NAME :

CLASS :
eco01H_revision_chapter 2 (3)
30 Questions DATE :

1. If the government removes a binding price ceiling from a market, then the price paid by
buyers will

increase, and the quantity sold in the increase, and the quantity sold in the
A B
market will increase. market will decrease.

decrease, and the quantity sold in the decrease, and the quantity sold in the
C D
market will increase. market will decrease.

2. When a binding price ceiling is imposed on a market,

the quantity supplied at the price ceiling

price no longer serves as a rationing
A B exceeds the quantity that would have
device.
been supplied without the price ceiling.

C all buyers benefit. D All of the above are correct.

3. A price ceiling is binding when it is set

above the equilibrium price, causing a above the equilibrium price, causing a
A B
shortage. surplus.

below the equilibrium price, causing a below the equilibrium price, causing a
C D
shortage. surplus.

4. To say that a price ceiling is binding is to say that the price ceiling

A results in a surplus. B is set above the equilibrium price.

causes quantity demanded to exceed

C D All of the above are correct.
quantity supplied.

5. If a binding price ceiling is imposed on the baby formula market, then

the quantity of baby formula demanded the quantity of baby formula supplied will
A B
will increase. decrease.

C a shortage of baby formula will develop. D All of the above are correct.
6. When a binding price ceiling is imposed on a market to benefit buyers,

every buyer and seller in the market

A every buyer in the market benefits. B
benefits.

every buyer who wants to buy the good

some buyers will not be able to buy any
C will be able to do so, but only if he waits in D
amount of the good.
long lines.

7. A price floor is

often imposed when sellers of a good are

a legal minimum on the price at which a successful in their attempts to convince
A B
good can be sold. the government that the market outcome
is unfair without a price floor.

C a source of inefficiency in a market. D All of the above are correct.

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

quantity sold in the market will stay the

A quantity sold in the market will decrease. B
same.

C price in the market will increase. D price in the market will decrease.

9. After a binding price floor becomes effective, a

smaller quantity of the good is bought and

A B a larger quantity of the good is demanded.
sold.

C a smaller quantity of the good is supplied. D All of the above are correct.

10. If a price floor is a binding constraint on a market, then

the equilibrium price must be above the the quantity demanded must exceed the
A B
price floor. quantity supplied.

sellers cannot sell all they want to sell at buyers cannot buy all they want to buy at
C D
the price floor. the price floor.

11. If a binding price floor is imposed on the video game market, then

the quantity of video games demanded the quantity of video games supplied will
A B
will decrease. increase.

C a surplus of video games will develop. D All of the above are correct.
12. Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a
price floor of $3 per tube. As a result of the price floor, the

demand curve for toothpaste shifts to the supply curve for toothpaste shifts to the
A B
left. right.

quantity demanded of toothpaste

quantity supplied of toothpaste stays the
C decreases, and the quantity of toothpaste D
same.
that firms want to supply increases.

13. Economists generally believe that rent control is

inefficient but the best available means of

A an efficient and fair way to help the poor. B
solving a serious social problem.

a highly inefficient way to help the poor an efficient way to allocate housing, but
C D
raise their standard of living. not a good way to help the poor.

14. Which of the following is not correct?

The impact of the minimum wage

The economy contains many labor
A B depends on the skill and experience of the
markets for different types of workers.
worker.

The minimum wage is not binding when

The minimum wage is binding for workers
C D the equilibrium wage is above the
with high skills and much experience.
minimum wage.

15. If the government removes a tax on a good, then the price paid by buyers will

increase, and the price received by sellers increase, and the price received by sellers
A B
will increase. will decrease.

decrease, and the price received by sellers decrease, and the price received by sellers
C D
will increase. will decrease.

16. If the government passes a law requiring sellers of mopeds to send $200 to the government
for every moped they sell, then

sellers of mopeds receive $200 less per

the supply curve for mopeds shifts
A B mopeds than they were receiving before
downward by $200.
the tax.

buyers of mopeds are unaffected by the

C D None of the above is correct.
tax.
17. If a tax is levied on the sellers of a product, then the demand curve will

A shift down. B shift up.

C become flatter. D not shift.

18. A tax on the sellers of cameras encourages

sellers to supply a smaller quantity at buyers to demand a smaller quantity at

A B
every price. every price.

sellers to supply a larger quantity at every

C D Both a) and b) are correct.
price.

19. A $2.00 tax levied on the sellers of birdhouses will shift the supply curve

A upward by exactly $2.00. B upward by less than $2.00.

C downward by exactly $2.00. D downward by less than $2.00.

20. A tax on the buyers of sofas

A increases the size of the sofa market. B decreases the size of the sofa market.

has no effect on the size of the sofa may increase, decrease, or have no effect
C D
market. on the size of the sofa market.

21. Which of the following is not correct?

A tax places a wedge between the price

Taxes levied on sellers and taxes levied on
A B that buyers pay and the price that sellers
buyers are not equivalent.
receive.

The wedge between the buyers’ price and

the sellers’ price is the same, regardless of In the new after-tax equilibrium, buyers
C D
whether the tax is levied on buyers or and sellers share the burden of the tax.
sellers.

22. If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax on
buyers of gasoline, then the price paid by buyers will

increase, and the price received by sellers increase, and the price received by sellers
A B
will increase. will not change.

not change, and the price received by not change, and the price received by
C D
sellers will increase. sellers will not change.
23. If the government wants to reduce the burning of fossil fuels, it should impose a tax on

A buyers of gasoline. B sellers of gasoline.

whichever side of the market is less

C either buyers or sellers of gasoline. D
elastic.

24. When a tax is placed on the buyers of lemonade, the

A sellers bear the entire burden of the tax. B buyers bear the entire burden of the tax.

burden of the tax will be always be equally burden of the tax will be shared by the
C divided between the buyers and the D buyers and the sellers, but the division of
sellers. the burden is not always equal.

25. The tax incidence

can be shifted to the buyer by imposing

is the manner in which the burden of a tax
A B the tax on the buyers of a product in a
is shared among participants in a market.
market.

can be shifted to the seller by imposing

C the tax on the sellers of a product in a D All of the above are correct.
market.

26. The price received by sellers in a market will increase if the government

decreases a binding price floor in that increases a binding price ceiling in that
A B
market. market.

increases a tax on the good sold in that imposes a binding price ceiling in that
C D
market. market.

27. Which of the following causes a shortage of a good?

A a binding price floor B a binding price ceiling

C a tax on the good D None of the above is correct.

28. If a tax is imposed on a market with inelastic supply and elastic demand, then

buyers will bear most of the burden of the sellers will bear most of the burden of the
A B
tax. tax.

the burden of the tax will be shared it is impossible to determine how the
C D
equally between buyers and sellers. burden of the tax will be shared.
29. The tax burden will fall most heavily on sellers of the good when the demand curve

is relatively steep, and the supply curve is is relatively flat, and the supply curve is
A B
relatively flat. relatively steep.

and the supply curve are both relatively and the supply curve are both relatively
C D
flat. steep.

30. Suppose that a tax is placed on books. If the sellers pay the majority of the tax, then we
know that the

A demand is more inelastic than the supply. B supply is more inelastic than the demand.

government has required that buyers government has required that sellers
C D
remit the tax payments. remit the tax payments.
Answer Key

1.a 2.a 3.c 4.c

5.d 6.d 7.d 8.b

9.a 10.c 11.d 12.c

13.c 14.c 15.c 16.d

17.d 18.a 19.a 20.b

21.a 22.d 23.c 24.d

25.a 26.b 27.b 28.b

29.b 30.b