Price Control

If the government removes a tax on a good, then the price paid by buyers will

• increase, and the price received by sellers will increase.
• increase, and the price received by sellers will decrease.
• decrease, and the price received by sellers will increase.
• decrease, and the price received by sellers will decrease.

A tax imposed on the sellers of a good will

• raise both the price buyers pay and the effective price sellers receive.
• raise the price buyers pay and lower the effective price sellers receive.
• lower the price buyers pay and raise the effective price sellers receive.
• lower both the price buyers pay and the effective price sellers receive.

If the government levies a $2 tax per DVD on buyers of DVDs, then the price received by sellers of DVDs would

• decrease by more than $2.
• decrease by exactly $2.
• decrease by less than $2.
• increase by an indeterminate amount.

If a tax is levied on the buyers of a product, then there will be a(n)

• decrease in demand
• increase in demand.
• decrease in quantity demanded
• increase in quantity demanded

The per-unit burden of the tax on buyers is

• $6
• $8
• $14
• $24

Suppose the government has imposed a price ceiling on cellular phones.  Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

• Cellular phones become more popular.
• Traditional land line phones become more expensive.
• The components used to produce cellular phones become more expensive.
• A technological advance makes cellular phone production less expensive.

The price ceiling

• causes a shortage of 45 units of the good.
• causes a shortage of 85 units
• is not binding because it is set below the equilibrium price.
• reduces deadweight loss

A nonbinding price floor
(i) causes a surplus.
(ii) causes a shortage.
(iii) is set at a price above the equilibrium price.
(iv) is set at a price below the equilibrium price.

• (iii) only
• (i) and (iii) only
• (ii) and (iv) only
• (iv) only

A price floor set at

• $4 will be binding and will result in a shortage of 3 units.
• $4 will be binding and will result in a shortage of 6 units.
• $7 will be binding and will result in a surplus of 6 units.
• $7 will be binding and will result in a surplus of 12 units.