Question 1

A price ceiling is binding when it is set

Accepted Answer

A)   above the equilibrium price, causing a shortage.
B)   above the equilibrium price, causing a surplus.
C)   below the equilibrium price, causing a shortage.
D)   below the equilibrium price, causing a surplus.

Question 2

If the government passes a law requiring buyers of college textbooks to send $5 to the government for every textbook they buy, then

Accepted Answer

A)   the demand curve for textbooks shifts downward by $5.
B)   buyers of textbooks pay $5 more per textbook than they were paying before the tax.
C)   sellers of textbooks are unaffected by the tax.
D)   All of the above are correct.

Question 3

Figure 6-7 
-Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?

Accepted Answer

A)   a price ceiling set at $6
B)   a price ceiling set at $5
C)   a price floor set at $9
D)   a price floor set at $8

Question 4

Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct?

Accepted Answer

A)   This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.
B)   The price paid by buyers is $0.30 per drink more than it was before the tax.
C)   Forty percent of the burden of the tax falls on sellers.
D)   All of the above are correct.

Question 5

Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

Accepted Answer

A)   the demand for treadmills will increase.
B)   the supply of treadmills will decrease.
C)   a shortage of treadmills will develop.
D)   All of the above are correct.

Question 6

Which of the following is not an example of a public policy?

Accepted Answer

A)   rent-control laws
B)   minimum-wage laws
C)   taxes
D)   equilibrium laws

Question 7

Figure 6-6 
-Refer to Figure 6-6. Which of the following statements is correct?

Accepted Answer

A)   A price ceiling set at $12 would be binding, but a price ceiling set at $8 would not be binding.
B)   A price floor set at $8 would be binding, but a price ceiling set at $8 would not be binding.
C)   A price ceiling set at $9 would result in a surplus.
D)   A price floor set at $11 would result in a surplus.

Question 8

The quantity sold in a market will increase if the government

Accepted Answer

A)   decreases a binding price floor in that market.
B)   decreases 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 9

Figure 6-34 
-Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much will sellers receive per unit after the tax is imposed?

Accepted Answer

With a $6 tax per un...

Question 10

Figure 6-20 
-Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

Accepted Answer

A)   $5
B)   between $5 and $10
C)   between $10 and $14
D)   $14

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

When policymakers set prices by legal decree, they

Accepted Answer

A)   are usually following the advice of mainstream economists.
B)   improve the organization of economic activity.
C)   obscure the signals that normally guide the allocation of society's resources.
D)   are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency.

Question 13

The presence of a price control in a market for a good or service usually is an indication that

Accepted Answer

A)   an insufficient quantity of the good or service was being produced in that market to meet the public's need.
B)   the usual forces of supply and demand were not able to establish an equilibrium price in that market.
C)   policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.
D)   policymakers correctly believed that price controls would generate no inequities of their own once imposed.

Question 14

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 15

If the government removes a binding price floor 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 16

When OPEC raised the price of crude oil in the 1970s, it caused the United States'

Accepted Answer

A)   nonbinding price floor on gasoline to become binding.
B)   binding price floor on gasoline to become nonbinding.
C)   nonbinding price ceiling on gasoline to become binding.
D)   binding price ceiling on gasoline to become nonbinding.

Question 17

Over time, housing shortages caused by rent control

Accepted Answer

A)   increase, because the demand for and supply of housing are less elastic in the long run.
B)   increase, because the demand for and supply of housing are more elastic in the long run.
C)   decrease, because the demand for and supply of housing are less elastic in the long run.
D)   decrease, because the demand for and supply of housing are more elastic in the long run.

Question 18

A tax on sellers shifts the supply curve but not the demand curve.

Accepted Answer

A) True 
 B)False

Question 19

In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

Accepted Answer

A) True 
 B)False

Question 20

A price floor is binding when it is set

Accepted Answer

A)   above the equilibrium price, causing a shortage.
B)   above the equilibrium price, causing a surplus.
C)   below the equilibrium price, causing a shortage.
D)   below the equilibrium price, causing a surplus.

Exam 6: Supply, Demand, and Government Policies

The quantity sold in a market will increase if the government

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Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

Correct AnswerverifiedShow Answer

A price ceiling is binding when it is set

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Figure 6-34 -Refer to Figure 6-34. If the government imposes a tax of $6 per unit in this market, how much will sellers receive per unit after the tax is imposed?

Correct AnswerverifiedWith a $6 tax per un...View AnswerShow Answer

If the government passes a law requiring buyers of college textbooks to send $5 to the government for every textbook they buy, then

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

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Figure 6-7 -Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?

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When policymakers set prices by legal decree, they

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A tax on sellers shifts the supply curve but not the demand curve.

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A price floor is binding when it is set

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In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

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

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Figure 6-20 -Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

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Over time, housing shortages caused by rent control

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Which of the following is not an example of a public policy?

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Figure 6-6 -Refer to Figure 6-6. Which of the following statements is correct?

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When OPEC raised the price of crude oil in the 1970s, it caused the United States'

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The presence of a price control in a market for a good or service usually is an indication that

Correct AnswerverifiedShow Answer

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With a $6 tax per un...
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