Principles of Microeconomics (Econ 002) Signature:
Drake University, Summer 2003
William M. Boal Printed name:
QUIZ #5 VERSION A
“Market Controls and Taxes”
INSTRUCTIONS: This quiz is closed-book, closed-notes, but calculators are permitted. Numerical answers, if
rounded, must be correct to at least 3 significant digits. Point values for each question are noted in brackets.
Maximum total points are 100.
I. Multiple choice: Circle the one best answer to each question. [3 pts each: 27 pts total]
(1) The quantity traded of gasoline would be
reduced if the government imposed
a. a price floor (or legal minimum price) for
gasoline.
b. a price ceiling (or legal maximum price) on
gasoline.
c. a quota on gasoline.
d. any of the above.
(2) If a price ceiling (or legal maximum price) on
doctor visits is binding, it creates
a. excess demand for doctor visits.
b. excess supply of doctor visits.
c. a surplus of doctors.
d. an increase in quantity of doctor visits supplied.
(3) Who loses if a price floor (or legal minimum
price) is imposed on housecleaning services?
a. All buyers of housecleaning services.
b. All sellers of housecleaning services.
c. All buyers and all sellers of housecleaning
services.
d. No one loses—everyone gains.
(4) The quantity of bicycle helmets actually sold
would increase if the government imposed a
a. price floor (or legal minimum price) on bicycle
helmets.
b. tax on bicycle helmets.
c. subsidy for bicycle helmets.
d. quota on bicycle helmets.
(5) The price of sugar will rise if the government
imposes
a. a price ceiling (or legal maximum price) for
sugar.
b. a quota on sellers of sugar.
c. a quota on buyers of sugar.
d. any of the above.
(6) A quota on producers of sport-utility vehicles, if
binding, will cause the price of sport-utility vehicles
to
a. rise.
b. fall.
c. remain constant.
d. rise or fall, depending on the shapes of the
demand and supply curves for sport-utility
vehicles.
(7) If the tax rate on cigarettes were steadily
increased, the tax revenues collected by the
government would likely
a. decrease steadily.
b. first decrease and then increase.
c. increase steadily.
d. first increase and then decrease.
(8) The net price received by sellers of teeshirts
would be less than the total price paid by buyers of
teeshirts if the government imposed a
a. price ceiling (or legal maximum price) on
teeshirts.
b. price floor (or legal minimum price) on
teeshirts.
c. subsidy for teeshirts.
d. tax on teeshirts.
(9) Suppose the price elasticity of demand for
buffalo burgers is -1.5 and the price elasticity of
supply of buffalo burgers is 0.8. If a tax is imposed
on buffalo burgers, which side of the market
effectively pays most of the tax?
a. Sellers.
b. Buyers.
c. Sellers and buyers each pay half of the tax.
d. Answer depends on which side is legally
required to remit the tax to the government.
