Chapter 6/Supply, Demand, And Government Policies ❖ 41
175. 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.
176. 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.
177. 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.
178. 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.
179. 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.
180. 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.
42 ❖ Chapter 6/Supply, Demand, and Government Policies
181. 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.
182. 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.
183. 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.
184. 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.
185. 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.
186. 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.
Chapter 6/Supply, Demand, And Government Policies ❖ 43
187. 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.
Figure 6-13
D
S
$7.25
2.75 7.25 in thousands
$2.75
1 2 3 4 5 6 7 8 9 10 workers
1
2
3
4
5
6
7
8
9
10 wage
188. Refer to Figure 6-13. In this market, a minimum wage of $7.25 is
a.
binding and creates a labor shortage.
b.
binding and creates unemployment.
c.
nonbinding and creates a labor shortage.
d.
nonbinding and creates neither a labor shortage nor unemployment.
189. Refer to Figure 6-13. In this market, a minimum wage of $2.75 is
a.
binding and creates a labor shortage.
b.
binding and creates unemployment.
c.
nonbinding and creates a labor shortage.
d.
nonbinding and creates neither a labor shortage nor unemployment.
190. Refer to Figure 6-13. In this market, a minimum wage of $7.25 creates a labor
a.
shortage of 2,250 workers.
b.
shortage of 4,500 workers.
c.
surplus of 2,250 workers.
d.
surplus of 4,500 workers.
d.
supply of labor, that is, a shortage of workers.
44 ❖ Chapter 6/Supply, Demand, and Government Policies
191. Refer to Figure 6-13. In this market, a minimum wage of $2.75 creates a labor
a.
shortage of 2,250 workers.
b.
shortage of 4,500 workers.
c.
surplus of 2,250 workers.
d.
neither a labor shortage nor surplus.
192. 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.
193. The Earned Income Tax Credit is an example of a
a.
minimum-wage law.
b.
price ceiling.
c.
wage subsidy.
d.
rent subsidy.
194. 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.
195. 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
196. 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.
Chapter 6/Supply, Demand, And Government Policies ❖ 45
197. 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.
198. 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.
199. 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.
200. 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.
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.
46 ❖ Chapter 6/Supply, Demand, and Government Policies
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.
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.
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.
Chapter 6/Supply, Demand, And Government Policies ❖ 47
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.
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.
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.
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 mopeds than they were receiving before the tax.
c.
buyers of mopeds are unaffected by the tax.
d.
None of the above is correct.
48 ❖ Chapter 6/Supply, Demand, and Government Policies
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.
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.
17. If a tax is levied on the sellers of a product, then there will be a(n)
a.
downward shift of the demand curve.
b.
upward shift of the demand curve.
c.
movement up and to the left along the demand curve.
d.
movement down and to the right along the demand curve.
18. If a tax is levied on the sellers of a product, then the supply curve will
a.
shift up.
b.
shift down.
c.
become flatter.
d.
not shift.
19. If a tax is levied on the sellers of a product, then there will be a(n)
a.
downward shift of the supply curve.
b.
upward shift of the supply curve.
c.
movement up and to the right along the supply curve.
d.
movement down and to the left along the supply curve.
Chapter 6/Supply, Demand, And Government Policies ❖ 49
20. A tax on the sellers of cameras encourages
a.
sellers to supply a smaller quantity at every price.
b.
buyers to demand a smaller quantity at every price.
c.
sellers to supply a larger quantity at every price.
d.
Both a) and b) are correct.
21. A tax levied on the sellers of blueberries
a.
increases sellers’ costs, reduces profits, and shifts the supply curve up.
b.
increases sellers’ costs, reduces profits, and shifts the supply curve down.
c.
decreases sellers’ costs, increases profits, and shifts the supply curve up.
d.
decreases sellers’ costs, increases profits, and shifts the supply curve down.
22. A tax on sellers will shift the
a.
demand curve upward by the amount of the tax.
b.
demand curve downward by the amount of the tax.
c.
supply curve upward by the amount of the tax.
d.
supply curve downward by the amount of the tax.
23. When a tax is imposed on the sellers of a good, the supply curve shifts
a.
upward by the amount of the tax.
b.
downward by the amount of the tax.
c.
upward by less than the amount of the tax.
d.
downward by less than the amount of the tax.
24. A $2.00 tax levied on the sellers of birdhouses will shift the supply curve
a.
upward by exactly $2.00.
b.
upward by less than $2.00.
c.
downward by exactly $2.00.
d.
downward by less than $2.00.
25. A $0.10 tax levied on the sellers of chocolate bars will cause the
a.
supply curve for chocolate bars to shift down by $0.10.
b.
supply curve for chocolate bars to shift up by $0.10.
c.
demand curve for chocolate bars to shift down by $0.10.
d.
demand curve for chocolate bars to shift up by $0.10.
50 ❖ Chapter 6/Supply, Demand, and Government Policies
26. When a tax is placed on the sellers of a product, the
a.
size of the market decreases.
b.
effective price received by sellers decreases, and the price paid by buyers increases.
c.
supply of the product decreases.
d.
All of the above are correct.
27. Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay
the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the
a.
demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20.
b.
demand curve will shift upward by $20, and the price paid by buyers will decrease by $20.
c.
supply curve will shift downward by $20, and the effective price received by sellers will increase
by less than $20.
d.
supply curve will shift downward by $20, and the effective price received by sellers will increase
by $20.
28. Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay
the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the
a.
demand curve will shift upward by $20, and the effective price received by sellers will increase by
$20.
b.
demand curve will shift upward by $20, and the effective price received by sellers will increase by
less than $20.
c.
supply curve will shift downward by $20, and the price paid by buyers will decrease by $20.
d.
supply curve will shift downward by $20, and the price paid by buyers will decrease by less than
$20.
29. Suppose sellers of liquor are required to send $1.00 to the government for every bottle of liquor they sell. Fur-
ther, suppose this tax causes the price paid by buyers of liquor to rise by $0.80 per bottle. Which of the fol-
lowing statements is correct?
a.
This tax causes the supply curve for liquor to shift upward by $1.00 at each quantity of liquor.
b.
The effective price received by sellers is $0.20 per bottle less than it was before the tax.
c.
Eighty percent of the burden of the tax falls on buyers.
d.
All of the above are correct.
30. A tax on the buyers of sofas
a.
increases the size of the sofa market.
b.
decreases the size of the sofa market.
c.
has no effect on the size of the sofa market.
d.
may increase, decrease, or have no effect on the size of the sofa market.
Chapter 6/Supply, Demand, And Government Policies ❖ 51
31. When a tax is placed on the buyers 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.
32. A tax on the buyers of cereal will increase the price of cereal paid by buyers,
a.
decrease the effective price of cereal received by sellers, and decrease the equilibrium quantity of
cereal.
b.
decrease the effective price of cereal received by sellers, and increase the equilibrium quantity of
cereal.
c.
increase the effective price of cereal received by sellers, and decrease the equilibrium quantity of
cereal.
d.
increase the effective price of cereal received by sellers, and increase the equilibrium quantity of
cereal.
33. A tax imposed on the buyers 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.
34. A tax imposed on the buyers 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.
35. A tax imposed on the buyers 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.
52 ❖ Chapter 6/Supply, Demand, and Government Policies
36. If the government levies a $5 tax per ticket on buyers of NFL game tickets, then the price paid by buyers of
NFL game tickets would
a.
increase by less than $5.
b.
increase by exactly $5.
c.
increase by more than $5.
d.
decrease by an indeterminate amount.
37. If the government levies a $2 tax per DVD on buyers of DVDs, then the price received by sellers of DVDs
would
a.
decrease by more than $2.
b.
decrease by exactly $2.
c.
decrease by less than $2.
d.
increase by an indeterminate amount.
38. When a tax is placed on the buyers of cell phones, the size of the cell phone market
a.
and the effective price received by sellers both decrease.
b.
decreases, but the effective price received by sellers increases.
c.
increases, but the effective price received by sellers decreases.
d.
and the effective price received by sellers both increase.
39. When a tax is placed on the buyers of tennis racquets, the size of the tennis racquet market
a.
and the price paid by buyers both decrease.
b.
decreases, but the price paid by buyers increases.
c.
increases, but the price paid by buyers decreases.
d.
and the price paid by buyers both increase.
40. Suppose buyers of vodka are required to send $1.00 to the government for every bottle of vodka they buy.
Further, suppose this tax causes the effective price received by sellers of vodka to fall by $0.60 per bottle.
Which of the following statements is correct?
a.
This tax causes the supply curve for vodka to shift upward by $1.00 at each quantity of vodka.
b.
The price paid by buyers is $0.40 per bottle more than it was before the tax.
c.
Sixty percent of the burden of the tax falls on buyers.
d.
All of the above are correct.
41. When a tax is levied on buyers of tea,
a.
buyers of tea and sellers of tea both are made worse off.
b.
buyers of tea are made worse off, and the well-being of sellers is unaffected.
c.
buyers of tea are made worse off, and sellers of tea are made better off.
d.
the well-being of both buyers of tea and sellers of tea is unaffected.
Chapter 6/Supply, Demand, And Government Policies ❖ 53
42. If a tax is levied on the buyers of a product, then the demand curve will
a.
not shift.
b.
shift down.
c.
shift up.
d.
become flatter.
43. If a tax is levied on the buyers of a product, then there will be a(n)
a.
upward shift of the demand curve.
b.
downward shift of the demand curve.
c.
movement up and to the left along the demand curve.
d.
movement down and to the right along the demand curve.
44. A tax on the buyers of personal computer external hard drives encourages
a.
sellers to supply a smaller quantity at every price.
b.
buyers to demand a smaller quantity at every price.
c.
buyers to demand a larger quantity at every price.
d.
Both a) and b) are correct.
45. A tax on buyers will shift the
a.
demand curve upward by the amount of the tax.
b.
demand curve downward by the amount of the tax.
c.
supply curve upward by the amount of the tax.
d.
supply curve downward by the amount of the tax.
46. When a tax is imposed on the buyers of a good, the demand curve shifts
a.
upward by the amount of the tax.
b.
downward by the amount of the tax.
c.
upward by less than the amount of the tax.
d.
downward by less than the amount of the tax.
47. A $0.50 tax levied on the buyers of pomegranate juice will shift the demand curve
a.
upward by exactly $0.50.
b.
upward by less than $0.50.
c.
downward by exactly $0.50.
d.
downward by less than $0.50.
54 ❖ Chapter 6/Supply, Demand, and Government Policies
48. A $3 tax levied on the buyers of shoes will cause the
a.
supply curve for shoes to shift down by $3.
b.
supply curve for shoes to shift up by $3.
c.
demand curve for shoes to shift down by $3.
d.
demand curve for shoes to shift up by $3.
49. When a tax is placed on the buyers of a product, the
a.
size of the market decreases.
b.
effective price received by sellers decreases, and the price paid by buyers increases.
c.
demand for the product decreases.
d.
All of the above are correct.
50. If the government passes a law requiring buyers of college textbooks to send $5 to the government for every
textbook they buy, then
a.
the demand curve for textbooks shifts downward by $5.
b.
buyers of textbooks pay $5 more per textbook than they were paying before the tax.
c.
sellers of textbooks are unaffected by the tax.
d.
All of the above are correct.
51. Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to
pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the
a.
demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20.
b.
demand curve will shift upward by $20, and the price paid by buyers will decrease by $20.
c.
supply curve will shift downward by $20, and the effective price received by sellers will increase
by less than $20.
d.
supply curve will shift downward by $20, and the effective price received by sellers will increase
by $20.
52. Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to
pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the
a.
demand curve will shift upward by $20, and the effective price received by sellers will increase by
$20.
b.
demand curve will shift upward by $20, and the effective price received by sellers will increase by
less than $20.
c.
supply curve will shift downward by $20, and the price paid by buyers will decrease by $20.
d.
supply curve will shift downward by $20, and the price paid by buyers will decrease by less than
$20.
Chapter 6/Supply, Demand, And Government Policies ❖ 55
53. Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy.
Further, suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle.
Which of the following statements is correct?
a.
This tax causes the demand curve for tequila to shift downward by $1.00 at each quantity of tequila.
b.
The price paid by buyers is $0.20 per bottle more than it was before the tax.
c.
Eighty percent of the burden of the tax falls on sellers.
d.
All of the above are correct.
54. If a tax is levied on the buyers of a product, then the supply curve will
a.
not shift.
b.
shift up.
c.
shift down.
d.
become flatter.
55. If a tax is levied on the buyers of a product, then there will be a(n)
a.
downward shift of the supply curve.
b.
upward shift of the supply curve.
c.
movement up and to the right along the supply curve.
d.
movement down and to the left along the supply curve.
56. Which of the following is not correct?
a.
Taxes levied on sellers and taxes levied on buyers are not equivalent.
b.
A tax places a wedge between the price that buyers pay and the price that sellers receive.
c.
The wedge between the buyers’ price and the sellers’ price is the same, regardless of whether the
tax is levied on buyers or sellers.
d.
In the new after-tax equilibrium, buyers and sellers share the burden of the tax.
57. If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax on buyers of gasoline,
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 not change.
c.
not change, and the price received by sellers will increase.
d.
not change, and the price received by sellers will not change.
56 ❖ Chapter 6/Supply, Demand, and Government Policies
58. If the government removes a $2 tax on buyers of cigars and imposes the same $2 tax on sellers of cigars, then
the price paid by buyers will
a.
not change, and the price received by sellers will not change.
b.
not change, and the price received by sellers will decrease.
c.
decrease, and the price received by sellers will not change.
d.
decrease, and the price received by sellers will decrease.
59. If the government wants to reduce smoking, it should impose a tax on
a.
buyers of cigarettes.
b.
sellers of cigarettes.
c.
either buyers or sellers of cigarettes.
d.
whichever side of the market is less elastic.
60. If the government wants to reduce the burning of fossil fuels, it should impose a tax on
a.
buyers of gasoline.
b.
sellers of gasoline.
c.
either buyers or sellers of gasoline.
d.
whichever side of the market is less elastic.
61. The term tax incidence refers to
a.
whether buyers or sellers of a good are required to send tax payments to the government.
b.
whether the demand curve or the supply curve shifts when the tax is imposed.
c.
the distribution of the tax burden between buyers and sellers.
d.
widespread view that taxes (and death) are the only certainties in life.
62. When a tax is placed on the buyers of lemonade, the
a.
sellers bear the entire burden of the tax.
b.
buyers bear the entire burden of the tax.
c.
burden of the tax will be always be equally divided between the buyers and the sellers.
d.
burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not
always equal.
63. Which of the following statements is correct concerning the burden of a tax imposed on take-out food?
a.
Buyers bear the entire burden of the tax.
b.
Sellers bear the entire burden of the tax.
c.
Buyers and sellers share the burden of the tax.
d.
We have to know whether it is the buyers or the sellers that are required to pay the tax to the
government in order to make this determination.
Chapter 6/Supply, Demand, And Government Policies ❖ 57
64. The tax incidence
a.
is the manner in which the burden of a tax is shared among participants in a market.
b.
can be shifted to the buyer by imposing the tax on the buyers of a product in a market.
c.
can be shifted to the seller by imposing the tax on the sellers of a product in a market.
d.
All of the above are correct.
65. How is the burden of a tax divided?
(i)
When the tax is levied on the sellers, the sellers bear a higher proportion of the tax burden.
(ii)
When the tax is levied on the buyers, the buyers bear a higher proportion of the tax burden.
(iii)
Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear
an equal proportion of the tax burden.
(iv)
Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear
some proportion of the tax burden.
a.
(i) and (ii) only
b.
(iv) only
c.
(i), (ii), and (iii) only
d.
(i), (ii), and (iv) only
66. When a tax is placed on the sellers of energy drinks, the
a.
sellers bear the entire burden of the tax.
b.
buyers bear the entire burden of the tax.
c.
burden of the tax will be always be equally divided between the buyers and the sellers.
d.
burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not
always equal.
67. If a tax is levied on the sellers of flour, then
a.
buyers will bear the entire burden of the tax.
b.
sellers will bear the entire burden of the tax.
c.
buyers and sellers will share the burden of the tax.
d.
the government will bear the entire burden of the tax.
68. Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax
would shift
a.
demand, raising both the equilibrium price and quantity in the market for artificially-sweetened
beverages.
b.
demand, lowering the equilibrium price and raising the equilibrium quantity in the market for
artificially-sweetened beverages.
c.
supply, raising the equilibrium price and lowering the equilibrium quantity in the market for
artificially-sweetened beverages.
d.
supply, lowering the equilibrium price and raising the equilibrium quantity in the market for
artificially-sweetened beverages.
58 ❖ Chapter 6/Supply, Demand, and Government Policies
69. Suppose the government imposes a 20-cent tax on the sellers of iced tea. Which of the following is not cor-
rect? The tax would
a.
shift the supply curve upward by 20 cents.
b.
raise the equilibrium price by 20 cents.
c.
reduce the equilibrium quantity.
d.
discourage market activity.
70. Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would
a.
shift the supply curve upward by less than 50 cents.
b.
raise the equilibrium price by 50 cents.
c.
create a 50-cent tax burden each for buyers and sellers.
d.
discourage market activity.
71. Suppose the government imposes a 25-cent tax on the buyers of incandescent light bulbs. Which of the fol-
lowing is not correct? The tax would
a.
shift the demand curve downward by 25 cents.
b.
lower the equilibrium price by 25 cents.
c.
reduce the equilibrium quantity.
d.
discourage market activity.
Chapter 6/Supply, Demand, And Government Policies ❖ 59
Figure 6-14
The vertical distance between points A and B represents the tax in the market.
D
S
B
A
70 100
10
16
24
quantity
price
72. Refer to Figure 6-14. The price that buyers pay after the tax is imposed is
a.
$8.
b.
$10.
c.
$16.
d.
$24.
73. Refer to Figure 6-14. The effective price that sellers receive after the tax is imposed is
a.
$6.
b.
$10.
c.
$16.
d.
$24.
74. Refer to Figure 6-14. The amount of the tax per unit is
a.
$6.
b.
$8.
c.
$14.
d.
$18.
60 ❖ Chapter 6/Supply, Demand, and Government Policies
75. Refer to Figure 6-14. The per-unit burden of the tax on buyers is
a.
$6.
b.
$8.
c.
$14.
d.
$24.
76. Refer to Figure 6-14. The per-unit burden of the tax on sellers is
a.
$6.
b.
$8.
c.
$10.
d.
$14.
Figure 6-15
quantity
price
77. Refer to Figure 6-15. Suppose a tax of $2 per unit is imposed on this market. What will be the new equilib-
rium quantity in this market?
a.
less than 50 units
b.
50 units
c.
between 50 units and 100 units
d.
greater than 100 units
78. Refer to Figure 6-15. Suppose a tax of $2 per unit is imposed on this market. How much will sellers receive
per unit after the tax is imposed?
a.
$3
b.
between $3 and $5
c.
between $5 and $7
d.
$7