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Econ Exam 2

Terms in this set (27)

A price ceiling is
a legal maximum on the price at which a good can be sold.
A surplus results when a
binding price floor is imposed on a market.
A shortage results when a
binding price ceiling is imposed on a market.
Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling is established,
a larger quantity of the good is demanded.
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 $2 above the equilibrium price in this market. Refer to Table 6-1. Following the imposition of a price floor $2 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
$3.
Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would
discourage market activity.
Which of the following causes the price paid by buyers to be different than the price received by sellers?
Tax on the good
The minimum wage was instituted to ensure workers
a minimally adequate standard of living.
A tax on the sellers of coffee will increase the price of coffee paid by buyers,
decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee.
Suppose the equilibrium price of a stick of deodorant is $4, and the government imposes a price floor of $5 per stick. As a result of the price floor, the
quantity demanded of deodorant decreases, and the quantity of deodorant that firms want to supply increases.
The price paid by buyers in a market will decrease if the government
decreases a tax on the good sold in the market
In the 1970s long lines at gas stations in the US were primarily a result of the fact that
the US government maintained a price ceiling on gasoline
The imposition of a binding price ceiling on a market causes
quantity demanded to be greater than quantity supplied
Which of the following are correct.
a. Rent control and the minimum wage are both examples of price ceilings
b. Rent control is an example of a price ceiling and minimum wage is an example of a price floor
c. rent control is an example of price floor and the minimum wage is an example of a price ceiling
d. rent control and the minimum wage are both examples of price floors
b. Rent control is an example of a price ceiling and minimum wage is an example of a price floor
If the government imposes a binding price ceiling on a market then the price paid by buyers will
decrease and the quantity sold in the market will decrease
To say that the price ceiling is non-binding is to say that the price ceiling
is set above the equilibrium price
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
a shortage of treadmills will develop
The term tax incidence refers to
the distribution of the tax burden between buyers and sellers
One disadvantage of the government subsidies over price controls is that subsidies
make higher taxes necessary
If a price floor is not binding then
the equilibrium is above the price floor
Which of the following statements is correct
a. A tax levied on buyers will never be partially paid by sellers
b. who bears the burden of a tax depends on the price elasticities of supply and demand
c. Government can decide who ultimately pays a tax
d. A tax levied on sellers always will be passed on completely to buyers
b. who bears the burden of a tax depends on the price elasticities of supply and demand
Which of the following is not a rationing mechanism used by landlords in cities with rent control?
a. Waiting lists
b. race
c. Price
d. Bribes
c. Price
If a tax is levied on the sellers of a product, then the demand curve will
not shift
Consider the US market for tea, a market in which the government has imposed a nonbinding price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding ceiling
Chinese tea plant producers refuse to ship to tea producers in the US
A tax on the sellers of the coffee will increase the price of coffee paid by buyers
decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee
You receive a paycheck from your employer and your pay stub indicates that $300 was deducted to pay the FICA tax. Which is correct?
The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee
If the government removes a tax on a good, then the price paid by buyers will
decrease, and the price received by sellers will increase
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