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Exam 6: When Governments Intervene in Markets

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Question 71

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Which of the following statements is correct?

A) When a quota is placed on a market, the new price will be regulated by the government.
B) With a price regulation, the new price will be whatever buyers are willing to pay for the amount being sold.
C) When a tax is levied on a product, the new price that buyers pay will always be the old price plus the tax.
D) With a price regulation, the new price will be the regulated price, but with a quota, the new price will be whatever buyers are willing to pay for the limited quantity available.

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

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Question 72

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Suppose the government imposes a price ceiling on a good because it believes that the market-determined price is too high. A price ceiling above the equilibrium price will cause:

A) consumers purchase more of the good than at the equilibrium price.
B) producers offer fewer units of the good for sale.
C) consumers purchase less of the good.
D) neither producers nor consumers change their behavior.

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

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Question 73

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Which of the following is an example of a quantity quota?

Buyers bear all the economic burden of a tax if the demand curve is _____, given an upward sloping supply curve.

(Figure: Tax on Seller) Refer to the graph which shows a tax on a seller. Old Supply is the old supply curve before the tax, and New Supply is the new supply curve after the implementation of the tax. Using the graph answer the following questions: ​ (i) What was the equilibrium price before the implementation of the tax? (ii) What price do buyers pay after the implementation of the tax? (iii) What price do sellers get after the implementation of the tax? (iv) What was the equilibrium quantity (in units) before the implementation of the tax? (v) What is the new equilibrium quantity (in units) after the implementation of the tax? (vi) The amount of the tax is $_______ per unit of the item. (vii) The economic burden of the tax on the buyer is $_______ per unit of the item. (viii) The economic burden of the tax on the seller is $_______ per unit of the item.

(Table: Quantity Supplied and Quantity Demanded in the Market for Magazine Subscriptions) Use Table: Quantity Supplied and Quantity Demanded in the Market for Magazine Subscriptions. A price floor of _____ would produce surplus in this market.

In 2017, eBay started charging a 20% value-added tax on fees charged to small businesses in the United Kingdom. Holding all else constant, this would _____ in the United Kingdom.

(Figure: Rent Controls in the Market for Apartments in New York City) Use Figure: Rent Controls in the Market for Apartments in New York City. If rent control is imposed, and the government wants it to be immediately effective, the rent control will most likely be set at either _____ or _____.

(Figure: The Market for Skateboards) Use Figure: The Market for Skateboards. If the government imposes a $60 tax on skateboards and collects it from the consumers, the _____ curve will shift _____ by _____.

(Figure: Market for Reusable Jute Shopping Bags) Refer to the market for reusable jute shopping bags that is shown in the figure. The original equilibrium price is $7 per bag. A subsidy is now introduced for buyers of the bags. The amount of the subsidy is:

Which of the following can a government use to change the quantity traded in a market? (i) quotas (ii) binding price floors (iii) binding price ceilings (iv) taxes

(Figure: Rent Controls in the Market for Apartments in New York City) Use Figure: Rent Controls in the Market for Apartments in New York City. If a rent ceiling is set at $900:

(Figure: Supply and Demand in the Market for Cappuccinos) Use Figure: Supply and Demand in the Market for Cappuccinos. A price ceiling of $4 causes:

The government of Macrostonia, a small dictatorship, restricts the price of automobiles to an amount less than or equal to $12,500 (a price below the equilibrium price) . Such a policy would create a:

A tax on sellers:

(Table: Market for Apartments in San Francisco) Use Table: Market for Apartments in San Francisco. If a government price ceiling of $1,600 is imposed in this market, the result will be inefficiency in the form of an _____ million apartments.

(Figure: Market) A quota of 25 units is placed on the market that is shown in the figure. How much are buyers willing to pay after the implementation of the quota?

Label each of the following below as either a price ceiling or a price floor: (a) Maximum prices on Canadian prescriptions drugs provide an example of a price _____. (b) The setting of minimum price for agricultural produce is an example of a price _____. (c) Scotland's minimum price on beer cans is an example of a price _____.

In January, the government passed the Affordable Housing Act. This law is designed to help low-income Americans by establishing a maximum amount a household can pay in rent in cities with populations over 500,000.

When looking at a demand and supply graph, if a tax is implemented on a buyer, the vertical distance between the old and new demand curves at the new equilibrium quantity will be equivalent to the