CH 6

Question 1

How do taxes on sellers affect the supply curve?

Answer 1

shift the supply curve back

Question 2

Statutory burden

Answer 2

the burden of being assigned by the government the responsibility of sending a tax payment; doesn’t matter

Question 3

Economic burden

Answer 3

who experiences a greater loss as a result of the tax

Question 4

Tax incidence

Answer 4

the division of the economic burden of a tax between buyers and sellers

Question 5

How do taxes on buyers affect the demand curve?

Answer 5

They shift it back

Question 6

Subsidy

Answer 6

a payment made by the government to those who make a specific choice (ex: childcare)

Question 7

Price ceiling

Answer 7

when the government sets a maximum price

Question 8

Binding price ceiling

Answer 8

when a price ceiling prevents the market from reaching the equilibrium price because the highest price that sellers can charge is set below the equilibrium price.

Question 9

Price floors

Answer 9

when the government sets a minimum price

Question 10

Binding price floor

Answer 10

when a price floor prevents the market from reaching the equilibrium price because the lowest price that sellers can charge is set above the equilibrium price.

Question 11

Quantity regulation

Answer 11

a maximum or minimum quantity that can be sold

Question 12

Mandate

Answer 12

requires you to buy/sell a minimum amount of a good

Question 13

Quotas

Answer 13

set a limit on the maximum quantity of a good that can be sold

Question 14

Governments impose quotas to _____, which can be applied to _____.

Answer 14

limit the quantity sold; both buyers and sellers

Question 15

_____ sets a minimum or maximum quantity that can be sold.

Answer 15

Quantity regulation

Question 16

When the government sets a quota on goods sold, the gap between _____ creates an incentive for potential _____ to find a way around the regulation.

Answer 16

price and marginal cost; sellers

Question 17

Taxes, price regulations, and quantity restrictions can all be used to:

Answer 17

achieve the same policy objectives.

Question 18

Example of a price floor

Answer 18

minimum wage

Question 19

If a price ceiling is placed above the equilibrium price, what will happen in the market?

Answer 19

Nothin

Question 20

usury laws

Answer 20

a maximum interest rate that can be charged on loans; intent to protect low-income borrowers from high rates when in reality they deny low-income borrowers funds.

Question 21

Distortion

Answer 21

the fall in quantity as a result of the tax; more distortion = less quantity and therefore less government revenue. More elasticity means more distortion

Question 22

Suppose that the demand for candy is less elastic than the supply of candy. If a tax is imposed on sellers of candy, which of the following is true?

Answer 22

Sellers will bear a smaller share of the tax burden because supply is more elastic than demand.