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Price controls often hurt those they are trying to help.

A) True
B) False

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Figure 6-12 Figure 6-12 -Refer to Figure 6-12. Which of the following statements best relates the figure to the events that occurred in the United States in the 1970s? A) Buyers of gasoline paid a price of P<sub>1</sub> before 1973; they paid a price of P<sub>2</sub> after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price. B) Buyers of gasoline paid a price of P<sub>1</sub> before 1973; they paid a price of P<sub>3</sub> after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price. C) Buyers of gasoline paid a price of P<sub>2</sub> before 1973; they paid a price of P<sub>3</sub> after OPEC increased the price of crude oil in 1973, with no shortage of gasoline at that price. D) The price ceiling was binding before 1973; the price ceiling was no longer binding after OPEC increased the price of crude oil in 1973. -Refer to Figure 6-12. Which of the following statements best relates the figure to the events that occurred in the United States in the 1970s?


A) Buyers of gasoline paid a price of P1 before 1973; they paid a price of P2 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price.
B) Buyers of gasoline paid a price of P1 before 1973; they paid a price of P3 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price.
C) Buyers of gasoline paid a price of P2 before 1973; they paid a price of P3 after OPEC increased the price of crude oil in 1973, with no shortage of gasoline at that price.
D) The price ceiling was binding before 1973; the price ceiling was no longer binding after OPEC increased the price of crude oil in 1973.

E) A) and C)
F) None of the above

Correct Answer

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Figure 6-36 Figure 6-36 -Refer to Figure 6-36. If the government places a $2 tax in the market, the seller bears $1 of the tax burden. -Refer to Figure 6-36. If the government places a $2 tax in the market, the seller bears $1 of the tax burden.

A) True
B) False

Correct Answer

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A tax of $1 on buyers always decreases the equilibrium price by $1.

A) True
B) False

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Since a tax imposed on buyers of a product only affects demand, such a tax has no impact on sellers in that market. ā€‹

A) True
B) False

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Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

A) True
B) False

Correct Answer

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Figure 6-10 Figure 6-10 -Refer to Figure 6-10. A price floor set at A) $6 will be binding and will result in a surplus of 10 units. B) $6 will be binding and will result in a surplus of 6 units. C) $16 will be binding and will result in a surplus of 10 units. D) $16 will be binding and will result in a surplus of 4 units. -Refer to Figure 6-10. A price floor set at


A) $6 will be binding and will result in a surplus of 10 units.
B) $6 will be binding and will result in a surplus of 6 units.
C) $16 will be binding and will result in a surplus of 10 units.
D) $16 will be binding and will result in a surplus of 4 units.

E) All of the above
F) B) and C)

Correct Answer

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Figure 6-25 Figure 6-25 -Refer to Figure 6-25. 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 A) larger, and the burden on sellers will be smaller. B) smaller, and the burden on sellers will be larger. C) the same, and the burden on sellers will be the same. D) The relative burdens in the two cases cannot be determined without further information. -Refer to Figure 6-25. 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


A) larger, and the burden on sellers will be smaller.
B) smaller, and the burden on sellers will be larger.
C) the same, and the burden on sellers will be the same.
D) The relative burdens in the two cases cannot be determined without further information.

E) B) and D)
F) B) and C)

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


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.

E) None of the above
F) All of the above

Correct Answer

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Under rent control, tenants can expect


A) lower rent and higher quality housing.
B) lower rent and lower quality housing.
C) higher rent and a shortage of rental housing.
D) higher rent and a surplus of rental housing.

E) B) and C)
F) All of the above

Correct Answer

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Long lines


A) and discrimination according to seller bias are both inefficient rationing mechanisms because they both waste buyers' time.
B) and discrimination according to seller bias are both inefficient rationing mechanisms because the good does not necessarily go to the buyer who values it most highly.
C) are an inefficient rationing mechanism because they waste buyers' time, and discrimination according to seller bias is an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it most highly.
D) are an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it most highly, and discrimination according to seller bias is an inefficient rationing mechanism because it wastes buyers' time.

E) A) and C)
F) A) and B)

Correct Answer

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One disadvantage of government subsidies over price controls is that subsidies


A) prevent the attainment of equilibrium in the markets in which they are imposed.
B) make higher taxes necessary.
C) are always unfair to those with low incomes.
D) cause unemployment.

E) A) and B)
F) A) and C)

Correct Answer

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Figure 6-19 Figure 6-19 -Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. Which of the following is correct? A) One-fourth of the burden of the tax will fall on buyers, and three-fourths of the burden of the tax will fall on sellers. B) One-third of the burden of the tax will fall on buyers, and two-thirds of the burden of the tax will fall on sellers. C) One-half of the burden of the tax will fall on buyers, and one-half of the burden of the tax will fall on sellers. D) Two-thirds of the burden of the tax will fall on buyers, and one-third of the burden of the tax will fall on sellers. -Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. Which of the following is correct?


A) One-fourth of the burden of the tax will fall on buyers, and three-fourths of the burden of the tax will fall on sellers.
B) One-third of the burden of the tax will fall on buyers, and two-thirds of the burden of the tax will fall on sellers.
C) One-half of the burden of the tax will fall on buyers, and one-half of the burden of the tax will fall on sellers.
D) Two-thirds of the burden of the tax will fall on buyers, and one-third of the burden of the tax will fall on sellers.

E) B) and C)
F) A) and B)

Correct Answer

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When a tax is levied on sellers of tea,


A) the well-being of both sellers and buyers of tea is unaffected.
B) sellers of tea are made worse off, and the well-being of buyers is unaffected.
C) sellers of tea are made worse off, and buyers of tea are made better off.
D) both sellers and buyers of tea are made worse off.

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

Correct Answer

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Table 6-6 Table 6-6 -Refer to Table 6-6. In this market, over what range of prices would a price ceiling set by the government be binding? -Refer to Table 6-6. In this market, over what range of prices would a price ceiling set by the government be binding?

Correct Answer

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A price ceiling must be set be...

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A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.

A) True
B) False

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The following table shows the demand and supply schedules in a particular market. The following table shows the demand and supply schedules in a particular market. If the government sets a price floor $2 above the equilibrium price, how many units will be sold in this market? If the government sets a price floor $2 above the equilibrium price, how many units will be sold in this market?

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The equilibrium price is $3, so the pric...

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In a free, competitive market, what is the rationing mechanism?


A) seller bias
B) buyer bias
C) government law
D) price

E) C) and D)
F) B) and D)

Correct Answer

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Figure 6-36 Figure 6-36 -Refer to Figure 6-36. If the government places a $2 tax in the market, the seller receives $6. -Refer to Figure 6-36. If the government places a $2 tax in the market, the seller receives $6.

A) True
B) False

Correct Answer

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A minimum wage that is set below a market's equilibrium wage will


A) result in an excess demand for labor, that is, unemployment.
B) result in an excess demand for labor, that is, a shortage of workers.
C) result in an excess supply of labor, that is, unemployment.
D) have no impact on employment.

E) A) and B)
F) A) and C)

Correct Answer

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