U.S. Chocolate Market Quiz

Consider the U.S. market for chocolate, a market in which the government has imposed a nonbinding price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling?

• A sharp drop in consumer income; chocolate is a normal good.

• South American cocoa bean producers refuse to ship to chocolate producers in the United States.

• A large increase in the size of the cocoa bean crop; cocoa beans are used to produce chocolate.

• A government study that shows that consuming chocolate increases the incidence of cancer.

If the government removes a binding price ceiling from a market, then the price paid by buyers will

• increase, and the quantity sold in the market will decrease.

• decrease, and the quantity sold in the market will increase.

• decrease, and the quantity sold in the market will decrease.

• increase, and the quantity sold in the market will increase.

Answer explanation

• Price: This part is correct. When the price ceiling is removed, the price will rise to the equilibrium price.

• Quantity sold increases: This part is also correct. With the price ceiling gone, more producers will be willing to supply the good, increasing the quantity sold.

This option is correct because both the price and the quantity sold will increase when the binding price ceiling is removed.

Which of the following causes a shortage of a good?

• Binding price ceiling

• Tax on the good

• Nonbinding price control

• Binding price floor

Which of the following causes the price paid by buyers to be different than the price received by sellers?

• Tax on the good

• Binding price floor

• Binding price ceiling

• Nonbinding price control

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling is established,

• a larger quantity of the good is supplied.

• a smaller quantity of the good is demanded.

• a smaller quantity of the good is bought and sold.

• the price rises above the previous equilibrium.

Refer to Figure 6-10. The per-unit burden of the tax on buyers is

• $24.

• $8.

• $14.

• $6.

Refer to Figure 6-11. Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

• Between 60 units and 100 units

• Greater than 100 units

• Less than 60 units

• 60 units

Refer to Figure 6-13. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. After paying the tax, Acme receives how much?

• $12.00

• $10.50

• $8.00

• $9.00

Refer to Figure 6-2. The price ceiling causes quantity

• demanded to exceed quantity supplied by 30 units.

• demanded to exceed quantity supplied by 90 units.

• supplied to exceed quantity demanded by 90 units.

• supplied to exceed quantity demanded by 60 units.

Refer to Figure 6-5. A government-imposed price of $12 in this market is an example of a

• binding price ceiling that creates a shortage.

• nonbinding price ceiling that creates a shortage.

• nonbinding price floor that creates a surplus.

• binding price floor that creates a surplus.