Question 1

Suppose the government sets a rent ceiling below the equilibrium rent in a city. Which of the following is NOT a likely consequence?

Accepted Answer

A surplus of available apartments

Question 2

If a minimum wage is set above the equilibrium wage rate, what is the most likely outcome in the labor market?

Accepted Answer

The quantity of labor supplied will exceed the quantity demanded

Question 3

A $$3 per-unit tax is imposed on sellers in a market. The equilibrium price before tax is 6. $$After the tax, buyers pay $$8 and sellers receive 5. $$What portion of the tax is paid by buyers?

Accepted Answer

$2

Question 4

Which of the following best describes the economic incidence of a tax?

Accepted Answer

It depends on the relative elasticities of supply and demand

Question 5

If the demand for a good is perfectly inelastic, who bears the entire burden of a per-unit tax imposed on the good?

Accepted Answer

Buyers

Question 6

A rent ceiling set below the equilibrium rent leads to which of the following inefficiencies?

Accepted Answer

Marginal social benefit exceeds marginal social cost

Question 7

Which allocation method for scarce housing under a rent ceiling is considered fair according to the fair-rules and fair-results views?

Accepted Answer

None of these methods

Question 8

Suppose the government imposes a production quota below the equilibrium quantity. What is the likely effect on price and marginal cost?

Accepted Answer

Price rises and marginal cost falls

Question 9

If a subsidy is given to producers, what is the effect on the market price and quantity produced?

Accepted Answer

Market price falls and quantity produced rises

Question 10

Which principle states that people should pay taxes according to the benefits they receive from government services?

Accepted Answer

Benefits principle

Question 11

A market for an illegal good is made legal and taxed at a high rate. What is the likely effect on the quantity traded compared to the illegal market?

Accepted Answer

Quantity traded will decrease to the same level as the illegal market if the tax is high enough

Question 12

If the supply of a good is perfectly elastic, who bears the entire burden of a per-unit tax imposed on the good?

Accepted Answer

Buyers

Question 13

Which of the following is a potential unintended consequence of a minimum wage set above the equilibrium wage?

Accepted Answer

Employers indulging in personal preferences when hiring

Question 14

What is the opportunity cost of housing in a market with a binding rent ceiling?

Accepted Answer

The regulated rent plus the opportunity cost of search activity

Question 15

Which of the following best describes the effect of a tax wedge in a market?

Accepted Answer

It creates a difference between the price buyers pay and the price sellers receive

Question 16

If the government imposes penalties on both buyers and sellers in a market for an illegal good, what happens to the equilibrium price and quantity?

Accepted Answer

Price decreases and quantity decreases

Question 17

Which of the following is NOT a cost of making goods and services illegal?

Accepted Answer

Increased respect for the law

Question 18

Suppose the demand for cigarettes is inelastic and a tax is imposed. Who will bear most of the tax burden?

Accepted Answer

Buyers

Question 19

Which of the following is a likely long-term effect of a minimum wage law on low-income teenagers?

Accepted Answer

Failure to get entry-level jobs and negative long-term effects

Question 20

Which of the following best describes deadweight loss resulting from a tax?

Accepted Answer

It is the loss of total surplus that occurs because the tax reduces the quantity traded below the efficient level

Government Actions in Markets: Price Controls, Minimum Wage, Taxes, Subsidies, and Illegal Goods

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