Chapter 4: Markets and Government Policy

Question 1

When the government imposes a binding price floor, it causes

Answer 1

a surplus of the good to develop

Question 2

In a market with a binding price ceiling, an increase in the ceiling will ________ the quantity supplied, ________ the quantity demanded, and reduce the ________.

Answer 2

increase, decrease, shortage

Question 3

A $1 per unit tax levied on consumers of a good is equivalent to

Answer 3

a $1 per unit tax levied on producers of the good

Question 4

Which of the following would increase quantity supplied, decrease quantity demanded, and increase the price that consumers pay?

Answer 4

the imposition of a binding price floor

Question 5

Which of the following would increase quantity supplied, increase quantity demanded, and decrease the price that consumers pay?

Answer 5

the repeal of a tax levied on producers

Question 6

When a good is taxed, the burden of the tax falls mainly on consumers if

Answer 6

supply is elastic, and demand is inelastic