1516 Supply, Demand, and Government Policies
208. The minimum wage has its greatest impact on the market for
a. female labor.
b. older labor.
c. black labor.
d. teenage labor.
209. The minimum wage does
not apply to
a. jobs for teenagers.
b. jobs for members of minority groups.
c. unpaid internships.
d. jobs that include on-the–job training.
Supply, Demand, and Government Policies 1517
210. Studies of the effects of the minimum wage typically find that a 10 percent increase in the
minimum wage depresses teenage employment by about
a. 1 to 3 percent.
b. 5 to 7 percent.
c. 10 percent.
d. None of the above is correct because studies show no decrease in teenage employment.
211. Which of the following is correct?
a. Studies of the effects of the minimum wage typically find that a 10 percent increase in the
minimum wage raises the average wage of teenagers by 10 percent.
b. The drop in teenage employment caused by a 10 percent increase in the minimum wage is not
significant.
c. The minimum wage is more often binding for teenagers than for other members of the labor
force.
d. All firms consistently enforce minimum–wage laws.
1518 Supply, Demand, and Government Policies
212. The minimum wage
a. is an example of a price ceiling.
b. has its greatest impact on middle-aged and immigrant workers.
c. does not apply to unpaid internships.
d. does not affect the quantity of labor demanded; it only affects the quantity of labor supplied.
213. A binding minimum wage tends to
a. cause a labor surplus.
b. cause unemployment.
c. have the greatest impact in the market for teenage labor.
d. All of the above are correct.
Supply, Demand, and Government Policies 1519
214. Minimum wage laws
a. may encourage some teenagers to drop out and take jobs.
b. create labor shortages.
c. have the greatest impact in the market for skilled labor.
d. All of the above are correct.
215. Advocates of the minimum wage
a. deny that the minimum wage produces any adverse effects.
b. emphasize the benefits to teenagers of increases in the minimum wage.
c. emphasize the low annual incomes of those who work for the minimum wage.
d. All of the above are correct.
1520 Supply, Demand, and Government Policies
216. Opponents of the minimum wage point out that the minimum wage
a. encourages teenagers to drop out of school.
b. prevents some workers from getting needed on–the-job training.
c. contributes to the problem of unemployment.
d. All of the above are correct.
217. The proportion of minimum-wage earners who are in families with incomes below the poverty
line is
a. less than one-third.
b. between one-third and one–half.
c. between one-half and two-thirds.
d. greater than two-thirds.
Supply, Demand, and Government Policies 1521
218. There are several criticisms of the minimum wage. Which of the following is not one of those
criticisms? The minimum wage
a. often hurts those people who it is intended to help.
b. results in an excess supply of low-skilled labor.
c. prevents some unskilled workers from getting needed on–the–job training.
d. fails to raise the wage of any employed person.
219. The minimum wage, if it is binding, raises the incomes of
a. no workers.
b. only those workers who cannot find jobs.
c. only those workers whose jobs would pay less than the minimum wage if it didn’t exist.
d. all workers.
1522 Supply, Demand, and Government Policies
220. The minimum wage, if it is binding, lowers the incomes of
a. no workers.
b. only those workers who become unemployed.
c. only those workers who have jobs.
d. all workers.
221. A minimum wage that is set above a market’s equilibrium wage will result in an excess
a. demand for labor, that is, unemployment.
b. demand for labor, that is, a shortage of workers.
c. supply of labor, that is, unemployment.
d. supply of labor, that is, a shortage of workers.
Supply, Demand, and Government Policies 1523
222. Unlike minimum wage laws, wage subsidies
a. discourage firms from hiring the working poor.
b. cause unemployment.
c. help only wealthy workers.
d. raise the living standards of the working poor without creating unemployment.
223. The Earned Income Tax Credit is an example of a
a. minimum-wage law.
b. price ceiling.
c. wage subsidy.
d. rent subsidy.
1524 Supply, Demand, and Government Policies
224. Which of the following is correct? Price controls
a. always help those they are designed to help.
b. never help those they are designed to help.
c. often hurt those they are designed to help.
d. always hurt those they are designed to help.
225. Which of the following would not interfere with market equilibria?
a. a minimum wage
b. a rent control
c. a non–binding price floor
d. a binding price ceiling
Supply, Demand, and Government Policies 1525
226. 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.
227. Which of the following is correct?
a. Workers determine the supply of labor, and firms determine the demand for labor.
b. Workers determine the demand for labor, and firms determine the supply of labor.
c. The labor market is a single market for all different types of workers.
d. The price of the product produced by labor adjusts to balance the supply of labor and the
demand for labor.
1526 Supply, Demand, and Government Policies
228. 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.
229. In “Venezuela Versus the Market,” the long lines and shortages are caused by
a. declining world energy prices.
b. unfettered capitalism.
c. price floors that are intended to make food more affordable for the poor.
d. price ceilings that are intended to make food more affordable for the poor.
Supply, Demand, and Government Policies 1527
230. In “Venezuela Versus the Market,” the price control placed on coffee
a. created a shortage of coffee.
b. resulted in higher profits for coffee growers.
c. increased coffee exports to other countries.
d. increased the amount of land and coffee used in production.
231. 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.
1528 Supply, Demand, and Government Policies
232. 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.
Multiple Choice – Section 02: Taxes
1. If the government removes a tax on a good, then the quantity of the good sold will
a. increase.
b. decrease.
c. not change.
d. All of the above are possible.
Supply, Demand, and Government Policies 1529
2. If the government removes a tax on a good, then the price paid by buyers will
a. increase, and the price received by sellers will increase.
b. increase, and the price received by sellers will decrease.
c. decrease, and the price received by sellers will increase.
d. decrease, and the price received by sellers will decrease.
3. A tax on the sellers of coffee mugs
a. increases the size of the coffee mug market.
b. decreases the size of the coffee mug market.
c. has no effect on the size of the coffee mug market.
d. may increase, decrease, or have no effect on the size of the coffee mug market.
1530 Supply, Demand, and Government Policies
4. When a tax is placed on the sellers of a product, buyers pay
a. more, and sellers receive more than they did before the
tax.
b. more, and sellers receive less than they did before the tax.
c. less, and sellers receive more than they did before the tax.
d. less, and sellers receive less than they did before the tax.
5. A tax on the sellers of coffee will increase the price of coffee paid by buyers,
a. increase the effective price of coffee received by sellers, and increase the equilibrium quantity
of coffee.
b. increase the effective price of coffee received by sellers, and decrease the equilibrium quantity
of coffee.
c. decrease the effective price of coffee received by sellers, and increase the equilibrium quantity
of coffee.
d. decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity
of coffee.
Supply, Demand, and Government Policies 1531
6. A tax imposed on the sellers of a good will raise the
a. price paid by buyers and lower the equilibrium quantity.
b. price paid by buyers and raise the equilibrium quantity.
c. effective price received by sellers and lower the equilibrium quantity.
d. effective price received by sellers and raise the equilibrium quantity.
7. A tax imposed on the sellers of a good will lower the
a. price paid by buyers and lower the equilibrium quantity.
b. price paid by buyers and raise the equilibrium quantity.
c. effective price received by sellers and lower the equilibrium quantity.
d. effective price received by sellers and raise the equilibrium quantity.
8. A tax imposed on the sellers of a good will
a. raise both the price buyers pay and the effective price sellers receive.
b. raise the price buyers pay and lower the effective price sellers receive.
c. lower the price buyers pay and raise the effective price sellers receive.
d. lower both the price buyers pay and the effective price sellers receive.
1532 Supply, Demand, and Government Policies
9. If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of
boats would
a. increase by more than $1,000.
b. increase by exactly $1,000.
c. increase by less than $1,000.
d. decrease by an indeterminate amount.
10. If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of
cars would
a. decrease by less than $500.
b. decrease by exactly $500.
c. decrease by more than $500.
d. increase by an indeterminate amount.
Supply, Demand, and Government Policies 1533
11. When a tax is placed on the sellers of cell phones, the size of the cell phone market
a. and the effective price received by sellers both increase.
b. increases, but the effective price received by sellers decreases.
c. decreases, but the effective price received by sellers increases.
d. and the effective price received by sellers both decrease.
12. When a tax is placed on the sellers of cell phones, the size of the cell phone market
a. and the price paid by buyers both increase.
b. increases, but the price paid by buyers decreases.
c. decreases, but the price paid by buyers increases.
d. and the price paid by buyers both decrease.
1534 Supply, Demand, and Government Policies
13. If the government passes a law requiring sellers of mopeds to send $200 to the government for
every moped they sell, then
a. the supply curve for mopeds shifts downward by $200.
b. sellers of mopeds receive $200 less per moped than they were receiving before the tax.
c. buyers of mopeds are unaffected by the tax.
d. None of the above is correct.
14. Suppose sellers of perfume are required to send $1.00 to the government for every bottle of
perfume they sell.
Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per
bottle. Which of the following statements is correct?
a. The effective price received by sellers is $0.40 per bottle less than it was before the tax.
b. Sixty percent of the burden of the tax falls on sellers.
c. This tax causes the demand curve for perfume to shift downward by $1.00 at each quantity of
perfume.
d. All of the above are correct.
Supply, Demand, and Government Policies 1535
15. 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.
16. If a tax is levied on the sellers of a product, then the demand curve will
a. shift down.
b. shift up.
c. become flatter.
d. not shift.