Question1

Which of the following is true about a binding price ceiling?

With a binding price ceiling, the quantity demanded is equal to the quantity supplied.

With a binding price ceiling, there will be surplus in the market.

A binding price ceiling imposed on a market is above the equilibrium price of the market.

With a binding price ceiling, the quantity demanded will exceed the quantity supplied.

With a binding price ceiling, the quantity demanded will be smaller than the quantity supplied.

Question 2

2.5 pts

Refer to the graph below, which shows both short-run and long-run demand and supply curves. D1 is the demand curve in short run and S1 is the supply curve in short run. D2 is the demand curve in long run and S2 is the supply curve in long run.

C Price Black-market price Price ceiling shortage Quantity C Price Black-market price Price floor surplus Quantity Question 13 2.5 pts Consider the market for good H. A tax is levied on buyers of good H. Demand and Supply are not perfectly elastic or perfectly inelastic. Which of the following graphs correctly shows the effects of the tax? The graph should also correctly indicate CS, PS, DWL and tax revenue after tax.\fC Price S2 CS Tax revenue PS Quantity C Price DWL S1 Tax PS revenue D CS Quantity Question 14 2.5 ptsSuppose a binding price floor is imposed on a market. Which of the following graphs correctly shows the effects of the binding price floor? The graph should correctly indicate the shortage/surplus. C Price _A_ C Price L Price ceiling ' Price ceiling Quantity Quantity If there is a $4 binding price ceiling imposed on a pharmaceutical drug, calculate the amount of the shortage in the long run. Price So $4 1,250,000 1,950,000 2,000,000 2,750,000 3,250,000 Quantity 800,000 01,250,000 1,950,000 2,000,000 3,250,000 Question 3 2 pts Consider the the following graphs.Good A Good B Price Price Supply Supply Quantity Quantity Supply of good A is price elastic than the supply of good B because the supply curve of good A is compared with the supply curve of good B. Omore; steeper less; steeper Omore; less steep Omore; equally steep Question 4 3 ptsA Pc B Pa C Ps E Q. Consider the above graph, which area represents producer surplus after the tax is imposed? A+B B+C+E A+ B +C+E B + C +F + G OE Question 5 3 pts If the government wants to raise taxes while generating no deadweight loss, it should raise taxes on a good with a operfectly elastic demand. operfectly elastic supply. operfectly inelastic demand. somewhat elastic demand. osomewhat elastic supply. Question 6 2 pts Assume that a tax on the market for milk causes a loss of $340 million in consumer and producer surplus combined and creates a deadweight loss of $50 million. Calculate the total tax revenue. (Hint: The loss of CS and PS combined = total tax revenue + DWL)C$50 million 033290 million C$340 million lC$390 million Question 7 2 pts A binding price ceiling is imposed on a market for a good. Which of the following statements is true. clf the government removes the price ceiling, the shortage will increase. clf supply increases of the good increases, the shortage will increase. clfthe demand for the good decreases, the shortage will increase. Of the government lowers the price ceiling further, the shortage will increase. Question 8 3 pts lPrice ___________ Supply Demand .. I I I I I Quantity in the graph above, which area represents the consumer surplus? Question 9 2 pts What is an unintended consequence of implementing a minimum wage policy. The minimum wage imposed is above the equilibrium wage in the labor market. cMinimum wage is an example of price ceiling. The minimum wage policy will lead to a labor shortage. Minimum wage is an example of price floor. The minimum wage policy will lead to quantity demanded of labor less than the quantity supplied of labor. Minimum wage is an example of price ceiling. The minimum wage policy will lead to companies hiring more workers. Minimum wage is an example of price floor. The minimum wage policy will result in companies hiring more workers and the equilibrium wage above the minimum wage. Question 10 0 pts (This is a bonus question. This question is worth 2 bonus points.) Consider the market for good D. Neither demand nor supply of good D is perfectly inelastic. A sales tax is imposed on good D, which of the following statements is correct? If a sales tax is levied on buyers, buyers will definitely bear more tax burden. The sales tax will decrease the equilibrium quantity. The sales tax will increase the equilibrium quantity. The total tax revenue generated will definitely be greater than the DWL generated. Question 11 2.5 pts Consider the market for luxury handbags. Assume that demand for luxury handbags is perfectly elastic. A tax is levied on sellers. Which of the following graphs correctly shows the effects of the tax? The graph should also correctly indicate PS, DWL and tax revenue after tax.C Price CS Tax revenue D1 PS D2 Quantity C Price 52 D Tax DWL revenue PS QuantityC Price Quantity Quantity lQuestion 12 2.5 ptsi A binding price ceiling is imposed on a market. Which of the following graphs correctly shows the effects of the price ceiling on the market? The graph should 'also correctly indicate the shortage/surplus and the black-market price. C Price surplus Price ceiling Black~market price Quantity C Price shortage V Price floor Blackmarket price Quantity