Microeconomics Chapter 6 Answers

Name: Class: Date: Ch 6 Indicate the answer choice that best completes the statement or answers the question. 1. The price paid by buyers in a market will decrease if the government a. increases a binding price ceiling in that market. b. decreases a binding price floor in that market. c. imposes a binding price floor in that market. d. increases a tax on the good sold in that market. 4. Rent control a. is the most efficient way to allocate scarce housing resources. b. is regarded by most economists as an efficient way of helping the poor. c. serves as an example of a price ceiling. d. serves as an example of how a social problem can be alleviated or even solved by government policies. Figure 6-23 Figure 6-22 2. Refer to Figure 6-22. Buyers pay how much of the tax per unit? a. $0.50. b. $5.00. c. $3.00. d. $1.50. 3. Refer to Figure 6-22. The equilibrium price in the market before the tax is imposed is a. $5.00. b. $1.50. c. $3.50. d. $2.00. 5. Refer to Figure 6-23. How much tax revenue does this tax produce for the government? a. $18. b. $6. c. $36. d. $30. 6. 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, a. the quantity of physicals supplied decreases. b. the quantity of physicals demanded increases. c. there is shortage of physicals. d. All of the above are correct. Name: Class: Date: Ch 6 7. A legal minimum on the price at which a good can be sold is called a a. price floor. b. tax. Figure 6-11 c. price ceiling. d. price subsidy. 8. The quantity sold in a market will decrease if the government 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. All of the above are correct. 9. If the government removes a binding price ceiling from a market, then the price received by sellers will a. decrease, and the quantity sold in the market will decrease. b. increase, and the quantity sold in the market will increase. c. decrease, and the quantity sold in the market will increase. d. increase, and the quantity sold in the market will decrease. Figure 6-26 11. Refer to Figure 6-11. If the government imposes a price ceiling at $6, it would be a. binding if market demand is Demand A or Demand B. b. non-binding if market demand is Demand A or Demand B. c. non-binding if market demand is Demand A and binding if market demand is Demand B. d. binding if market demand is Demand A and non-binding if market demand is Demand B. 12. Minimum-wage laws dictate a. a maximum wage that firms may pay workers. b. a minimum wage that firms may pay workers. c. both a minimum wage and a maximum wage that firms may pay workers. d. the exact wage that firms must pay workers. 10. Refer to Figure 6-26. The amount of the tax per unit is a. $8. b. $10. c. $4. d. $14. 13. A binding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. a. (ii) only b. (iv) only c. (i) and (iii) only d. (ii) and (iv) only Name: Class: Date: Ch 6 Figure 6-7 16. You receive a paycheck from your employer, and your pay stub indicates that $300 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct? a. Your employer is required by law to pay $300 to match the $300 deducted from your check. b. The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee. c. This type of tax is an example of a payroll tax. d. All of the above are correct. 14. Refer to Figure 6-7. Suppose a price ceiling of $5 is imposed on this market. As a result, a. the price of the good continues to serve as the rationing mechanism. Figure 6-13 This figure shows the market demand and market supply curves for good X. b. buyers’totalexpenditureonthegood decreases by $80. c. the quantity of the good supplied decreases by 20 units. d. the demand curve shifts to the left; quantity sold is now 30 units and the price is $5. 15. Refer to Figure 6-7. Suppose a price floor of $8 is imposed on this market. As a result, a. the price of the good continues to serve as the rationing mechanism. b. the quantity of the good demanded decreases by 10 units. c. the supply curve shifts to the left; quantity sold is now 30 units and the price is $8. d. buyers’totalexpenditureonthegood decreases by $20. 17. Refer to Figure 6-13. If the government imposes a price floor of $7 on this market, then there will be a. a surplus of 20 units. b. no surplus. c. a surplus of 15 units. d. a surplus of 10 units. Name: Class: Date: Ch 6 Figure 6-6 18. Refer to Figure 6-6. If the government imposes a price ceiling of $6 on this market, then there will be a. no shortage. b. a shortage of 20 units. c. a shortage of 30 units. d. a shortage of 10 units. Figure 6-15 19. Refer to Figure 6-15. Suppose a price floor of $4 is imposed on this market. As a result, a. the supply curve shifts to the left so as to now pass through the point (quantity = 30, price = $4). b. the number of units sold in the market will increase by 15 units. c. buyers’totalexpenditureonthegood decreases by $15. d. the quantity demanded of the good decreases by 30 units. 20. Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers 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 a. supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20. b. demand curve will shift upward by $20, and the price paid by buyers will decrease by $20. c. supply curve will shift downward by $20, and the effective price received by sellers will increase by $20. d. demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20. Name: Class: Date: Ch 6 21. If a price ceiling is a binding constraint on a market, then a. sellers cannot sell all they want to sell at the price ceiling. 24. The price paid by buyers in a market will increase if the government a. increases a binding price ceiling in that market. b. buyers cannot buy all they want to buy at the price ceiling. b. imposes a binding price ceiling in that market. c. decreases a binding price floor in that market. c. the equilibrium price must be below the price ceiling. d. the quantity supplied must exceed the quantity demanded. 22. Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of a. both taxes would fall more heavily on the buyers than on the sellers. b. both taxes would fall more heavily on the sellers than on the buyers. c. the macaroni tax would fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax would fall more heavily on the buyers than on the sellers. d. the macaroni tax would fall more heavily on the buyers than on the sellers, and the burden of the cigarette tax would fall more heavily on the sellers than on the buyers. 23. If a price floor is a binding constraint on a market, then a. the equilibrium price must be above the price floor. b. sellers cannot sell all they want to sell at the price floor. c. the quantity demanded must exceed the quantity supplied. d. buyers cannot buy all they want to buy at the price floor. d. decreases a tax on the good sold in that market. 25. A binding minimum wage tends to a. have the greatest impact in the market for teenage labor. b. cause a labor surplus. c. cause unemployment. d. All of the above are correct. 26. Rent-control laws dictate a. the exact rent that landlords must charge tenants. b. a maximum rent that landlords may charge tenants. c. both a minimum rent and a maximum rent that landlords may charge tenants. d. a minimum rent that landlords may charge tenants. 27. One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this? a. He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city. b. He fears that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. c. He fears that low rents will cause low-income people to move into the city, reducing the quality of life for other people. d. He fears that rent controls will cause a construction boom, which will make the city crowded and more polluted. Name: Class: Date: Ch 6 28. 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 $20 per ticket, then the a. supply curve will shift downward by $30, and the effective price received by sellers will increase by $30. b. supply curve will shift downward by $30, and the effective price received by sellers will increase by less than $30. c. demand curve will shift upward by $30, and the price paid by buyers will decrease by $30. d. demand curve will shift upward by $30, and the price paid by buyers will decrease by less than $30. Figure 6-12 30. If the minimum wage exceeds the equilibrium wage, then a. the quantity supplied of labor will exceed the quantity demanded. b. the minimum wage will not be binding. c. the quantity demanded of labor will exceed the quantity supplied. d. there will be no unemployment. 31. If a binding price ceiling is imposed on the baby formula market, then a. the quantity of baby formula demanded will increase. b. the quantity of baby formula supplied will decrease. c. a shortage of baby formula will develop. d. All of the above are correct. 32. The imposition of a binding price floor on a market a. causes quantity demanded to be greater than quantity supplied. b. causes quantity demanded to be less than quantity supplied. c. causes quantity demanded to be equal to quantity supplied. d. causes a decrease in demand. 29. Refer to Figure 6-12. When the price ceiling applies in this market and the supply curve for gasoline shifts from S1 to S2, a. the market price will stay at P1. b. the market price will increase to P3. c. a shortage will occur at the new market price of P2. d. a surplus will occur at the new market price of P 2. 33. When a tax is levied on sellers of tea, a. both sellers and buyers of tea are made worse off. b. the well-being of both sellers and buyers of tea is unaffected. c. sellers of tea are made worse off, and buyers of tea are made better off. d. sellers of tea are made worse off, and the well-being of buyers is unaffected. 34. When a payroll tax is enacted, the wage received by workers a. rises, and the wage paid by firms falls. b. falls, and the wage paid by firms rises. c. falls, and the wage paid by firms falls. d. rises, and the wage paid by firms rises. Name: Class: Date: Ch 6 35. A tax burden falls more heavily on the side of the market that a. is less inelastic. b. is closer to unit elastic. c. is more inelastic. d. has a fewer number of participants. 36. You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct? a. This type of tax is an example of a payback tax. b. Your employer is required by law to pay $400 to match the $400 deducted from your check. c. The $400 that you paid is the true burden of the tax that falls on you, the employee. d. All of the above are correct. Table 6-4 The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $3 above the equilibrium price in this market. Quantity Quantity Price Demanded Supplied $0 15 0 $1 13 3 $2 11 6 $3 9 9 $4 7 12 $5 5 15 $6 3 18 37. Refer to Table 6-4. Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is a. $5. b. $3. c. $4. d. $2. 38. Congress intended that a. the entire FICA tax be paid by workers. b. the entire FICA tax be paid by firms. c. half the FICA tax be paid by workers, and half be paid by firms. d. one-quarter of the FICA tax be paid by workers, and three-quarters be paid by firms. 39. The quantity sold in a market will decrease if the government decreases a a. binding price floor in that market. b. tax on the good sold in that market. c. binding price ceiling in that market. d. All of the above are correct. 40. If the government removes a tax on a good, then the price paid by buyers will a. decrease, and the price received by sellers will increase. b. increase, and the price received by sellers will increase. c. decrease, and the price received by sellers will decrease. d. increase, and the price received by sellers will decrease. 41. A nonbinding price floor (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. a. (ii) and (iv) only b. (iii) only c. (iv) only d. (i) and (iii) only Name: Class: Date: Ch 6 Figure 6-24 44. The incidence of a tax falls more heavily on a. consumers than producers if demand is more inelastic than supply. b. producers than consumers if supply is more inelastic than demand. c. consumers than producers if supply is more elastic than demand. d. All of the above are correct. c. $18 d. $16 45. A tax imposed on the sellers of a good will lower the a. price paid by buyers and raise the equilibrium quantity. b. effective price received by sellers and raise the equilibrium quantity. c. price paid by buyers and lower the equilibrium quantity. d. effective price received by sellers and lower the equilibrium quantity. Figure 6-29 Suppose the government imposes a $2 on this market. 46. The quantity sold in a market will increase if the government a. decreases a binding price ceiling in that market. 42. Refer to Figure 6-24. Andrew is a buyer of the good. Taking the tax into account, how much does Andrew effectively pay to acquire one unit of the good? a. $26 b. $24 b. decreases a binding price floor in that market. c. increases a tax on the good sold in that market. d. More than one of the above is correct. 43. Refer to Figure 6-29. The buyers and sellers will bear an equal share of the tax burden if the demand is a. D2, and the supply is S1. b. D1, and the supply is S1. c. D1, and the supply is S2. d. D2, and the supply is S2. 47. Which of the following is correct? a. Workers determine the supply of labor, and firms determine the demand for labor. b. The labor market is a single market for all different types of workers. c. The price of the product produced by labor adjusts to balance the supply of labor and the demand for labor. d. Workers determine the demand for labor, and firms determine the supply of labor. 48. Minimum-wage laws dictate the a. the highest and lowest prices employers may pay for labor. b. highest price employers may pay for labor. c. average price employers must pay for labor. d. lowest price employers may pay for labor. Name: Ch 6 49. The minimum wage does not apply to a. jobs for teenagers. b. jobs that include on-the-job training. c. unpaid internships. d. jobs for members of minority groups. 50. Which of the following is not correct? a. As scientists, economists develop and test theories to explain the world around them. b. Economic policies rarely have effects that their architects did not intend or anticipate. c. As policy advisers, economists use their theories to help change the world for the better. d. Economists have two roles: scientist and policy adviser. Class: Date: