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Exam 6: Supply, Demand, and Government Policies

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Question 71

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Figure 6-14 ​ -Refer to Figure 6-14. Suppose D₁ represents the demand curve for gasoline in both the short run and long run, S₁ represents the supply curve for gasoline in the short run, and S₂ represents the supply curve for gasoline in the long run. After the imposition of the $2 tax, the price paid by buyers will be

A) higher in the long run than in the short run.
B) higher in the short run than in the long run.
C) equivalent in the short run and the long run.
D) unable to be determined without additional information.

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

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Question 72

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Figure 6-16 ​ ​ -Refer to Figure 6-16. A price floor set at $40 would create a surplus of 20 units.

A) True
B) False

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Question 73

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The term tax incidence refers to

Scenario 6-2 Suppose demand for a product is given by the equation Q^D = 120 - 4P and supply for the product is given by the equation Q^S = 4P -Refer to Scenario 6-2. Suppose the government sets a price floor at $13 for this product. Initially, is this price floor binding? Suppose that for some reason demand were to decrease to $Q ^ { D } = 80 - 4 P$ Would the $13 price floor be binding after the shift in the demand curve? If so, what is the size of the resulting shortage/surplus?

Binding price floors benefit sellers because they allow sellers to sell all the goods they want at a higher price.

Scenario 6-2 Suppose demand for a product is given by the equation Q^D = 120 - 4P and supply for the product is given by the equation Q^S = 4P -Refer to Scenario 6-2. Suppose the government sets a price floor at $13 for this product. Is this price floor binding, and what will be the size of the shortage/surplus in this market?

Figure 6-7 -Refer to Figure 6-7. If the government imposes a price ceiling at $9, it would be

In a particular market, market demand is given by the equation Q^D = 60 - P and market supply is given by the equation Q^S = P Suppose a per-unit tax is imposed that reduces the number of units bought and sold in the market to 25 units. What is the size of the tax, and who bears the greater burden of the tax, buyers or sellers?

In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that

Which of the following is not a result of rent control?

The burden that results from a tax on yachts falls more heavily on the buyers of yachts than on the sellers of yachts.

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

Figure 6-19 ​ -Refer to Figure 6-19. If the government set a price ceiling at $80, would there be a shortage or surplus, and how large would be the shortage/surplus?

Table 6-2 $\begin{array} { | l | l | l | } \hline \text { Price (\$) } & \begin{array} { l } \text { Quantity } \\\text { Demanded }\end{array} & \begin{array} { l } \text { Quantity } \\\text { Supplied }\end{array} \\\hline 0 & 21 & 0 \\\hline 1 & 18 & 4 \\\hline 2 & 15 & 8 \\\hline 3 & 12 & 12 \\\hline 4 & 9 & 16 \\\hline 5 & 6 & 20 \\\hline 6 & 3 & 24 \\\hline 7 & 0 & 28 \\\hline\end{array}$ -Refer to Table 6-2. If the government set a price floor at $2, would there be a shortage or surplus, and how large would be the shortage/surplus?

The rationing mechanisms that develop under binding price ceilings are usually inefficient.

Figure 6-9 -Refer to Figure 6-9. In this market, a minimum wage of $7 is

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Figure 6-19 ​ -Refer to Figure 6-19. If the government set a price ceiling at $40, would there be a shortage or surplus, and how large would be the shortage/surplus?

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

Whether a tax is levied on sellers or buyers, buyers and sellers usually share the burden of taxes.