Week 7 Quiz

In the course's illustrative running market, demand is Qd = 90 − 10P and supply is Qs = 10P − 30, with P in dollars and Q in units per day; with no intervention it clears at 6 dollars and 30 units. The government sets a price ceiling of 4 dollars. What happens in the market?

Select one.

• Buyers want 50 units and sellers offer 10, a shortage of 40
• Buyers want 50 units and sellers offer 10, a surplus of 40
• Buyers want 50 units and sellers offer 40, a shortage of 10
• Nothing changes, because a ceiling only matters above 6 dollars

In the course's illustrative running market, demand is Qd = 90 − 10P and supply is Qs = 10P − 30, with P in dollars and Q in units per day; with no intervention it clears at 6 dollars and 30 units. Which one of these price ceilings would bind?

Select one.

• A ceiling of 7 dollars
• A ceiling of 8 dollars
• A ceiling of 5 dollars
• A ceiling of 9 dollars

In the course's illustrative running market, demand is Qd = 90 − 10P and supply is Qs = 10P − 30, with P in dollars and Q in units per day; with no intervention it clears at 6 dollars and 30 units. With a binding ceiling of 4 dollars, only 10 units trade; at that quantity buyers value the last unit at 8 dollars and it costs sellers 4. What is the deadweight loss?

Select one.

• 20 dollars a day
• 40 dollars a day
• 80 dollars a day
• 10 dollars a day

In the course's illustrative running market, demand is Qd = 90 − 10P and supply is Qs = 10P − 30, with P in dollars and Q in units per day; with no intervention it clears at 6 dollars and 30 units. The government sets a price floor of 8 dollars. Which description fits the market?

Select one.

• Sellers offer 50 units and buyers want 10, so 40 buyers go without
• The market stays at 6 dollars and 30 units, because the floor does not bind
• Sellers offer 50 units and buyers want 10, and all 50 units trade
• Sellers offer 50 units and buyers want 10, leaving 40 unsold units

In the course's illustrative running market, demand is Qd = 90 − 10P and supply is Qs = 10P − 30, with P in dollars and Q in units per day; with no intervention it clears at 6 dollars and 30 units. A tax of 2 dollars per unit is collected from sellers, so supply becomes Qs = 10P − 50. What are the new prices and quantity?

Select one.

• Buyers pay 8 dollars, sellers keep 6, and 20 units trade
• Buyers pay 7 dollars, sellers keep 5, and 20 units trade
• Buyers pay 7 dollars, sellers keep 7, and 30 units trade
• Buyers pay 6 dollars, sellers keep 4, and 30 units trade

In the course's illustrative running market, demand is Qd = 90 − 10P and supply is Qs = 10P − 30, with P in dollars and Q in units per day; with no intervention it clears at 6 dollars and 30 units. A 2-dollar tax per unit collected from sellers cuts the quantity traded by 10 units a day. What is the deadweight loss?

Select one.

• 40 dollars a day
• 20 dollars a day
• 10 dollars a day
• 80 dollars a day

In the course's illustrative who-bears-it market, demand is Qd = 60 − 5P and supply is Qs = 15P − 40; with no tax it clears at 5 dollars and 35 units. A tax of 4 dollars per unit is collected from sellers; afterward buyers pay 8 dollars, sellers keep 4, and 20 units trade. How is the tax's burden shared?

Select one.

• Sellers bear all 4 dollars, since sellers write the check
• Each side bears 2 dollars, since the tax is split evenly
• Buyers bear 1 dollar and sellers bear 3
• Buyers bear 3 dollars and sellers bear 1

In the course's illustrative who-bears-it market, demand is Qd = 60 − 5P and supply is Qs = 15P − 40; with no tax it clears at 5 dollars and 35 units. A tax of 4 dollars per unit is collected from sellers. Which feature of this market decides how the burden of that tax is divided between buyers and sellers?

Select one.

• Quantity demanded changes by only 5 units per dollar, while quantity supplied changes by 15
• Which side the law makes hand the tax to the government
• Quantity demanded changes by 15 units per dollar, while quantity supplied changes by 5
• Nothing about the curves, because every tax is split evenly

True or false: in the course's illustrative running market, a 2-dollar subsidy per unit lets buyers pay 5 dollars and sellers receive 7, so because both buyers and sellers gain, total surplus rises above its no-subsidy level of 90 dollars a day.

True or false.

• True
• False

Which of these statements about the minimum wage are positive claims, ones that evidence or the model could check, rather than normative judgments? Select all that apply.

Select every option that applies.

• In the simple competitive model, a binding minimum wage lowers the quantity of labor employed.
• Card and Krueger (1994) found no fall in fast-food jobs in New Jersey after its 1992 increase.
• A higher minimum wage is worth the cost of some lost hours for a few workers.
• Every state ought to set its minimum wage above the federal floor.