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Exam 6: Supply, Demand, And Government Policies.

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Question 51

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As rationing mechanisms,prices

A) and long lines are efficient.
B) are efficient, but long lines are inefficient.
C) are inefficient, but long lines are efficient.
D) and long lines are inefficient.

E) A) and D)
F) A) and C)

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Question 52

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A binding price ceiling causes quantity demanded to be less than quantity supplied.

A) True
B) False

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Question 53

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Figure 6-7 -Refer to Figure 6-7.Suppose a price ceiling of $5 is imposed on this market.As a result,

Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy.Further,suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle.Which of the following statements is correct?

Economists blame the long lines at gasoline stations in the U.S.in the 1970s on

Table 6-1 -Refer to Table 6-1.Suppose the government imposes a price ceiling of $1 on this market.What will be the size of the shortage in this market?

Figure 6-16 -Refer to Figure 6-16.Suppose a tax of $5 per unit is imposed on this market.How much will sellers receive per unit after the tax is imposed?

Assume the demand for cigarettes is relatively inelastic,and the supply of cigarettes is relatively elastic.When cigarettes are taxed,we would expect

When a free market for a good reaches equilibrium,anyone who is willing and able to sell at the market price can sell the good.

Figure 6-20 -Refer to Figure 6-20.The per-unit burden of the tax on buyers of the good is

Lawmakers can decide whether the buyers or the sellers must send a tax to the government,but they cannot legislate the true burden of a tax.

You have responsibility for economic policy in the country of Freedonia.Recently,the neighboring country of Sylvania has cut off all exports of oranges to Freedonia.Harpo,who is one of your advisors,suggests that you should impose a binding price ceiling in order to avoid a shortage of oranges.Chico,another one of your advisors,argues that without a binding price floor,a shortage will certainly develop.Zeppo,a third advisor,says that the best way to avoid a shortage of oranges is to take no action at all.Which of your three advisors is most likely to have studied economics?

Figure 6-21 -Refer to Figure 6-22.Suppose the same supply and demand curves apply,and a tax of the same amount per unit as shown here is imposed.Now,however,the sellers of the good,rather than the buyers,are required to pay the tax to the government.After the sellers are required to pay the tax,relative to the case depicted in the graph,the burden on buyers will be

In 1990,Congress passed a new luxury tax on items such as yachts,private airplanes,furs,jewelry,and expensive cars.The goal of the tax was to

Minimum-wage laws are precise policy instruments that can specifically target workers whose family incomes are low.

To say that a price ceiling is nonbinding is to say that the price ceiling

Using the graph shown,in which the vertical distance between points A and B represents the tax in the market,answer the following questions. a.What was the equilibrium price and quantity in this market before the tax? b.What is the amount of the tax? c.How much of the tax will the buyers pay? d.How much of the tax will the sellers pay? e.How much will the buyer pay for the product after the tax is imposed? f.How much will the seller receive after the tax is imposed? g.As a result of the tax,what has happened to the level of market activity?

Workers determine the supply of labor,and firms determine the demand for labor.

Figure 6-21 -Refer to Figure 6-22.The burden of the tax on buyers is

If the demand curve is very elastic and the supply curve is very inelastic in a market,then the sellers will bear a greater burden of a tax imposed on the market,even if the tax is imposed on the buyers.