microeconomics – chapter 6 (connect)

You are an advisor to the Egyptian government, which has placed a price ceiling on bread. Unfortunately, many families still cannot buy the bread they need. The price ceiling has not increased the consumption of bread because:
A. it has reduced the quantity supplied
B. it has increased the price elasticity of demand
C. it has reduced the quantity demanded
D. is has reduced the price elasticity of demand

Suppose there has been a long-standing price ceiling on housing in your city. Recently, population has declined and the demand for housing has decreased. The decrease in demand could cause the price ceiling to:
A. become non-binding so there would be no shortage or deadweight loss
B. decrease the shortage but increase the deadweight loss
C. increase the shortage and / or deadweight loss
D. increase the shortage but decrease deadweight loss

Suppose Canada maintains a price floor for spinach. This policy might decrease revenues for spinach farmers if the:
A. quantity demanded for spinach is inelastic
B. quantity demanded for spinach is elastic
C. quantity supplied of spinach is inelastic
D. quantity supplied of spinach is elastic

Suppose Colombia maintains a price floor for coffee beans. If the price floor encourages new growers to enter the market and produce coffee, the size of the deadweight loss would:
A. increase because the supply curve would shift leftward, and the equilibrium price would increase above the original equilibrium price
B. decrease because the supply curve would shift rightward, and the equilibrium price would fall even lower than the original equilibrium price
C. increase because the supply curve would shift rightward, and the equilibrium price would fall even lower than the original equilibrium price
D. decrease because the supply curve would shift leftward, and the equilibrium price would increase above the original price

Many states tax cigarette purchases. Suppose smokers are unhappy about paying the extra charge for their cigarettes. If the state imposes the tax on the stores that sell the cigarettes rather than on smokers, it will:
A. cause some stores to go out of business
B. not make any difference to smokers because hate tax incidence or burden of the tac is a function of the relative elasticities of supply and demand
C. lower the price for cigarette smokers because the tax would be on stores that sell the cigarettes rather than on smokers
D. raises the price for cigarette smokers because the tax would be on the store that sell cigarettes rather than on smokers

Consider a tax on cigarettes. The tax incidence will fall more heavily on the side of the market that is:
A. more elastic, which is likely to be the supply (seller) side because of the addictive nature of the product.
B. less elastic, which is likely to be the demand (consumer) side because of the addictive nature of the product.
C. less elastic, which is likely to be the supply (seller) side because of the addictive nature of the product.
D. more elastic, which is likely to be the demand (consumer) side because of the addictive nature of the product.

In the Philippines, rice production is lower than rice consumption, resulting in a need to import rice from other countries.If the Philippine government considers a policy of subsidizing rice farmers, the benefits would include:
A. lower prices for consumers and higher prices for producers.
B. lower prices for consumers and producers.
C. higher prices for consumers and lower prices for producers.
D. higher prices for consumers and producers.

If the Philippine government considers a policy of subsidizing rice farmers, the costs would include:
A. lower prices for producers.
B. reduced rice production.
C. higher prices for consumers.
D. more expense for taxpayers.

A subsidy will increase consumer and producer surplus in a market and will increase the quantity of trades. A subsidy (such as a subsidy for producing corn in the United States) can be considered inefficient because a subsidy results in a quantity:
A. lower than the market equilibrium quantity where the cost of supplying that unit exceeds the willingness to pay.
B. higher than the market equilibrium quantity where the cost of supplying that unit exceeds the willingness to buy.
C. higher than the market equilibrium quantity where the cost of supplying that unit is less than the willingness to pay.
D. higher than the market equilibrium quantity where the cost of supplying that unit exceeds the willingness to pay.

Suppose the government imposes a price ceiling on gasoline. One month after the price ceiling is imposed, there is a shortage of gasoline, but it is much smaller than critics of the policy had warned. The critics' estimates might still be correct because over time the shortage of gasoline is likely to:
A. increase as elasticity decreases and consumers become less responsive to the price change.
B. decrease as elasticity increases and consumers become more responsive to the price change.
C. increase as elasticity increases and consumers become more responsive to the price change.
D. decrease as elasticity decreases and consumers become more responsive to the price change.

A province facing a budget shortfall decides to tax soft drinks. You are a budget analyst for the province. You would expect to collect more tax revenue in the:
A. second year because elasticity is smaller over a longer time frame.
B. first year because elasticity is larger over a longer time frame.
C. first year because people will stock up on soda.
D. second year because people will adjust and begin to consume more drinks in the second year.

The weekly supply of and demand for fast-food cheeseburgers in your city are shown in the figure below. In an effort to curb a looming budget deficit, the mayor recently proposed a tax that would be levied on sales at fast-food restaurants.

A. the mayor's proposal includes a sales tax of 60 cents on cheeseburgers to be paid by consumers. the new outcome in this market is __________ thousand cheeseburgers. the new price is $__________

B. __________ cents of the tax burden is borne by consumers, and __________ cents of the tax burden is borne by suppliers

C. the efficiency costs associated with the proposed tax are $__________

D. the government will collect $__________ in revenue

E. the loss of consumer surplus from this tax is $__________

Demand 'D1' and supply 'S1' of laptop computers are given in the figure below. The quantity of laptops is given in thousands. Suppose the government provides a $300 subsidy for every laptop computer that consumers purchase.

A. the appropriate supply curve with the subsidy is __________ (S3 / S2), and the quantity of laptops bought and sold at the new equilibrium will be __________ thousand

B. under the subsidy, consumers will pay $__________

C. under the subsidy, sellers will receive $__________

D. the government should budget $__________ for the subsidy