Question 1

Suppose the government sets a rent ceiling at $$1,200 per month in a city where the equilibrium rent is 1$$,400 per month. Which of the following outcomes is most likely to occur?

Accepted Answer

A shortage of housing, as the quantity demanded exceeds the quantity supplied.

Question 2

A minimum wage is set at $$15 per hour, while the equilibrium wage is 14 $$per hour. What is the effect on the labor market?

Accepted Answer

The quantity of labor supplied will exceed the quantity demanded, creating unemployment.

Question 3

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

Accepted Answer

It depends on the elasticities of demand and supply, not on legal assignment.

Question 4

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

Accepted Answer

Buyers bear the entire burden.

Question 5

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

Accepted Answer

Marginal social benefit exceeds marginal social cost, resulting in a deadweight loss.

Question 6

Suppose a $$3 per pack tax is imposed on cigarettes. The equilibrium price rises from 6 to$$ $$8, and the price received by sellers falls to 5. $$How much of the tax is paid by buyers?

Accepted Answer

$2 per pack

Question 7

Which principle of tax fairness states that people should pay taxes according to how easily they can bear the burden?

Accepted Answer

The ability-to-pay principle

Question 8

In the market for illegal drugs, if penalties are imposed only on sellers, what happens to the equilibrium price and quantity?

Accepted Answer

The equilibrium price rises and the quantity decreases.

Question 9

If the supply of a good is perfectly elastic and a tax is imposed, who bears the entire burden of the tax?

Accepted Answer

Buyers bear the entire burden.

Question 10

A minimum wage set above the equilibrium wage rate leads to which of the following outcomes?

Accepted Answer

A deadweight loss and decreased worker and firm surplus.

Question 11

Suppose the government wants to discourage consumption of a good with inelastic demand, such as gasoline. Who will bear most of the burden of a tax on this good?

Accepted Answer

Buyers will bear most of the burden.

Question 12

Which of the following is NOT a typical outcome of rent control?

Accepted Answer

Efficient allocation of housing

Question 13

In the labor market, the supply curve represents:

Accepted Answer

The marginal social cost of labor to workers (leisure forgone).

Question 14

If a tax is imposed and the demand is perfectly elastic, what happens to the price received by sellers?

Accepted Answer

It decreases by the amount of the tax.

Question 15

Which of the following allocation methods for scarce housing under rent control is considered fair according to the fair-rules view?

Accepted Answer

None of these methods is considered fair.

Question 16

Suppose a per-unit tax is imposed on sellers, and the demand for donuts has $$|\varepsilon_D|$$ close to zero. What is the likely outcome?

Accepted Answer

Buyers will bear most of the burden of the tax.

Question 17

Which of the following is a rationale for minimum wage laws?

Accepted Answer

To boost the purchasing power of low-income families.

Question 18

In the market for illegal goods, if penalties are imposed on both buyers and sellers, what is the effect?

Accepted Answer

Both supply and demand decrease, lowering equilibrium quantity.

Question 19

Which formula best represents the deadweight loss caused by a tax?

Accepted Answer

$$	ext{Deadweight Loss} = \frac{1}{2} 	imes 	ext{Tax} 	imes 	ext{Decrease in Quantity}$$

Question 20

Which of the following is a potential unintended outcome of the one-child policy in China, as it relates to the marriage market?

Accepted Answer

Fewer caretakers for aging parents

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

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