Economics: Price Controls, Taxes, Subsidies, and Market Equilibrium

A law prohibiting price-gouging is an example of a price ceiling.

True

Agricultural price supports redistribute money from producers to consumers.

False

Rent control" is an example of a price floor.

False

A minimum wage law is an example of a price ceiling.

False

An excise tax is percentage tax on each good or service transacted.

False

A subsidy benefits both the consumers and producers of the subsidized product or service.

True

A decrease in the excise tax on new automobiles will reduce the tax revenue.

True

A subsidy paid to the consumers of energy-efficient appliances will lead to a higher list price for energy-efficient appliances

True

An excise tax on gasoline is an example of a sales tax

False

The revenue from a tax is in general greater than the burden of the tax.

False

The incidence of an excise tax on potatoes is shared equally by consumers and producers

False

A binding price ceiling on cucumbers will create a shortage of cucumbers

True

An increase in the price floor on milk will create a larger surplus of milk.

True

An "Ad Valorem Tax" isn't really a tax, but rather a normative concept.

False

"Tax incidence" is another term for "deadweight loss."

False

A subsidy on LED lightbulbs is inefficient.

True

A subsidy paid to consumers of honey will cause the effective price to consumers to be greater than the effective price to producers.

False

A minimum wage set above the market equilibrium wage will make all workers who are affected by the minimum wage better off.

False

A subsidy on daycare for children is inefficient.

True

Scarcity implies that choices involve trade-offs.

True

The opportunity cost of going to see a movie does not include the price of the movie tickets.

False

Voluntary exchange is mutually beneficial.

True

Diminishing marginal productivity is an implication of scarcity and rational self-interest.

True

Diminishing marginal utility implies the Law of Increasing Opportunity Costs.

False

One source of the gains from trade is specialization according to comparative advantage.

True

Market supply is a relationship between price and quantity supplied.

True

An increase in price will lead to an increase in Market Supply, all else constant.

False

Market supply is unrelated to individual firms' supply.

False

Income is a determinant of supply.

False

In general, the marginal opportunity cost of producing and selling goods increases as the quantity produced and made available for sale increases.

True

In general, the marginal willingness and ability to pay for a good falls as the quantity consumed increases.

True

In general, the elasticity of supply with respect to price is positive.

True

The "Law of Demand" refers to the inverse relationship between price and quantity demanded, all else constant.

True

If the market for food is in equilibrium, then no one is starving.

False

Competitive markets lead to an efficient allocation of resources.

True

Normative analysis involves value-judgements and opinions about how thing should be.

True

Producer surplus occurs when quantity supplied is greater than quantity demanded.

False

If the income elasticity of demand for bananas is 3, then bananas are a luxury.

True

If the income elasticity of demand for kiwi is 0.5, then kiwis are an inferior good

False