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Supply, Demand, and Government Policies 1655
74. In an unregulated labor market, the wage adjusts to balance labor supply and labor demand.
a. True
b. False
75. The economy contains many labor markets for different types of workers.
a. True
b. False
76. One common example of a price floor is the minimum wage.
a. True
b. False
1656 Supply, Demand, and Government Policies
77. The goal of the minimum wage is to ensure workers a minimally adequate standard of living.
a. True
b. False
78. The United States is the only country in the world with minimum-wage laws.
a. True
b. False
79. States in the U.S. may mandate minimum wages above the federal level.
a. True
b. False
Supply, Demand, and Government Policies 1657
80. A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor
supplied.
a. True
b. False
81. A binding minimum wage creates unemployment.
a. True
b. False
82. A binding minimum wage creates a surplus of labor.
a. True
b. False
1658 Supply, Demand, and Government Policies
83. A binding minimum wage creates a shortage of labor.
a. True
b. False
84. A binding minimum wage may not help all workers, but it does not hurt any workers.
a. True
b. False
85. A binding minimum wage raises the incomes of some workers, but it lowers the incomes of
workers who cannot find jobs.
a. True
b. False
Supply, Demand, and Government Policies 1659
86. The impact of the minimum wage depends on the skill and experience of the worker.
a. True
b. False
87. Workers with high skills and much experience are not typically affected by the minimum wage.
a. True
b. False
88. The minimum wage has its greatest impact on the market for teenage labor.
a. True
b. False
1660 Supply, Demand, and Government Policies
89. The minimum wage is more often binding for teenagers than for other members of the labor
force.
a. True
b. False
90. Studies by economists have found that a 10 percent increase in the minimum wage decreases
teenage employment 10 percent.
a. True
b. False
Supply, Demand, and Government Policies 1661
91. A large majority of economists favor eliminating the minimum wage.
a. True
b. False
92. Advocates of the minimum 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.
a. True
b. False
93. If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a shortage of
labor will exist.
a. True
b. False
1662 Supply, Demand, and Government Policies
94. Minimum-wage laws are precise policy instruments that can specifically target workers whose
family incomes are low.
a. True
b. False
95. Minimum-wage laws benefit society by creating a surplus of labor.
a. True
b. False
96. Most economists are in favor of price controls as a way of allocating resources in the economy.
a. True
b. False
Supply, Demand, and Government Policies 1663
97. When policymakers set prices by legal decree, they obscure the signals that normally guide the
allocation of society’s resources.
a. True
b. False
98. Price controls often hurt those they are trying to help.
a. True
b. False
99. Rent subsidies and wage subsidies are better than price controls at helping the poor because
they have no costs associated with them.
a. True
b. False
1664 Supply, Demand, and Government Policies
100. A price ceiling is always a binding price control, whereas a price floor may be either binding or
not binding.
a. True
b. False
101. 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.
a. True
b. False
102. When a tax is imposed on a good, the result is always a shortage of the good.
a. True
b. False
Supply, Demand, and Government Policies 1665
103. When a tax of $1.00 per gallon is imposed on sellers of gasoline, the supply curve for gasoline
shifts upward, but by less than $1.00.
a. True
b. False
104. A tax on sellers shifts the supply curve but not the demand curve.
a. True
b. False
105. A tax on sellers shifts the supply curve to the left.
a. True
b. False
1666 Supply, Demand, and Government Policies
106. A tax on sellers increases supply.
a. True
b. False
107. A tax on sellers and an increase in input prices affect the supply curve in the same way.
a. True
b. False
108. A tax of $1 on sellers shifts the supply curve upward by exactly $1.
a. True
b. False
Supply, Demand, and Government Policies 1667
109. A tax of $1 on sellers always increases the equilibrium price by $1.
a. True
b. False
110. A tax on sellers reduces the size of a market.
a. True
b. False
111. A tax on sellers increases the quantity of the good sold in the market.
a. True
b. False
1668 Supply, Demand, and Government Policies
112. A tax on sellers usually causes buyers to pay more for the good and sellers to receive less for
the good than they did before the tax was levied.
a. True
b. False
113. A tax on buyers shifts the demand curve and the supply curve.
a. True
b. False
114. A tax on buyers shifts the demand curve to the right.
a. True
b. False
Supply, Demand, and Government Policies 1669
115. A tax on buyers decreases demand.
a. True
b. False
116. A tax of $1 on buyers shifts the demand curve downward by exactly $1.
a. True
b. False
117. A tax of $1 on buyers always decreases the equilibrium price by $1.
a. True
b. False
1670 Supply, Demand, and Government Policies
118. A tax on buyers increases the size of a market.
a. True
b. False
119. A tax on buyers decreases the quantity of the good sold in the market.
a. True
b. False
120. A tax on buyers usually causes buyers to pay more for the good and sellers to receive less for
the good than they did before the tax was levied.
a. True
b. False
Supply, Demand, and Government Policies 1671
121. Regardless of whether a tax is levied on sellers or buyers, taxes discourage market activity.
a. True
b. False
122. Regardless of whether a tax is levied on sellers or buyers, taxes encourage market activity.
a. True
b. False
123. Taxes levied on sellers and taxes levied on buyers are equivalent.
a. True
b. False
1672 Supply, Demand, and Government Policies
124. The wedge between the buyers’ price and the sellers’ price is the same, regardless of whether
the tax is levied on buyers or sellers.
a. True
b. False
125. The term tax incidence refers to how the burden of a tax is distributed among the various people
who make up the economy.
a. True
b. False
126. If a tax is imposed on the sellers of a product, then the tax burden will fall entirely on the sellers.
a. True
b. False
Supply, Demand, and Government Policies 1673
127. If a tax is imposed on the buyers of a product, then the tax burden will fall entirely on the buyers.
a. True
b. False
128. Whether a tax is levied on sellers or buyers, buyers and sellers usually share the burden of
taxes.
a. True
b. False
129. The tax incidence depends on whether the tax is levied on buyers or sellers.
a. True
b. False
1674 Supply, Demand, and Government Policies
130. 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.
a. True
b. False
131. Buyers and sellers always share the burden of a tax equally.
a. True
b. False
132. Buyers and sellers rarely share the burden of a tax equally.
a. True
b. False
