CF-SP10-5001_261_1_1152_1055105442

							Quiz 3
Eco 261
Principles of Microeconomics
Instructor: A. Biswas
Spring 2010

Due date: March 4 , 2010
Quiz submission policy:
The quiz is due at the beginning of due date’s class (that is March 4, 2010) and late
submission will not be accepted. The only exception is that if you arrive to class late and
submit the quiz immediately when entering the classroom, it will be accepted. Once class
ends no quiz will be accepted (even if class ends early). Quiz must be submitted during
class. So, for example, quiz placed in my mailbox will not be accepted. The only
exception is that if you make arrangements with us and obtain our prior permission. If
you think any of the questions are ambiguous or have multiple correct answers you
should justify your interpretation and defend your answers.

Instructions
1. Please write your name and please staple all the pages together and submit at the
beginning of due date’s class for credits.

Name:……………………………………………………………………………………..

True-false type questions: Each question worth 2 points
Please indicate your answer clearly. Unclear answers will not earn credit.

1.      Price controls are usually enacted when policymakers believe that the market
price of a good or service is unfair to buyers or sellers. True or False

2.     A price ceiling is a legal minimum on the price at which a good or service can be
sold.
True or False

3.     A price ceiling set below the equilibrium price causes quantity demanded to
exceed quantity supplied. True or False

4.    To be binding, a price floor must be set above the equilibrium price. True or
False

5.     A binding minimum wage causes the quantity of labor demanded to exceed the
quantity of labor supplied. True or False
Multiple choice type questions: Each question worth 2 points
Circle the letter (a or b or c or d) representing the best answer. Unclear answers will not
earn credit.

6.        A tax levied on the sellers of blueberries
     a.    increases sellers’ costs, reduces profits, and shifts the supply curve up.
     b.    increases sellers’ costs, reduces profits, and shifts the supply curve down.
     c.    decreases sellers’ costs, increases profits, and shifts the supply curve up.
     d.    decreases sellers’ costs, increases profits, and shifts the supply curve down.

7.     The term tax incidence refers to
     a. whether buyers or sellers of a good are required to send tax payments to the
        government.
     b. whether the demand curve or the supply curve shifts when the tax is imposed.
     c. the distribution of the tax burden between buyers and sellers.
     d. widespread view that taxes always will be a fact of life.

8.        A tax on buyers will
     a.    shift the demand curve upwards by the amount of the tax.
     b.    shift the demand curve downwards by the amount of the tax.
     c.    shift the supply curve upwards by the amount of the tax.
     d.    shift the supply curve downwards by the amount of the tax.

9.        If a tax is levied on the buyers of sugar, then
     a.    buyers will bear the entire burden of the tax.
     b.    sellers will bear the entire burden of the tax.
     c.    buyers and sellers will share the burden of the tax.
     d.    the government will bear the entire burden of the tax.

10.   Suppose that in a particular market, the supply curve is highly elastic and the
demand curve is highly inelastic. If a tax is imposed in this market, then
    a. the buyers will bear a greater burden of the tax than the sellers.
    b. the sellers will bear a greater burden of the tax than the buyers.
    c. the buyers and sellers are likely to share the burden of the tax equally.
    d. the buyers and sellers will not share the burden equally, but it is impossible to
       determine who will bear the greater burden of the tax without more information.
Extra Credit: 2 points
Circle the letter (a or b or c or d) representing the best answer. Unclear answers
will not earn extra credit.

1. Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline
tickets are required to pay the tax to the government. If the tax is reduced from $50 per
ticket to $30 per ticket, then
     a. the demand curve will shift upward by $20, and the price paid by buyers will
          decrease by less than $20.
     b. the demand curve will shift upward by $20, and the price paid by buyers will
          decrease by $20.
     c. the supply curve will shift downward by $20, and the effective price received by
          sellers will increase by less than $20.
     d. the supply curve will shift downward by $20, and the effective price received by
          sellers will increase by $20.