The supply of oil is likely to be
a.
inelastic in both the short run and long run.
b.
elastic in both the short run and long run.
c.
elastic in the short run and inelastic in the long run.
d.
inelastic in the short run and elastic in the long run.
d.
inelastic in the short run and elastic in the long run.
2. If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currentl
d.
demand for marijuana is inelastic
3. A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will
a.
raise the price, reduce the quantity, decrease total revenues, and decrease crime.
b.
lower the price, increase the quantity, increase
d.
raise the price, reduce the quantity, increase total revenues, and increase crime.
4. If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?
The good is an inferior good
5. If the income elasticity of demand for a good is 0.56, is the good a normal or inferior good?
The good is a normal good
6. If a supply curve is perfectly vertical, what is the value of the price elasticity of supply?
0
8. Generally, a firm is more willing and able to increase quantity supplied in response to a price change when
a.
the relevant time period is short rather than long.
b.
the relevant time period is long rather than short.
c.
supply is inelastic.
d.
the fir
b.
the relevant time period is long rather than short
9. A key determinant of the price elasticity of supply is the
a.
number of close substitutes for the good in question.
b.
extent to which buyers alter their quantities demanded in response to changes in prices.
c.
length of the time period.
d.
extent to w
c.
length of the time period
10. The price elasticity of supply measures how much
a.
the quantity supplied responds to changes in input prices.
b.
the quantity supplied responds to changes in the price of the good.
c.
the price of the good responds to changes in supply.
d.
sellers re
b.
the quantity supplied responds to changes in the price of the good
11. If the quantity supplied responds only slightly to changes in price, then
a.
supply is said to be elastic.
b.
supply is said to be inelastic.
c.
an increase in price will not shift the supply curve very much.
d.
even a large decrease in demand will ch
b.
supply is said to be inelastic
12. A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?
a.
Supply curves are steeper over long periods of time than over short periods of time.
b.
Buyers of
c.
The number of firms in a market tends to be more variable over long periods of time than over sort periods of time
13. Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?
a.
The flatter supply curve represents a supply that is inelastic relative to the supply represented by the
b.
The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve
14. 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.
both a minimum wage and a maximum wage that firms may pay workers.
c.
a minimum wage that firms may pay workers
15. 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 we
c.
policymakers believe that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers
16. 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 corr
b.
both to raise revenue for public purposes and to influence market outcomes
17. Which of the following is not a function of prices in a market system?
a.
Prices have the crucial job of balancing supply and demand.
b.
Prices send signals to buyers and sellers to help them make rational economic decisions.
c.
Prices coordinate econ
d.
Prices ensure an equal distribution of goods and services among consumers
18. 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.
None of the above is correct because all price ceilings must
b.
the equilibrium price is below the price ceiling
19. 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.
c.
below the equilibrium price.
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 qu
a.increase, and the quantity sold in the market will increase
21. A shortage results when a
a.
nonbinding price ceiling is imposed on a market.
b.
nonbinding price ceiling is removed from a market.
c.
binding price ceiling is imposed on a market.
d.
binding price ceiling is removed from a market.
c.
binding price ceiling is imposed on a market
22. A price floor is
a.
a legal minimum on the price at which a good can be sold.
b.
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 floor.
c.
a source of i
d.
all of the above are correct
23. If a price floor is not binding, then
a.
the equilibrium price is above the price floor.
b.
the equilibrium price is below the price floor.
c.
there will be a surplus in the market.
d.
there will be a shortage in the market.
a.
the equilibrium price is above the price floor.
24. After a binding price floor becomes effective, a
a.
smaller quantity of the good is bought and sold.
b.
a larger quantity of the good is demanded.
c.
a smaller quantity of the good is supplied.
d.
All of the above are correct.
a.
smaller quantity of the good is bought and sold
25. If the government removes a binding price floor 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 quan
c.
decrease, and the quantity sold in the market will increase
26. A price floor 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.
b.
above the equilibrium price, causing a surplus.
27. A surplus results when a
a.
nonbinding price floor is imposed on a market.
b.
nonbinding price floor is removed from a market.
c.
binding price floor is imposed on a market.
d.
binding price floor is removed from a market.
c.
biding price floor is imposed on a market
29. Price ceilings and price floors that are binding
a.
are desirable because they make markets more efficient and more fair.
b.
cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.
c.
can have the effect o
b.
cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.
33. 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
d.
He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city
34. The minimum wage is an example of a:
a.
price ceiling.
b.
price floor
c.
wage subsidy.
d.
tax.
b.
price floor
35. A binding minimum wage
a.
alters both the quantity demanded and quantity supplied of labor.
b.
affects only the quantity of labor demanded; it does not affect the quantity of labor supplied.
c.
has no effect on the quantity of labor demanded or the qu
a.
alters both the quantity demanded and quantity of labor supplied
36. 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.
a.
increase
37. 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
b.
decreases the size of the coffee mug market
38. 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.
a.
price paid by buyers an lower the equilibrium quantity.
39. 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.
d.
not shift
40. A tax on the buyers 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.
b.
buyers to demand a smaller quantity at every price
41. 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.
b.
more sellers receive less than they did before the tax
42. 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 deman
b.
downward shift of the demand curve
43. A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve
a.
upward by exactly $1.50.
b.
upward by less than $1.50.
c.
downward by exactly $1.50.
d.
downward by less than $1.50.
c.
downward by exactly $1.50
44. 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 $20 per ticket, then the
a.
demand curve will shift upward by
a.
demand curve will shift upward by $30, and the price paid by buyers will decrease by less than $30
45. 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 seller
d.
not change, and the price received by sellers will not change
46. 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
c.
the distribution of the tax burden between buyers and sellers
47. 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 o
b.
(iv) only
53. The incidence of a tax falls more heavily on
a.
consumers than producers if demand is more inelastic than supply.
b.
producers than consumers if supply is more inelastic than demand.
c.
consumers than producers if supply is more elastic than demand.
d
d.
all of the above are correct
54. If a tax is imposed on a market with inelastic demand and elastic supply, then
a.
buyers will bear most of the burden of the tax.
b.
sellers will bear most of the burden of the tax.
c.
the burden of the tax will be shared equally between buyers and se
a.
buyers will bear most of the burden of the tax
55. The tax burden will fall most heavily on buyers of the good when the demand curve
a.
is relatively steep, and the supply curve is relatively flat.
b.
is relatively flat, and the supply curve is relatively steep.
c.
and the supply curve are both relati
a.
is relatively steep, and the supply curve is relatively flat
56. A tax burden falls more heavily on the side of the market that
a.
has a fewer number of participants.
b.
is more inelastic.
c.
is closer to unit elastic.
d.
is less inelastic.
b.
is more elastic
57. Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect
a.
most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or
b.
most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to government.
58. If a tax is imposed on a market with inelastic supply and elastic demand, then
a.
buyers will bear most of the burden of the tax.
b.
sellers will bear most of the burden of the tax.
c.
the burden of the tax will be shared equally between buyers and se
b.
sellers will bear most of the burden of the tax