Question

1.) The presence of a price control in a market for a good or service usually is an indication that

A. an insufficient quantity of the good or service was being produced in that market to meet the public’s need.

B. the usual forces of supply and demand were not able to establish an equilibrium price in that market.

C. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

D. policymakers correctly believed that price controls would generate no inequities of their own once imposed.

2.)Which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk?

A. Policymakers have studied the effects of the price ceiling carefully, and they recognize that the price ceiling is advantageous for society as a whole.

B. Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.

C. Sellers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.

D. Buyers and sellers of milk have agreed that the price ceiling is good for both of them and have therefore pressured policymakers into imposing the price ceiling.

3.) When a tax is placed on the buyers of cell phones, the size of the cell phone market

A. and the effective price received by sellers both decrease.

B. decreases, but the effective price received by sellers increases.

C. increases, but the effective price received by sellers decreases.

D. and the effective price received by sellers both increase.

4.) Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift

A. demand, raising both the equilibrium price and quantity in the market for artificially-sweetened beverages.

B. demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages.

C. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially-sweetened beverages.

D. supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages.

5.) Most labor economists believe that the supply of labor is

A. less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.

B. less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.

C. more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.

D. more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.

Answer 1

1. Option C.

• Price control is a legal control of prices in the market by the policy makers when they believe that the prices prevailing in the market are unfair to both the buyers and sellers.

2. Option B.

• The most likely explanation for the imposition of price ceiling on the market of milk is that the buyer's of milk, recognizing that price ceiling is good for them, have pressured policymakers into imposing the price ceiling.
• The price ceiling is the maximum price at which a good can be sold.

3. option A.

• When a tax is placed on the buyer's of cell phones,the size of the cell phone Market and the effective price recieved by the seller's, both decrease.
• This is because when tax is imposed the price of the cell phones increases.
• The sellers cannot further increase the price for their profit due to the price ceiling imposed by the policy makers.
• Hence they receive very less amount for the cell phones sold.

4. Option C

• The tax shifts the supply when 20 cent tax is imposed on the sellers of artificially sweetened beverages.
• This will lead to an increase in the equilibrium price while the equilibrium quantity lowers.

5. Option B.

• Most labour economist's believe that the supply of labour is less elastic than demand.
• Which means that, there is very less or no change in the supply even when the price changes.
• Therefore according to them, the workers bear most of the burden of the payroll tax.