Question 1

One economist has argued that rent control is "the best way to destroy a city,other than bombing." Why would an economist say this?

Accepted Answer

A)   He fears that low rents will cause low-income people to move into the city,reducing the quality of life for other people.
B)   He fears that rent control will benefit landlords at the expense of tenants,increasing inequality in the city.
C)   He fears that rent controls will cause a construction boom,which will make the city crowded and more polluted.
D)   He fears that rent control will eliminate the incentive to maintain buildings,leading to a deterioration of the city.

Question 2

When a tax is placed on the sellers of a product,

Accepted Answer

A)   buyers pay more and sellers receive more than they did before the tax.
B)   buyers pay more and sellers receive less than they did before the tax.
C)   buyers pay less and sellers receive more than they did before the tax.
D)   buyers pay less and sellers receive less than they did before the tax.

Question 3

The price paid by buyers in a market will increase if the government

Accepted Answer

A)   decreases a binding price floor in that market.
B)   increases a binding price ceiling in that market.
C)   decreases a tax on the good sold in that market.
D)   imposes a binding price ceiling in that market.

Question 4

A price floor will be binding only if it is set

Accepted Answer

A)   equal to the equilibrium price.
B)   above the equilibrium price.
C)   below the equilibrium price.
D)   either above or below the equilibrium price.

Question 5

When a binding price floor is imposed on a market to benefit sellers,

Accepted Answer

A)   no sellers actually do benefit.
B)   some sellers benefit,but no sellers are harmed.
C)   some sellers benefit and some sellers are harmed.
D)   all sellers benefit.

Question 6

Which of the following causes a shortage of a good?

Accepted Answer

A)   a binding price floor
B)   a binding price ceiling
C)   a tax on the good
D)   More than one of the above is correct.

Question 7

The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.

Accepted Answer

A) True 
 B)False

Question 8

When a tax is placed on the sellers of lemonade,

Accepted Answer

A)   the sellers bear the entire burden of the tax.
B)   the buyers bear the entire burden of the tax.
C)   the burden of the tax will be always be equally divided between the buyers and the sellers.
D)   the burden of the tax will be shared by the buyers and the sellers,but the division of the burden is not always equal.

Question 9

If the government removes a binding price ceiling from a market,then the price paid by buyers will

Accepted Answer

A)   increase and the quantity sold in the market will increase.
B)   increase and the quantity sold in the market will decrease.
C)   decrease and the quantity sold in the market will increase.
D)   decrease and the quantity sold in the market will decrease.

Question 10

A tax on buyers will

Accepted Answer

A)   shift the demand curve upwards by the amount of the tax.
B)   shift the demand curve downwards by the amount of the tax.
C)   shift the supply curve upwards by the amount of the tax.
D)   shift the supply curve downwards by the amount of the tax.

Question 11

The quantity sold in a market will decrease if the government

Accepted Answer

A)   decreases a binding price floor in that market.
B)   increases a binding price ceiling in that market.
C)   increases a tax on the good sold in that market.
D)   More than one of the above is correct.

Question 12

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

Accepted Answer

A)   Firms expect the price of televisions to rise in the future.
B)   The number of firms selling televisions decreases.
C)   Consumers' income decreases,and televisions are a normal good.
D)   The number of consumers buying televisions increases.

Question 13

A price floor set above the equilibrium price is not binding.

Accepted Answer

A) True 
 B)False

Question 14

If a price ceiling is not binding,then it will have no effect on the market.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Suppose that a tax is placed on books.If the sellers pay the majority of the tax,then we know that the

Accepted Answer

A)   demand is more inelastic than the supply.
B)   supply is more inelastic than the demand.
C)   government has required that buyers remit the tax payments.
D)   government has required that sellers remit the tax payments.

Question 17

The burden of a luxury tax falls

Accepted Answer

A)   more on the rich than on the middle class.
B)   more on the poor than on the rich.
C)   more on the middle class than on the rich.
D)   equally on the rich,the middle class,and the poor.

Question 18

If the government wants to reduce smoking,it should impose a tax on

Accepted Answer

A)   buyers of cigarettes.
B)   sellers of cigarettes.
C)   either buyers or sellers of cigarettes.
D)   whichever side of the market is less elastic.

Question 19

Figure 6-12 
-Refer to Figure 6-12.The price paid by buyers after the tax is imposed is

Accepted Answer

A)   $3.
B)   $4.
C)   $5.
D)   $7.

Question 20

A tax on sellers usually causes buyers to pay more the good and sellers to receive less for the good than they did before the tax was levied.

Accepted Answer

A) True 
 B)False

Exam 6: Supply, Demand, and Government Policies

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

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Figure 6-12 -Refer to Figure 6-12.The price paid by buyers after the tax is imposed is

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A tax on sellers usually causes buyers to pay more the good and sellers to receive less for the good than they did before the tax was levied.

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If a price ceiling is not binding,then it will have no effect on the market.

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The quantity sold in a market will decrease if the government

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When a tax is placed on the sellers of lemonade,

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The price paid by buyers in a market will increase if the government

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A price floor set above the equilibrium price is not binding.

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A price floor will be binding only if it is set

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The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.

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A tax on buyers will

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When a tax is placed on the sellers of a product,

Correct AnswerverifiedShow Answer

If the government removes a binding price ceiling from a market,then the price paid by buyers will

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The burden of a luxury tax falls

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following causes a shortage of a good?

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Suppose that a tax is placed on books.If the sellers pay the majority of the tax,then we know that the

Correct AnswerverifiedShow Answer

One economist has argued that rent control is "the best way to destroy a city,other than bombing." Why would an economist say this?

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When a binding price floor is imposed on a market to benefit sellers,

Correct AnswerverifiedShow Answer

If the government wants to reduce smoking,it should impose a tax on

Correct AnswerverifiedShow Answer

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