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Figure 6-1 Panel (a) Panel (b) Figure 6-1 Panel (a) Panel (b) -Refer to Figure 6-1. The price ceiling shown in panel (a) A) is not binding. B) creates a surplus. C) creates a shortage. D) Both a) and b) are correct. Figure 6-1 Panel (a) Panel (b) -Refer to Figure 6-1. The price ceiling shown in panel (a) A) is not binding. B) creates a surplus. C) creates a shortage. D) Both a) and b) are correct. -Refer to Figure 6-1. The price ceiling shown in panel (a)


A) is not binding.
B) creates a surplus.
C) creates a shortage.
D) Both a) and b) are correct.

E) A) and D)
F) None of the above

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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 quantity of labor supplied.
D) causes only temporary unemployment because the market will adjust and eliminate any temporary surplus of workers.

E) None of the above
F) B) and C)

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Figure 6-14 Figure 6-14 -Refer to Figure 6-14. If the horizontal line on the graph represents a price ceiling, then the price ceiling is A) binding and creates a shortage of 20 units of the good. B) binding and creates a shortage of 40 units of the good. C) not binding but creates a shortage of 40 units of the good. D) not binding, and there will be no surplus or shortage of the good. -Refer to Figure 6-14. If the horizontal line on the graph represents a price ceiling, then the price ceiling is


A) binding and creates a shortage of 20 units of the good.
B) binding and creates a shortage of 40 units of the good.
C) not binding but creates a shortage of 40 units of the good.
D) not binding, and there will be no surplus or shortage of the good.

E) B) and D)
F) A) and D)

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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 levied on buyers or sellers.
D) In the new after-tax equilibrium, buyers and sellers share the burden of the tax.

E) A) and D)
F) B) and C)

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A price ceiling is


A) often imposed on markets in which "cutthroat competition" would prevail without a price ceiling.
B) a legal maximum on the price at which a good can be sold.
C) 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 ceiling.
D) All of the above are correct.

E) A) and C)
F) A) and B)

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Workers determine the supply of labor, and firms determine the demand for labor.

A) True
B) False

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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.

E) B) and C)
F) C) and D)

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Figure 6-15 Figure 6-15 -Refer to Figure 6-15. For a price ceiling to be binding in this market, it would have to be set at A) any price below $3. B) a price between $2 and $3. C) a price between $3 and $4. D) any price above $3. -Refer to Figure 6-15. For a price ceiling to be binding in this market, it would have to be set at


A) any price below $3.
B) a price between $2 and $3.
C) a price between $3 and $4.
D) any price above $3.

E) A) and B)
F) None of the above

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Figure 6-28 Figure 6-28 -Refer to Figure 6-28. Suppose a tax of $4 per unit is imposed on this market. Which of the following is correct? A) Buyers and sellers will share the burden of the tax equally. B) Buyers will bear more of the burden of the tax than sellers. C) Sellers will bear more of the burden of the tax than buyers. D) Any of the above is possible in this market. -Refer to Figure 6-28. Suppose a tax of $4 per unit is imposed on this market. Which of the following is correct?


A) Buyers and sellers will share the burden of the tax equally.
B) Buyers will bear more of the burden of the tax than sellers.
C) Sellers will bear more of the burden of the tax than buyers.
D) Any of the above is possible in this market.

E) A) and C)
F) B) and C)

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Figure 6-13 This figure shows the market demand and market supply curves for good X. Figure 6-13 This figure shows the market demand and market supply curves for good X. -Refer to Figure 6-13. Which of the following price floors would be binding in this market? A) $3 B) $4 C) $5 D) $6 -Refer to Figure 6-13. Which of the following price floors would be binding in this market?


A) $3
B) $4
C) $5
D) $6

E) None of the above
F) B) and D)

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Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

A) True
B) False

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If the minimum wage exceeds the equilibrium wage, then


A) the quantity demanded of labor will exceed the quantity supplied.
B) the quantity supplied of labor will exceed the quantity demanded.
C) the minimum wage will not be binding.
D) there will be no unemployment.

E) B) and D)
F) All of the above

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Figure 6-15 Figure 6-15 -Refer to Figure 6-15. Suppose a price floor of $4 is imposed on this market. As a result, A) buyers' total expenditure on the good decreases by $15. B) the supply curve shifts to the left so as to now pass through the point (quantity = 30, price = $4) . C) the quantity demanded of the good decreases by 30 units. D) the number of units sold in the market will increase by 15 units. -Refer to Figure 6-15. Suppose a price floor of $4 is imposed on this market. As a result,


A) buyers' total expenditure on the good decreases by $15.
B) the supply curve shifts to the left so as to now pass through the point (quantity = 30, price = $4) .
C) the quantity demanded of the good decreases by 30 units.
D) the number of units sold in the market will increase by 15 units.

E) B) and C)
F) C) and D)

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Scenario 6-2 Suppose demand for a product is given by the equation Scenario 6-2 Suppose demand for a product is given by the equation and supply for the product is given by the equation -Refer to Scenario 6-2. Suppose the government sets a price floor at $13 for this product. Is this price floor binding, and what will be the size of the shortage/surplus in this market? and supply for the product is given by the equation Scenario 6-2 Suppose demand for a product is given by the equation and supply for the product is given by the equation -Refer to Scenario 6-2. Suppose the government sets a price floor at $13 for this product. Is this price floor binding, and what will be the size of the shortage/surplus in this market? -Refer to Scenario 6-2. Suppose the government sets a price floor at $13 for this product. Is this price floor binding, and what will be the size of the shortage/surplus in this market?

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The price floor will not be bi...

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If a nonbinding price floor is imposed on a market, then the


A) quantity sold in the market will decrease.
B) quantity sold in the market will stay the same.
C) price in the market will increase.
D) price in the market will decrease.

E) None of the above
F) A) and B)

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The tax incidence depends on whether the tax is levied on buyers or sellers.

A) True
B) False

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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.

E) A) and C)
F) All of the above

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Figure 6-9 Figure 6-9 -Refer to Figure 6-9. At which price would a price ceiling be nonbinding? A) $4 B) $5 C) $3 D) $7 -Refer to Figure 6-9. At which price would a price ceiling be nonbinding?


A) $4
B) $5
C) $3
D) $7

E) B) and D)
F) A) and D)

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Figure 6-15 Figure 6-15 -Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at A) any price below $3. B) a price between $2 and $3. C) a price between $3 and $4. D) any price above $3. -Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at


A) any price below $3.
B) a price between $2 and $3.
C) a price between $3 and $4.
D) any price above $3.

E) A) and D)
F) B) and C)

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Figure 6-7 Figure 6-7 -Refer to Figure 6-7. Suppose a price ceiling of $5 is imposed on this market. As a result, A) the quantity of the good supplied decreases by 20 units. B) the demand curve shifts to the left; quantity sold is now 30 units and the price is $5. C) buyers' total expenditure on the good decreases by $80. D) the price of the good continues to serve as the rationing mechanism. -Refer to Figure 6-7. Suppose a price ceiling of $5 is imposed on this market. As a result,


A) the quantity of the good supplied decreases by 20 units.
B) the demand curve shifts to the left; quantity sold is now 30 units and the price is $5.
C) buyers' total expenditure on the good decreases by $80.
D) the price of the good continues to serve as the rationing mechanism.

E) C) and D)
F) None of the above

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