatter. C. shift down. D. not shift.

A tax on the sellers of cameras encourages 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.

A $0.50 tax levied on the buyers of pomegranate juice will shift the demand curve A. downward by less than $0.50. B. downward by exactly $0.50. C. upward by exactly $0.50. D. upward by less than $0.50.

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

The term tax incidence refers to A. widespread view that taxes (and death) are the only certainties in life. B. whether the demand curve or the supply curve shifts when the tax is imposed. C. the distribution of the tax burden between buyers and sellers. D.whether buyers or sellers of a good are required to send tax payments to the government.

Which of the following statements is correct concerning the burden of a tax imposed on take-out food? A.We have to know whether it is the buyers or the sellers that are required to pay the tax to the government in order to make this determination. B. Sellers bear the entire burden of the tax. C. Buyers bear the entire burden of the tax. D. Buyers and sellers share the burden of the tax.

Suppose the government imposes a 20-cent tax on the sellers of iced tea. Which of the following is not correct? The tax would A. discourage market activity. B. reduce the equilibrium quantity. C. raise the equilibrium price by 20 cents. D. shift the supply curve upward by 20 cents.

The price that buyers pay after the tax is imposed is A. $24 B. $8 C. $16 D. $10

The price that sellers receive after the tax is imposed is A. $6 B. $10 C. $16 D. $24

The per-unit burden of the tax on buyers is A. $10 B. $14 C. $6 D. $8

The per-unit burden of the tax on sellers is A. $8 B. $14 C. $6 D. $10

What is the post-tax equilibrium quantity in this market? A. between 70 units and 100 units B. less than 70 units C. greater than 100 units D. 70 units

Suppose a tax of $10 per unit is imposed on this market. What will be the new equilibrium quantity in this market? A. less than 70 units B. greater than 100 units C. 70 units D. between 70 units and 100 units

If a tax is imposed on a market with inelastic demand and elastic supply, then A. it is impossible to determine how the burden of the tax will be shared. B. sellers will bear most of the burden of the tax. C. the burden of the tax will be shared equally between buyers and sellers. D. buyers will bear most of the burden of the tax.

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 A. $1 B. less than $1 C. between $1 and $2. D. $2

The tax burden will fall most heavily on sellers of the good when the demand curve A. is relatively flat, and the supply curve is relatively steep. B. is relatively steep, and the supply curve is relatively flat. C. and the supply curve are both relatively flat. D. and the supply curve are both relatively steep.