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the burden of tax is distributed among the various people who make up the economy
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Tax Incidence
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what hurts those they are trying to help
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Price controls
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lowest price for labor
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price floors
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lawmakers can decide whether the buyers or the sellers must send a tax top the government, but they can't legislate the true burden of a tax
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true
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binding minimum wage creates what
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unemployment
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When OPEC raised the price of crude oil in the 1970's it caused the
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United states' nonbonding price ceiling on gasoline to become binding
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You have responsibility for economic policy in the country of Freedonia. Recently, the neighboring country of Sylvania has cut off all exports of oranges to Freedonia. Harpo, who is one of your advisors, suggests that you should impose a binding price ceiling in order to avoid a shortage of oranges. Chico, another one of your advisors, argues that without a binding price floor, a shortage will certainly develop. Zeppo, a third advisor, says that the best way to avoid a shortage of oranges is to take no action at all. Which of your three advisors is most likely to have studied economics?
answer
Zeppo
question
When a binding price ceiling is imposed on a market
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- price no longer serves as a rationing device
- the quantity supplied at the price ceiling exceeds the quantity that would have been supplied without the price ceiling
- all buyers benefit
- the quantity supplied at the price ceiling exceeds the quantity that would have been supplied without the price ceiling
- all buyers benefit
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Price controls are usually enacted
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When policymakers believe that the market price of a good or service is unfair to buyers or sellers
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If nonbonding price floor is imposed on a market then
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the quantity sold in the market will stay the same
question
Refer to Figure 6-3. If the government imposes a price floor of $14 on this market, then there will be a
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surplus of 40
- in the graph you take the quantity at 14 dollars of supply and demand. You subtract the highest from the lowest and that is your surplus.
- in the graph you take the quantity at 14 dollars of supply and demand. You subtract the highest from the lowest and that is your surplus.
question
Refer to Figure 6-12. For every unit of the good that is sold,
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subtract the lowest number on the supply curve after tax- lowest number on supply curve before tax
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suppose the equilibrium price of a physical examination by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,
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the quantity demanded of physicals increases and the quantity supplied of physicals decreases
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Refer to Figure 6-3. In which of the following cases would sellers have to develop a rationing mechanism?
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lowest price is the ceiling (which in this case was $8)
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if a tax is levied on the sellers of a product, then the supply curve
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will shift up
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when a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so
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true
question
not all sellers benefit from a binding price floor
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true
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if the demand curve is very elastic and the supply curve is very inelastic in a market, then the sellers will:
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bear a greater burden of a tax imposed on the market, even if the tax is imposed on the buyer
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A tax of $1 on sellers always increases the equilibrium price by $1
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false
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price controls are usually enacted when a policymakers believe that the market price of a good or service is unfair to buyers
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true
question
in a free competitive market what is the rationing mechanism
answer
price
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Suppose the government imposes a price floor of $5 on this market. What will be the size of the surplus in this market?
answer
go to the $5 and take quantity supplied- quantity demanded
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if the government removes a binding price floor from a market, then the price received by sellers will
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decrease the quantity sold in the market will increase
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if a price floor is a binding constraint on a market, then
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sellers cannot sell all they want to sell at the price floor
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if the government removes a binding price ceiling from a market, then the price paid by buyers will
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increase and the quantity sold in the market will increase
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if buyers pay the majority of the tax, then we know that
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demand is more inelastic then supply
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Suppose the government has imposed a price floor on cellular phones. Which of the following events could transform the price floor from one that is binding to one that is not binding?
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traditional land line phones become more expensive
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A tax on the buyers of TV's
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;dads buyers to demand a smaller quantity at every place
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if the government levies a $500 tax on buyers, then the price received by sellers would
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decrease less then $500
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A tax imposed on the buyers of a good will
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lower the effective price received by sellers and lower the equilibrium quantity