True/False
Indicate whether the statement is true or
false.
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1.
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When the government imposes a binding price ceiling on a competitive market, a
shortage of the good arises, and sellers must ration the scarce goods among the large number of
potential buyers.
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2.
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A surplus in the market would result when the quantity supplied is less than the
quantity demanded.
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3.
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A minimum wage set above the equilibrium wage will decrease the quantity of
workers demanded and increase the quantity supplied, thus causing unemployment among
teenagers.
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4.
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Rent subsidies, unlike rent controls, do not reduce the quantity of housing
supplied and, therefore, do not lead to housing shortages.
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5.
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A tax burden falls more heavily on the consumers when demand is more
elastic.
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6.
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The adverse effects of rent controls are very apparent to the general population
because these effects occur very quickly.
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7.
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The minimum wage has the greatest impact on the market for teenage
workers.
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Multiple Choice
Identify the choice that best completes the statement or
answers the question.
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1.
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Rent controls on apartments
a. | increase the supply of apartments | b. | improve housing quality | c. | hold down the demand
for apartments | d. | cause a chronic shortage of apartments |
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2.
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A surplus will occur if
a. | a price ceiling is set above the equilibrium price | b. | a price ceiling is
set below the equilibrium price | c. | a price floor is set above the equilibrium
price | d. | a price floor is set below the equilibrium price |
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3.
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Assume that the government imposes a $1 tax on a good that currently sells for a
price of $5. If, after the tax is imposed, the good sells for $5.60, then
a. | the entire tax burden is being passed on to consumers | b. | the entire tax
burden is being carried by the sellers | c. | the tax burden is being shared between buyers
and sellers | d. | there is no tax burden |
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4.
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A law requiring sellers to pay the government a tax on cigarettes has the effect
of:
a. | shifting the supply curve to the right | b. | shifting the demand curve to the
right | c. | shifting the demand curve to the left | d. | shifting the supply curve to the
left |
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5.
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A tax burden falls more on consumers than sellers if
a. | the tax is paid at the point of sale | b. | the tax is included in the price of the
good | c. | the demand curve is less elastic than the supply curve | d. | the supply curve is
less elastic than the demand curve |
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6.
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An effective price ceiling will
a. | result in a surplus of the product | b. | result in a shortage of the
product | c. | clear the market | d. | cause producers to supply more of the
product |
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7.
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Parking permits at your university are $50 per semester and students complain
that they cannot find parking places in the university’s parking lot. This would suggest
that
a. | there is an equilibrium in the market for university parking
permits | b. | the price of parking permits is above the equilibrium price | c. | the price of parking
permits is below the equilibrium price | d. | the university should decrease the price of
parking permits |
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8.
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If the supply curve is elastic and the demand curve is inelastic, then the
greater part of a tax burden will be borne by
a. | the seller of the product | b. | the buyer of the product | c. | the
government | d. | the buyer and the seller share the burden equally |
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9.
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Assume a province initiates rent controls. Which of the following is NOT a
method landlords use to ration housing when shortages develop?
a. | preference is given to tenants without children | b. | landlords require
long leases | c. | landlords accept under-the-table payments from waiting tenants | d. | some landlords will
discriminate on the basis of race, age or religion |
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10.
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A tax is levied on sellers of goods. Which of the following describes the
effects of the tax?
a. | the demand curves shifts left as does the supply curve | b. | the demand curve
shifts left and the supply curve remains stable | c. | the demand curve remains stable and the supply
curve shifts left | d. | the demand curve remains stable and the supply
curve remains stable |
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11.
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The tax burden falls more heavily on the side of the market that is _______
elastic.
a. | more | b. | less | c. | both a. and
b. | d. | neither a. nor b. |
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Use the table below to answer questions 12 and 13. Wage Rate
($ Per
hour) | Labour Supplied
(Thousands of
hours) | Labour Demanded
(Thousands of
hours) | 9 | 1000 | 200 | 8 | 800 | 400 | 7 | 600 | 600 | 6 | 400 | 800 | 5 | 200 | 1000 | | | |
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12.
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If the government sets the legal minimum wage at $8, what would be the amount of
unemployment?
a. | 400 hours of labour | b. | zero hours of labour | c. | 800 hours of
labour | d. | 200 hours of labour |
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13.
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What is the equilibrium level of labour, if the government does not intervene in
the market?
a. | 400 hours of labour | b. | 200 hours of labour | c. | 600 hours of
labour | d. | 800 hours of labour |
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Short Answer
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1.
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Use a supply and demand diagram to illustrate the effects of a sales tax on the
sellers of a product.
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2.
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Explain what would be expected to happen when the government imposes a binding
price ceiling in a competitive market.
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3.
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What situation would be expected in a labour market in which the government
imposes a binding minimum wage law?
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4.
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What is the general rule about elasticity and the tax burden?
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5.
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Explain how a tax on buyers of a product affects market outcomes.
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