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Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia?
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A price floor is the ________.
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Chapter 7
Economics
| Question | Answer |
|---|---|
| Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia? | Quantity demanded will decrease, quantity supplied will increase, and a surplus will result |
| A price floor is the ________. | lower limit on the price of a good |
| Which term refers to a legally established minimum price that firms may charge? | a price floor |
| A price floor set above the equilibrium price leads to a(n) ________. | excess supply of goods in the market |
| A price ceiling refers to ________. | the upper limit on the price of a good |
| The price of a gallon of gasoline in Bonland is $3.20. However, just before the election, the government decides to fix the price of gasoline at $2.80 per gallon. This is an example of a ________. | price ceiling |
| When a price ceiling is in place keeping the price below the market price, what’s larger: quantity demanded or quantity supplied | Quantity demanded |
| Price controls distribute resources in many unintended ways. In the following cases below, who will probably spend more time waiting in line to get scarce, price-controlled goods? Choose one from each pair | Retired people |
| In order to be binding, a price ceiling | must lie below the free market equilibrium price |
| In New York City, about 1 million apartments are subject to rent control by the local government. Rent control | puts a legal limit on the rent that landlords can charge for an apartment |
| In a city with rent-controlled apartments, all of the following are true except | landlords have an incentive to rent more apartments than they would without rent control. |
| A price ceiling does NOT lead to a deadweight loss if ________. | the equilibrium market price lies below the price ceiling |
| How does a free market eliminate a shortage? | By letting the price rise |
| How do unregulated markets cure a “labor shortage” when there are no immigrants to boost the labor supply? | Let the price of labor increase |
| In the town of Freedonia, the government declares that all street parking must be free. In an almost identical town of Meterville, parking costs $5 per hour (or $1.25 per 15 minutes). Where will it be easier to find parking: in Freedonia or Meterville? | Meterville |
| To affect the market outcome, a price ceiling | must be set below the equilibrium price |
| With an increase in the demand for a good, if prices are not allowed to increase | there will be no incentive for firms to increase the quantity supplied of the good |
| A price ceiling is a legally determined maximum price that sellers may charge | True |
| When the government taxes a good or service, it | affects the market equilibrium for that good or service |
| The actual division of the burden of a tax between buyers and sellers in a market is called | tax incidence |
| If a tax is imposed on a good,________. | the equilibrium quantity of the good in the market falls |
| If the sellers of a good are taxed for each unit sold, ________. | a smaller quantity of the good is sold |
| Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles. After the purchase of a new snowmobile, a buyer must pay the government $1,500. How would the imposition of the tax on buyers be illustrated in a graph? | The tax will shift the demand curve to the left by $1,500 |
| Suppose an excise tax of $1 is imposed on every case of beer sold and sellers are responsible for paying this tax. How would the imposition of the tax be illustrated in a graph? | The supply curve for cases of beer would shift to the left by $1 |
| The tax incidence on buyers is higher if ________. | the elasticity of the market supply curve is higher than the elasticity of the market demand curve |
| The tax incidence on sellers is higher if ________. | the buyers are more sensitive to price changes than the sellers |
| For a given supply curve, the deadweight loss from the imposition of a tax is smaller if demand is more elastic | False |
| The burden of a tax falls entirely on buyers if ________. | the price elasticity of demand is zero (perfectly inelastic) |
| The actual division of the burden of a tax is called | tax incidence |
| The person or firm that pays a tax bears the burden of the tax | False |
| When the demand for a product is less elastic than the supply | consumers pay the majority of the tax on the product |
| When the demand for a product is less elastic than the supply, consumers pay the majority of the tax on the product | True |
| In a progressive tax system, ________. | the marginal tax rate exceeds the average tax rate |
| In a ________ tax system, the marginal tax rate declines with income | regressive |
| If, as your taxable income decreases, you pay a smaller percentage of your taxable income in taxes, then the tax is | Progressive |
| A proportional tax is a tax for which people with lower incomes | pay the same percentage of their incomes in tax as do people with higher incomes |
| A tax bracket is | the income range within which a particular tax rate applies |
| If you pay a constant percentage of your taxable income in taxes, the tax is | proportional |
| The corporate income tax is ultimately paid by all of the following except | the corporation's debtors in the form of lower rates of return on the corporation's bonds |
| If you pay $2,000 in taxes on an income of $20,000, and a tax of $2,700 on an income of $30,000, then over this range of income the tax is | regressive |
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