Question 1

The surplus caused by a binding price floor will be greatest if

Accepted Answer

A)   demand is inelastic and supply is elastic.
B)   supply is inelastic and demand is elastic.
C)   both supply and demand are elastic.
D)   both supply and demand are inelastic.E) A) and B)
F) All of the above

Question 2

The burden of a tax falls more heavily on the buyers in a market when

Accepted Answer

A)   both supply and demand are inelastic.
B)   demand is elastic and supply is inelastic.
C)   both supply and demand are elastic.
D)   demand is inelastic and supply is elastic.E) A) and B)
F) A) and C)

Question 3

When a tax is collected from the buyers in a market,

Accepted Answer

A)   the tax burden falls most heavily on the buyers.
B)   the buyers bear the burden of the tax.
C)   the sellers bear the burden of the tax.
D)   the tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers.E) C) and D)
F) A) and B)

Question 4

If the equilibrium price of petrol is R10.00 per litre and the government places a price ceiling on petrol of R15.00 per litre, the result will be a shortage of petrol.

Accepted Answer

A) True 
 B)False

Question 5

The quantity sold in a market will decrease if the government

Accepted Answer

A)   decreases a binding price floor in that market.
B)   increases a binding price ceiling in that market.
C)   increases a tax on the good sold in that market.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 6

Which of the following is an example of a price floor?

Accepted Answer

A)   The minimum wage.
B)   Rent controls.
C)   Restricting petrol prices to R10.00 per litre when the equilibrium price is R15.00 per litre.
D)   All of these answers are price floors.E) C) and D)
F) B) and C)

Question 7

A binding price ceiling creates

Accepted Answer

A)   a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price.
B)   a surplus.
C)   a shortage.
D)   an equilibrium.E) B) and C)
F) None of the above

Question 8

Why would policymakers choose to impose a price ceiling or price floor?

Accepted Answer

More than one reason may exist for polic...

Question 9

A price ceiling that is not a binding constraint today could cause a shortage in the future if demand were to increase and raise the equilibrium price above the fixed price ceiling.

Accepted Answer

A) True 
 B)False  True

Question 10

For a price ceiling to be a binding constraint on the market, the government must set it

Accepted Answer

A)   above the equilibrium price.
B)   below the equilibrium price.
C)   precisely at the equilibrium price.
D)   at any price because all price ceilings are binding constraints.E) None of the above
F) A) and D)

Question 11

Within the supply and demand model, a tax collected from the sellers of a good shifts the

Accepted Answer

A)   demand curve downward by the size of the tax per unit.
B)   supply curve downward by the size of the tax per unit.
C)   demand curve upward by the size of the tax per unit.
D)   supply curve upward by the size of the tax per unit.E) B) and D)
F) C) and D)

Question 12

The government decides to reduce air pollution by reducing the use of petrol. It imposes a tax of R0.50 on each litre of petrol sold.
a. Should it impose this tax on petrol companies or motorists? Create a graph to justify your answer.
b. If demand for petrol were more elastic, would this tax be more or less effective in reducing the quantity of petrol consumed?
c. To what extent are consumers of petrol and oil industry workers affected by this tax?

Accepted Answer

a. It doesn't matter whether the tax is ...

Question 13

Subsidies are levied when a government wants to:

Accepted Answer

A)   increase its tax revenues.
B)   encourage the consumption of a good it thinks is currently under-produced.
C)   decrease the demand for a product.
D)   provide consumers with a disincentive to buy.E) A) and B)
F) C) and D)

Question 14

Which of the following is correct? A tax burden…

Accepted Answer

A)   falls more heavily on the side of the market that is more elastic.
B)   falls more heavily on the side of the market that is less elastic.
C)   falls more heavily on the side of the market that is closest to unit elastic.
D)   is distributed independently of the relative elasticities of supply and demand.E) A) and B)
F) A) and C)

Question 15

-Refer to the graph above. What is the amount of the tax per unit?

Accepted Answer

A)   R80
B)   R60
C)   R40
D)   R20E) C) and D)
F) B) and D) A

Question 16

How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The tax burden fall...

Question 17

The tax burden will fall most heavily on sellers of the good when the demand curve

Accepted Answer

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 relatively flat.
D)   and the supply curve are both relatively steep.E) A) and C)
F) A) and D)

Question 18

-Refer to the graph above. Which of the following statements is correct?

Accepted Answer

A)   The amount of the tax per unit is R60.
B)   The tax leaves the size of the market unchanged.
C)   The tax is levied on buyers of the good, rather than on sellers.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 19

Which of the following causes a surplus of a good?

Accepted Answer

A)   A binding price floor.
B)   A binding price ceiling.
C)   A tax on the good.
D)   More than one of the above is correct.E) A) and B)
F) A) and D) A

Question 20

A price ceiling set below the equilibrium price causes a surplus.

Accepted Answer

A) True 
 B)False

Exam 8: Supply, Demand and Government Policies

The surplus caused by a binding price floor will be greatest if

Correct Answer
verified

The burden of a tax falls more heavily on the buyers in a market when

Correct Answer
verified

When a tax is collected from the buyers in a market,

Correct Answer
verified

If the equilibrium price of petrol is R10.00 per litre and the government places a price ceiling on petrol of R15.00 per litre, the result will be a shortage of petrol.

Correct Answer
verified

The quantity sold in a market will decrease if the government

Correct Answer
verified

Which of the following is an example of a price floor?

Correct Answer
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A binding price ceiling creates

Correct Answer
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Why would policymakers choose to impose a price ceiling or price floor?

Correct Answer
verified
More than one reason may exist for polic...
View Answer

A price ceiling that is not a binding constraint today could cause a shortage in the future if demand were to increase and raise the equilibrium price above the fixed price ceiling.

Correct Answer
verified
True

For a price ceiling to be a binding constraint on the market, the government must set it

Correct Answer
verified

Within the supply and demand model, a tax collected from the sellers of a good shifts the

Correct Answer
verified

Correct Answer
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a. It doesn't matter whether the tax is ...
View Answer

Subsidies are levied when a government wants to:

Correct Answer
verified

Which of the following is correct? A tax burden…

Correct Answer
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-Refer to the graph above. What is the amount of the tax per unit?

Correct Answer
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A

How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.

Correct Answer
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The tax burden fall...
View Answer

The tax burden will fall most heavily on sellers of the good when the demand curve

Correct Answer
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-Refer to the graph above. Which of the following statements is correct?

Correct Answer
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Which of the following causes a surplus of a good?

Correct Answer
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A

A price ceiling set below the equilibrium price causes a surplus.

Correct Answer
verified

Exam 8: Supply, Demand and Government Policies

The surplus caused by a binding price floor will be greatest if

Correct AnswerverifiedShow Answer

The burden of a tax falls more heavily on the buyers in a market when

Correct AnswerverifiedShow Answer

When a tax is collected from the buyers in a market,

Correct AnswerverifiedShow Answer

If the equilibrium price of petrol is R10.00 per litre and the government places a price ceiling on petrol of R15.00 per litre, the result will be a shortage of petrol.

Correct AnswerverifiedShow Answer

The quantity sold in a market will decrease if the government

Correct AnswerverifiedShow Answer

Which of the following is an example of a price floor?

Correct AnswerverifiedShow Answer

A binding price ceiling creates

Correct AnswerverifiedShow Answer

Why would policymakers choose to impose a price ceiling or price floor?

Correct AnswerverifiedMore than one reason may exist for polic...View AnswerShow Answer

A price ceiling that is not a binding constraint today could cause a shortage in the future if demand were to increase and raise the equilibrium price above the fixed price ceiling.

Correct AnswerverifiedTrue

For a price ceiling to be a binding constraint on the market, the government must set it

Correct AnswerverifiedShow Answer

Within the supply and demand model, a tax collected from the sellers of a good shifts the

Correct AnswerverifiedShow Answer

Correct Answerverifieda. It doesn't matter whether the tax is ...View AnswerShow Answer

Subsidies are levied when a government wants to:

Correct AnswerverifiedShow Answer

Which of the following is correct? A tax burden…

Correct AnswerverifiedShow Answer

-Refer to the graph above. What is the amount of the tax per unit?

Correct AnswerverifiedA

How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.

Correct Answerverified The tax burden fall...View AnswerShow Answer

The tax burden will fall most heavily on sellers of the good when the demand curve

Correct AnswerverifiedShow Answer

-Refer to the graph above. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following causes a surplus of a good?

Correct AnswerverifiedA

A price ceiling set below the equilibrium price causes a surplus.

Correct AnswerverifiedShow Answer

Correct Answer
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More than one reason may exist for polic...
View Answer

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True

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Correct Answer
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a. It doesn't matter whether the tax is ...
View Answer

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A

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The tax burden fall...
View Answer

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A

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