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Question;76. The;impact of the minimum wage depends on the skill and experience of the worker.;77. Workers;with high skills and much experience are not typically affected by the minimum;wage.;78. The;minimum wage has its greatest impact on the market for teenage labor.;79. The;minimum wage is more often binding for teenagers than for other members of the;labor force.;80. Studies;by economists have found that a 10 percent increase in the minimum wage;decreases teenage employment 10 percent.;81. A;large majority of economists favor eliminating the minimum wage.;wage admit that it has some adverse;effects, but they believe that these effects are small and that a higher;minimum wage makes the poor better off.;83. If;the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour;then a shortage of labor will exist.;Figure;6-17;84. Refer;to Figure 6-17. A price ceiling set;at $30 would result in a shortage of 20 units.;85. Refer;to Figure 6-17. A price ceiling set;at $70 would result in a shortage of 40 units.;86. Refer;to Figure 6-17. A price floor set at;$60 would result in a surplus of 20 units.;87. Refer;to Figure 6-17. A price floor set at;$40 would result in a surplus of 20 units.;88. Most;economists are in favor of price controls as a way of allocating resources in;the economy.;89. When;policymakers set prices by legal decree, they obscure the signals that normally;guide the allocation of society?s resources.;90. Price;controls often hurt those they are trying to help.;91. Rent;subsidies and wage subsidies are better than price controls at helping the poor;because they have no costs associated with them.;92. The;term tax incidence refers to how the burden of a tax is distributed among the;various people who make up the economy.;93. A;tax on sellers shifts the supply curve but not the demand curve.;94. A;tax on sellers shifts the supply curve to the left.;95. A;tax on sellers increases supply.;96. A;tax on sellers and an increase in input prices affect the supply curve in the;same way.;97. A;tax of $1 on sellers shifts the supply curve upward by exactly $1.;98. A;tax of $1 on sellers always increases the equilibrium price by $1.;99. A;tax on sellers reduces the size of a market.;100.A;tax on sellers increases the quantity of the good sold in the market.;101.If;a tax is imposed on the sellers of a product, then the tax burden will fall;entirely on the sellers.;102.A;tax on sellers usually causes buyers to pay more the good and sellers to receive;less for the good than they did before the tax was levied.;103.A;tax on buyers shifts the demand curve and the supply curve.;104.A;tax on buyers shifts the demand curve to the right.;105.A;tax on buyers decreases demand.;106.A;tax of $1 on buyers shifts the demand curve downward by exactly $1.;107.A;tax of $1 on buyers always decreases the equilibrium price by $1.;108.A;tax on buyers increases the size of a market.;109.A;tax on buyers decreases the quantity of the good sold in the market.;110.If;a tax is imposed on the buyers of a product, then the tax burden will fall;entirely on the buyers.;111.A;tax on buyers usually causes buyers to pay more the good and sellers to receive;less for the good than they did before the tax was levied.;112.Whether;a tax is levied on sellers or buyers, taxes discourage market activity.;113.Whether;a tax is levied on sellers or buyers, taxes encourage market activity.;114.Whether;a tax is levied on sellers or buyers, buyers and sellers usually share the;burden of taxes.;115.Taxes;levied on sellers and taxes levied on buyers are equivalent.;116.The;wedge between the buyers? price and the sellers? price is the same, regardless;of whether the tax is levied on buyers or sellers.;117.The;tax incidence depends on whether the tax is levied on buyers or sellers.;118.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.;119.A;tax on golf clubs will cause buyers of golf clubs to pay a higher price;sellers of golf clubs to receive a lower price, and fewer golf clubs to be;sold.;120.FICA;is an example of a payroll tax, which is a tax on the wages that firms pay;their workers.;121.Since;half of the FICA tax is paid by firms and the other half is paid by workers;the burden of the tax must fall equally on firms and workers.;122.Buyers;and sellers always share the burden of a tax equally.;123.Buyers;and sellers rarely share the burden of a tax equally.;124.Who;bears the majority of a tax burden depends on whether the tax is placed on the;buyers or the sellers.;125.Who;bears the majority of a tax burden depends on the relative elasticity of supply;and demand.;126.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.;127.If;the demand curve is very inelastic and the supply curve is very elastic 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.;128.A;tax burden falls more heavily on the side of the market that is less elastic.;on the side of the market that is more;inelastic.;130.A;tax on a market with elastic demand and elastic supply will shrink the market;more than a tax on a market with inelastic demand and inelastic supply will;shrink the market.;believe that the supply of labor is much;more elastic than the demand.;132.Workers;rather than firms, bear most of the burden of the payroll tax.;133.Most;of the burden of a luxury tax falls on the middle class workers who produce;luxury goods rather than on the rich who buy them.;SHORT ANSWER;1. Using;a supply and demand diagram, show a labor market with a binding minimum;wage. Use the diagram to show those who;are helped by the minimum wage and those who are hurt by the minimum wage..;2.;a.;Using the;graph shown, analyze the effect a $300 price ceiling would have on the market;for ten-speed bicycles. Would this be;a binding price ceiling?;b.;Using the;graph shown, analyze the effect a $700 price floor would have on this market;for ten-speed bicycles. Would this be;a binding price floor?;c.;Why would;policymakers choose to impose a price ceiling or price floor?;3. Using;the graph shown, answer the following questions.;a.;What was the;equilibrium price 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?;4. Using;the graph shown, answer the following questions.;a.;What was the;equilibrium price 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?;5. 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?;6. How;does elasticity affect the burden of a tax? Justify your answer using supply;and demand diagrams.;Sec00 - Supply, Demand, and Government;Policies;MULTIPLE CHOICE;1. Which;of the following is not correct?;a.;Economists;have two roles: scientist and policy adviser.;b.;As;scientists, economists develop and test theories to explain the world around;them.;c.;Economic;policies rarely have effects that their architects did not intend or;anticipate.;d.;As policy;advisers, economists use their theories to help change the world for the;better.;2. Rent-control;laws dictate;a.;the exact;rent that landlords must charge tenants.;b.;a maximum;rent that landlords may charge tenants.;c.;a minimum;rent that landlords may charge tenants.;d.;a minimum;rent and a maximum rent that landlords may charge tenants.;3. Minimum-wage;laws dictate;a.;the exact;wage that firms must pay workers.;b.;a maximum;wage that firms may pay workers.;c.;a minimum;wage that firms may pay workers.;d.;a minimum;wage and a maximum wage that firms may pay workers.;4. Price;controls are usually enacted;a.;as a means of;raising revenue for public purposes.;b.;when policymakers;believe that the market price of a good or service is unfair to buyers or;sellers.;c.;when;policymakers detect inefficiencies in a market.;d.;All of the;above are correct.;5. The;presence of a price control in a market for a good or service usually is an;indication that;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, in that market, price controls would generate no;inequities of their own.;6. Price;controls;a.;always;produce a fair outcome.;b.;always;produce an efficient outcome.;c.;can generate;inequities of their own.;d.;Both (a) and;(b) are correct.;7. Policymakers;use taxes;a.;to raise;revenue for public purposes, but not to influence market outcomes.;b.;both to raise;revenue for public purposes and to influence market outcomes.;c.;when they;realize that price controls alone are insufficient to correct market;inequities.;d.;only in those;markets in which the burden of the tax falls clearly on the sellers.;Sec01 - Supply, Demand, and Government;Policies - Controls on Prices;MULTIPLE CHOICE;1. In;a competitive market free of government regulation;a.;price adjusts;until quantity demanded is greater than quantity supplied.;b.;price adjusts;until quantity demanded is less than quantity supplied.;c.;price adjusts;until quantity demanded equals quantity supplied.;d.;supply;adjusts to meet demand at every price.;2. A;legal maximum on the price at which a good can be sold is called a price;a.;floor.;b.;subsidy.;c.;support.;d.;ceiling.;3. A;price ceiling is;a.;often imposed;on markets in which ?cutthroat competition? would prevail without a price;ceiling.;b.;a legal;maximum on the price at which a good can be sold.;c.;often imposed;when sellers of a good are successful in their attempts to convince the;government that the market outcome is unfair without a price ceiling.;d.;All of the;above are correct.;4. Which;of the following is the most likely explanation for the imposition of a price;ceiling on the market for milk?;a.;Policymakers;have studied the effects of the price ceiling carefully, and they recognize;that the price ceiling is advantageous for society as a whole.;b.;Buyers of;milk, recognizing that the price ceiling is good for them, have pressured;policymakers into imposing the price ceiling.;c.;Sellers of;milk, recognizing that the price ceiling is good for them, have pressured;policymakers into imposing the price ceiling.;d.;Buyers and;sellers of milk have agreed that the price ceiling is good for both of them;and have therefore pressured policymakers into imposing the price ceiling.;5. If;a price ceiling is not binding, then;a.;the;equilibrium price is above the price ceiling.;b.;the;equilibrium price is below the price ceiling.;c.;it has no;legal enforcement mechanism.;d.;More than one;of the above is correct.;6. If;a price ceiling is not binding, then;a.;there will be;a surplus in the market.;b.;there will be;a shortage in the market.;c.;the market;will be less efficient than it would be without the price ceiling.;d.;there will be;no effect on the market price or quantity sold.;7. If;a nonbinding price ceiling is imposed on a market, then;a.;the quantity;sold in the market will decrease.;b.;the quantity;sold in the market will stay the same.;c.;the price in;the market will increase.;d.;the price in;the market will decrease.;8. A;price ceiling will be binding only if it is set;a.;equal to the;equilibrium price.;b.;above the equilibrium;price.;c.;below the;equilibrium price.;d.;either above;or below the equilibrium price.;9. A;price ceiling is binding when it is set;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.;10. To;say that a price ceiling is binding is to say that the price ceiling;a.;results in a;surplus.;b.;is set above;the equilibrium price.;c.;causes;quantity demanded to exceed quantity supplied.;d.;All of the;above are correct.;11. A;shortage results when;a.;a nonbinding;price ceiling is imposed on a market.;b.;a nonbinding;price ceiling is removed from a market.;c.;a binding;price ceiling is imposed on a market.;d.;a binding;price ceiling is removed from a market.;12. The;imposition of a binding price ceiling on a market causes quantity demanded to;be;a.;greater than;quantity supplied.;b.;less than;quantity supplied.;c.;equal to quantity;supplied.;d.;Both (a) and;(b) are possible.;13. If;a price ceiling is a binding constraint on a market, then;a.;the;equilibrium price must be below the price ceiling.;b.;the quantity;supplied must exceed the quantity demanded.;c.;sellers cannot;sell all they want to sell at the price ceiling.;d.;buyers cannot;buy all they want to buy at the price ceiling.;14. Which;of the following observations would be consistent with the imposition of a;binding price ceiling on a market?;a.;A smaller quantity;of the good is bought and sold after the price ceiling becomes effective.;b.;A smaller;quantity of the good is demanded after the price ceiling becomes effective.;c.;A larger;quantity of the good is supplied after the price ceiling becomes effective.;d.;All of the;above are correct.;15. If;a binding price ceiling is imposed on the computer market, then;a.;the demand;for computers will increase.;b.;the supply of;computers will decrease.;c.;a shortage of;computers will develop.;d.;All of the;above are correct.;16. If;a binding price ceiling is imposed on the computer market, then;a.;the quantity;of computers demanded will increase.;b.;the quantity;of computers supplied will decrease.;c.;a shortage of;computers will develop.;d.;All of the;above are correct.;17. 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 demand;curve for physicals shifts to the right.;b.;the supply;curve for physicals shifts to the left.;c.;the quantity;demanded of physicals increases and the quantity supplied of physicals;decreases.;d.;the number of;physicals performed stays the same.;18. Suppose;the government has imposed a price ceiling on televisions. Which of the following events could transform;the price ceiling from one that is not binding into one that is binding?;a.;Firms expect;the price of televisions to fall in the future.;b.;The number of;firms selling televisions decreases.;c.;Consumers;income decreases, and televisions are a normal good.;d.;The number of;consumers buying televisions decreases.;19. Suppose;the government has imposed a price ceiling on cellular phones. Which of the following events could transform;the price ceiling from one that is binding to one that is not binding?;a.;Cellular;phones become more popular.;b.;Traditional;land line phones become more expensive.;c.;The;components used to produce cellular phones become more expensive.;d.;A;technological advance makes cellular phone production less expensive.;20. If;the government removes a binding price ceiling from a market, then the price;paid by buyers will;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.;21. 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.;decrease and;the quantity sold in the market will increase.;c.;increase and;the quantity sold in the market will decrease.;d.;increase and;the quantity sold in the market will increase.;22. When;a binding price ceiling is imposed on a market;a.;price no;longer serves as a rationing device.;b.;the quantity;supplied at the price ceiling exceeds the quantity that would have been supplied;without the price ceiling.;c.;all buyers;benefit.;d.;All of the;above are correct.;23. When;a binding price ceiling is imposed on a market to benefit buyers;a.;every buyer;in the market benefits.;b.;every seller;in the market benefits, too.;c.;every buyer;who wants to buy the good will be able to do so, but only if they wait in;long lines.;d.;some buyers;will not be able to buy any amount of the good.;24. When;a binding price ceiling is imposed on a market to benefit buyers;a.;no buyers;actually do benefit.;b.;some buyers;benefit, but no buyers are harmed.;c.;some buyers;benefit and some buyers are harmed.;d.;all buyers;benefit.;25. In;response to a shortage caused by the imposition of a binding price ceiling on a;market;a.;price will no;longer be the mechanism that rations scarce resources.;b.;long lines of;buyers may develop.;c.;sellers could;ration the good or service according to their own personal biases.;d.;All of the;above are correct.;26. 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.;27. As;a rationing mechanism, discrimination according to seller bias is;a.;efficient and;fair.;b.;efficient;but potentially unfair.;c.;inefficient;but fair.;d.;inefficient;and potentially unfair.;28. 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.;29. In;a free, competitive market, what is the rationing mechanism?;a.;seller bias;b.;buyer bias;c.;government;law;d.;price;30. Which of the;following would be the least likely result of a binding price ceiling;imposed on the market for rental cars?;a.;an;accumulation of dirt in the interior of rental cars;b.;poor engine;maintenance in rental cars;c.;free gasoline;given to people as an incentive to a rent a car;d.;slow;replacement of old rental cars with new ones;31. When;OPEC raised the price of crude oil in the 1970s, it caused the;a.;demand for;gasoline to increase.;b.;demand for;gasoline to decrease.;c.;supply of;gasoline to increase.;d.;supply of;gasoline to decrease.;32. When;OPEC raised the price of crude oil in the 1970s, it caused the;a.;supply of;gasoline to decrease.;b.;quantity of;gasoline demanded to decrease.;c.;equilibrium;price of gasoline to increase.;d.;All of the;above are correct.;33. When;OPEC raised the price of crude oil in the 1970s, it caused the;a.;United States? nonbinding price floor on gasoline to;become binding.;b.;United States? binding price floor on gasoline to;become nonbinding.;c.;United States? nonbinding price ceiling on gasoline;to become binding.;d.;United States? binding price ceiling on gasoline to;become nonbinding.;34. In;the United States;before OPEC increased the price of crude oil in 1973, there was;a.;no price;ceiling on gasoline.;b.;a nonbinding;price ceiling on gasoline.;c.;a binding;price ceiling on gasoline.;d.;a nonbinding;price floor on gasoline.;35. Economists;blame the long lines at gasoline stations in the U.S. in the 1970s on;a.;U.S. government regulations pertaining to;the price of gasoline.;b.;the;Organization of Petroleum Exporting Countries (OPEC).;c.;major oil;companies operating in the U.S.;d.;consumers who;bought gasoline frequently, even when their cars' gasoline tanks were nearly;full.;36. Other;than OPEC, the shortage of gasoline in the U.S. in the 1970s could also be;blamed on;a.;a sharp;increase in the demand for gasoline that was brought on by the Vietnam War.;b.;the;government?s policy of maintaining a price ceiling on gasoline.;c.;an;indifference among U.S.;consumers toward conservation.;d.;the lack of;substitutes for crude oil.;37. In;the 1970s, long lines at gas stations in the United States were primarily a;result of the fact that;a.;OPEC raised;the price of crude oil in world markets.;b.;U.S. gasoline producers raised the price of;gasoline.;c.;the U.S.;government maintained a price ceiling on gasoline.;d.;Americans;typically commuted long distances.;38. Rent;control;a.;serves as an;example of how a social problem can be alleviated or even solved by;government policies.;b.;serves as an;example of a price ceiling.;c.;is regarded;by most economists as an efficient way of helping the poor.;d.;is the most;efficient way to allocate scarce housing resources.;39. The;goal of rent control is to;a.;facilitate;controlled economic experiments in urban areas.;b.;help;landlords by assuring them a low vacancy rate for their apartments.;c.;help the poor;by assuring them an adequate supply of apartments.;d.;help the poor;by making housing more affordable.;40. Economists;generally believe that rent control is;a.;an efficient;and fair way to help the poor.;b.;inefficient;but the best available means of solving a serious social problem.;c.;a highly;inefficient way to help the poor raise their standard of living.;d.;an efficient;way to allocate housing, but not a good way to help the poor.;41. 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;low rents will cause low-income people to move into the city, reducing the;quality of life for other people.;b.;He fears that;rent control will benefit landlords at the expense of tenants, increasing;inequality in the city.;c.;He fears that;rent controls will cause a construction boom, which will make the city;crowded and more polluted.;d.;He fears that;rent control will eliminate the incentive to maintain buildings, leading to a;deterioration of the city.;42. In;the housing market, rent control causes;a.;quantity;supplied and quantity demanded to fall.;b.;quantity;supplied to fall and quantity demanded to rise.;c.;quantity;supplied to rise and quantity demanded to fall.;d.;quantity;supplied and quantity demanded to rise.;43. Which;of the following is not a short-run effect of rent control on the;housing market?;a.;reduced rents;b.;a large;shortage;c.;a small;increase in quantity demanded;d.;a small;decrease in quantity supplied;44. Over;time, housing shortages caused by rent control;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.;45. Which;of the following statements about the effects of rent control is correct?;a.;The short-run;effect of rent control is a surplus of apartments, and the long-run effect of;rent control is a shortage of apartments.;b.;The short-run;effect of rent control is a relatively small shortage of apartments, and the;long-run effect of rent control is a larger shortage of apartments.;c.;In the long;run, rent control leads to a shortage of apartments and an improvement in the;quality of available apartments.;d.;The effects;of rent control are very noticeable to the public in the short run because;the primary effects of rent control occur very quickly.;46. The;long-run effects of rent controls are a good illustration of the principle that;a.;society faces;a short-run tradeoff between unemployment and inflation.;b.;the cost of;something is what you give up to get it.;c.;people;respond to incentives.;d.;government;can sometimes improve on market outcomes.;47. 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;48. Under;rent control, bribery is a mechanism to;a.;bring the;total price of an apartment (including the bribe) closer to the equilibrium;price.;b.;allocate;housing to the poorest individuals in the market.;c.;force the;total price of an apartment (including the bribe) to be less than the market;price.;d.;allocate;housing to the most deserving tenants.;49. Under;rent control, landlords cease to be responsive to tenants' concerns about the;quality of the housing because;a.;with rent;control, the government guarantees landlords a minimum level of profit.;b.;they become;resigned to the fact that many of their apartments are going to be vacant at;any given time.;c.;with;shortages and waiting lists, they have no incentive to maintain and improve;their property.;d.;with rent;control, it becomes the government's responsibility to maintain rental;housing.;50. 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.

 

Paper#57996 | Written in 18-Jul-2015

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