Eco 102 H Review (Chapter 6: Supply, Demand, And Government Policies)
Choose the BEST answer. Read the explanation if there is.
Questions and Answers
- 1.
Two roles of economists: as policy advisors, they develop and test their theories to explain the world around them. As policy advisers, they use their theoires to help change the world for the better.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The other way around.Rate this question:
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- 2.
The price ceiling is binding if it's below the equilibrium point.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
A price ceiling is a government-imposed limit on how high a price can be charged for a product or service. When the price ceiling is set below the equilibrium point, it means that the maximum price allowed by the government is lower than the market price determined by supply and demand. In this situation, the price ceiling becomes binding because it creates a shortage of the product or service, as suppliers are unable to charge the market price and may choose not to produce enough to meet the demand. Therefore, the statement that the price ceiling is binding if it's below the equilibrium point is true.Rate this question:
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- 3.
The price floor is binding if it's above the equilibrium point.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
A price floor is a government-imposed minimum price set above the equilibrium price in a market. When the price floor is above the equilibrium point, it creates a situation where the quantity supplied exceeds the quantity demanded, leading to a surplus. This surplus occurs because suppliers are willing to sell more at the higher price, but consumers are not willing to buy as much at that price. Therefore, the statement is true as a binding price floor creates a surplus in the market.Rate this question:
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- 4.
In house renting, both supply and demand are more elastic in the long run.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
In house renting, both supply and demand are more elastic in the long run. This means that both the quantity supplied and the quantity demanded are more responsive to changes in price over time. In the long run, landlords can adjust the number of rental properties available, and tenants have more flexibility to find alternative housing options. This elasticity allows for a more balanced market where prices can adjust to equate supply and demand.Rate this question:
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- 5.
When tenants get lower rents, they:
- A.
The price is not in equilibrium
- B.
They have smaller house
- C.
Are satisfied
- D.
Also get lower-quality housing
Correct Answer
D. Also get lower-quality housingExplanation
When tenants get lower rents, they also get lower-quality housing. This means that in order to reduce the rent, landlords may cut corners on maintenance, repairs, and overall quality of the property. Therefore, while tenants may benefit from paying less rent, they may have to compromise on the condition and standards of their housing.Rate this question:
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- 6.
Minimum wage raises the income of those workers who have job, but it lowers the income of workers who cannot find jobs.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because when the minimum wage is increased, it directly raises the income of workers who have jobs and are earning at or below the minimum wage. However, it can also have negative consequences for workers who are unable to find jobs because employers may be less willing to hire or retain workers due to the increased labor costs. This can result in a decrease in employment opportunities and therefore lower income for those individuals.Rate this question:
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- 7.
The impact of the minimum wage depends on the skill and experience of the worker.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The impact of the minimum wage depends on the skill and experience of the worker. This is true because workers with higher skills and experience are more likely to earn wages above the minimum wage. On the other hand, workers with lower skills and experience may be more affected by changes in the minimum wage as they are more likely to earn the minimum wage or close to it. Therefore, the impact of the minimum wage varies depending on the worker's skill level and experience.Rate this question:
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- 8.
The minimum wage has greatest impact on:
- A.
The market for teenage labor
- B.
The increase in number of old laborers
- C.
The average employee
- D.
The manager of the organization
Correct Answer
A. The market for teenage laborExplanation
The minimum wage has the greatest impact on the market for teenage labor because teenagers often have limited work experience and skills, making them more likely to be employed in low-wage jobs. When the minimum wage increases, employers may be less willing to hire teenagers or may reduce their working hours to offset the higher labor costs. This can result in fewer job opportunities for teenagers and potentially higher unemployment rates among this age group.Rate this question:
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- 9.
Minimum wage is more often ______ for teenagers than for other members of the labor forces.
- A.
Advantageous
- B.
Abusive
- C.
Non-binding
- D.
Binding
Correct Answer
D. BindingExplanation
The correct answer is "binding". This means that the minimum wage is legally enforceable for teenagers, just as it is for other members of the labor force. It implies that teenagers are entitled to receive the same minimum wage as adults, ensuring fair compensation for their work.Rate this question:
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- 10.
10 percent increase in the minimum wage increases teenage employment between 1 and 3 percent.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
....depresses teenage employmentRate this question:
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- 11.
When minimum wage rises, some teenagers who are still attending school choose to:
- A.
Stay in school because their parents can now easily pay
- B.
Drop out and take jobs
- C.
Result to underground employment
- D.
Have a part time job
Correct Answer
B. Drop out and take jobsExplanation
When the minimum wage rises, some teenagers who are still attending school may choose to drop out and take jobs. This is because the higher minimum wage makes it more attractive for them to work rather than continue their education. They may see the opportunity to earn a higher income immediately as more beneficial than staying in school and potentially waiting for future job prospects. This decision can have both short-term benefits in terms of immediate income, but also long-term consequences in terms of limited educational attainment and potential career opportunities.Rate this question:
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- 12.
When policymakers set prices by legal decree, they improve the signals that normally guide the allocation of society's resources.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
...obscure the signals...Rate this question:
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- 13.
Price controls are often aimed at helping the poor.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Price controls are often implemented by governments to regulate the prices of essential goods and services. These controls are typically aimed at ensuring affordability and accessibility for low-income individuals, thereby helping the poor. By setting maximum prices or subsidizing certain products, price controls can prevent price gouging and ensure that basic necessities are affordable for those with limited financial means. This can be particularly beneficial for vulnerable populations who may struggle to afford essential items in times of economic hardship. Therefore, the statement that price controls are often aimed at helping the poor is true.Rate this question:
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- 14.
Minimum-wage laws may raise the incomes of some workers, but they also:
- A.
Cause other workers to be unemployed
- B.
Disrupt market equilibrium
- C.
Cause inflation
- D.
Decrease quality of hired workers
Correct Answer
A. Cause other workers to be unemployedExplanation
Minimum-wage laws may cause other workers to be unemployed because when the minimum wage is increased, businesses may not be able to afford to pay all of their employees at the higher rate. As a result, they may have to lay off some workers or reduce their hours. This can lead to an increase in unemployment among those workers who are not able to find alternative employment. Additionally, businesses may also choose to automate certain tasks or outsource jobs to lower-wage countries in order to offset the increased labor costs, further contributing to unemployment.Rate this question:
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- 15.
Which is not a step for analyzing supply and demand?
- A.
Decide whether the law affects the supply curve or demand curve
- B.
Decide which way the curve shifts
- C.
Examine how the shift affects the equilibrium price and quantity
- D.
Decide whether the supply and demand curves are elastic or inelastic
Correct Answer
D. Decide whether the supply and demand curves are elastic or inelasticExplanation
The step "Decide whether the supply and demand curves are elastic or inelastic" is not a step for analyzing supply and demand because elasticity refers to the responsiveness of quantity demanded or supplied to changes in price, while analyzing supply and demand involves examining the factors that cause the curves to shift and how those shifts affect equilibrium price and quantity. Elasticity is a separate concept that is used to measure the degree of responsiveness in supply or demand.Rate this question:
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- 16.
When the tax is levied on sellers, buyers and sellers share the burden of the tax.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
When the tax is levied on sellers, it affects the price of the goods or services they offer. As a result, sellers may increase the price to cover the tax, which ultimately impacts the buyers. The burden of the tax is shared between buyers and sellers because buyers end up paying a higher price for the goods or services, while sellers have to adjust their pricing to account for the tax. Therefore, the statement is true.Rate this question:
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- 17.
When a good is taxed, the quantity of the good sold is ____ in the new equilibrium.
- A.
Smaller
- B.
Larger
- C.
The same
- D.
Shifted
Correct Answer
A. SmallerExplanation
When a good is taxed, the price of the good increases for consumers. As a result, the quantity demanded decreases because consumers are less willing to purchase the good at a higher price. Additionally, the quantity supplied may also decrease as producers may be less willing to supply the good at a lower after-tax price. Therefore, the new equilibrium quantity of the good sold is smaller than the original quantity.Rate this question:
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- 18.
Buyers and sellers share the burden of the tax all the time.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Buyers and sellers share the burden of the tax because when a tax is imposed on a good or service, both parties are affected. The seller may pass on a portion of the tax to the buyer by increasing the price of the product, which means the buyer pays more. On the other hand, the seller may also absorb some of the tax by reducing their profit margin. Therefore, both parties ultimately bear the burden of the tax in some way.Rate this question:
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- 19.
Taxes levied on sellers and taxes levied on buyers are equivalent.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Taxes levied on sellers and taxes levied on buyers are equivalent because they both result in an increase in the final price of the product. Whether the tax is imposed on the seller or the buyer, the burden of the tax is ultimately passed on to the consumer in the form of higher prices. This is known as tax incidence, and it shows that the economic impact of the tax is the same regardless of who is officially responsible for paying it. Therefore, the statement is true.Rate this question:
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- 20.
The only difference between taxes on the sellers and taxes on buyers is:
- A.
Whose curve is more inelastic
- B.
Who benefits more
- C.
Who sends the money to the government
- D.
Who leaves faster from the market
Correct Answer
C. Who sends the money to the governmentExplanation
The correct answer is "who sends the money to the government". This is because the difference between taxes on sellers and taxes on buyers lies in the party responsible for remitting the tax to the government. In the case of taxes on sellers, the sellers are responsible for sending the money to the government. On the other hand, in the case of taxes on buyers, the buyers are the ones who send the money to the government.Rate this question:
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- 21.
The amount that shows up as a deduction on your pay stub is the:
- A.
Worker's tax
- B.
Worker's burden
- C.
Worker contribution
- D.
Employee tax
Correct Answer
C. Worker contributionExplanation
The deduction that appears on your pay stub is referred to as "worker contribution." This deduction represents the amount that the worker contributes towards taxes or other financial obligations. It is a portion of the worker's salary that is withheld by the employer to fulfill these obligations.Rate this question:
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- 22.
The elasticity measures the willingness of buyers or sellers to leave the market when:
- A.
Conditions improve
- B.
Prices inflate
- C.
Condition becomes unfavorable
- D.
The tax is too big
Correct Answer
C. Condition becomes unfavorableExplanation
The elasticity measures the willingness of buyers or sellers to leave the market when the condition becomes unfavorable. When the market conditions deteriorate, buyers or sellers may be more inclined to exit the market as it becomes less profitable or advantageous for them. Elasticity refers to the responsiveness of quantity demanded or supplied to changes in market conditions, and in this case, it indicates the likelihood of market participants leaving when the conditions become unfavorable.Rate this question:
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Mar 21, 2023Quiz Edited by
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Jan 06, 2012Quiz Created by
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