Question 1

Policymakers use taxes
A)to raise revenue for public purposes but not to influence market outcomes.
B)both to raise revenue for public purposes and to influence market outcomes.
C)when they realize that price controls alone are insufficient to correct market inequities.
D)only in those markets in which the burden of the tax falls clearly on the sellers.

Accepted Answer

Policymakers use taxes both to raise revenue for public purposes and to influence market outcomes. Taxes can be used to discourage consumption (e.g. taxes on cigarettes or alcohol) or to encourage certain behaviors (e.g. tax credits for renewable energy). Additionally, taxes can also be used as a tool for redistributing wealth and reducing income inequality. Therefore, taxes can have a direct impact on market outcomes and are often used as a policy tool to address market failures.

Question 2

Price controls are usually enacted
A)as a means of raising revenue for public purposes.
B)when policymakers believe that the market price of a good or service is unfair to buyers or sellers.
C)when policymakers tax a good.
D)All of the above are correct.

Accepted Answer

Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers. This can include setting price ceilings (maximum prices) to help buyers afford a good or service or setting price floors (minimum prices) to help sellers receive fair compensation for their products. Price controls are not generally enacted as a means of raising revenue or through taxation, although taxes can be used as a tool to encourage or discourage certain behaviors.

Question 3

Price controls
A)always produce a fair outcome.
B)always produce an efficient outcome.
C)can generate inequities of their own.
D)All of the above are correct.

Accepted Answer

Price controls can generate inequities of their own because they may lead to shortages, surpluses, or quality deterioration of the controlled product. Additionally, price controls may benefit some consumers while harming others, depending on how the controls are implemented and enforced. Therefore, price controls may not always lead to a fair or efficient outcome.

Question 4

Minimum-wage laws dictate
A)the exact wage that firms must pay workers.
B)a maximum wage that firms may pay workers.
C)a minimum wage that firms may pay workers.
D)both a minimum wage and a maximum wage that firms may pay workers.

Accepted Answer

Minimum-wage laws set a legal minimum that employers must pay their workers, creating a floor for wages. Therefore, the correct choice is C, which states that the minimum wage is the wage that firms may pay workers.

Question 5

Which of the following is not an example of a public policy?
A)rent-control laws
B)minimum-wage laws
C)taxes
D)equilibrium laws

Accepted Answer

Equilibrium laws are not a type of public policy. Public policy refers to government actions and decisions that are aimed at addressing societal problems, promoting the common good, and enhancing public welfare. Rent-control laws, minimum-wage laws, and taxes are all examples of public policies that are designed to regulate economic activities, protect vulnerable groups, and raise revenue for public services. Equilibrium laws, on the other hand, are principles of economics that describe how supply and demand interact to determine market prices and quantities. They are not enforced by governments, but are rather a feature of market systems.

Question 6

Rent-control laws dictate
A)the exact rent that landlords must charge tenants.
B)a maximum rent that landlords may charge tenants.
C)a minimum rent that landlords may charge tenants.
D)both a minimum rent and a maximum rent that landlords may charge tenants.

Accepted Answer

Rent-control laws generally place a cap on the maximum rent that landlords may charge tenants. They do not typically dictate the exact rent or set a minimum rent that must be charged.

Question 7

The presence of a price control in a market for a good or service usually is an indication that
A)an insufficient quantity of the good or service was being produced in that market to meet the public's need.
B)the usual forces of supply and demand were not able to establish an equilibrium price in that market.
C)policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.
D)policymakers correctly believed that price controls would generate no inequities of their own once imposed.

Accepted Answer

Price controls are often implemented when policymakers believe that the prevailing market price is unfair to either buyers or sellers. This could be because prices are too high for consumers to afford essential goods or too low for producers to cover their costs.

Question 8

Which of the following is not correct?
A)Economists have two roles: scientist and policy adviser.
B)As scientists, economists develop and test theories to explain the world around them.
C)Economic policies rarely have effects that their architects did not intend or anticipate.
D)As policy advisers, economists use their theories to help change the world for the better.

Accepted Answer

Economic policies can have unintended consequences or effects that were not anticipated by their architects. This is why economists often conduct impact assessments and evaluations of policies after their implementation to determine their effectiveness and any unintended effects.

Quiz 6: Supply, Demand, and Government Policies

Policymakers use taxes

Price controls are usually enacted

Price controls

Minimum-wage laws dictate

Which of the following is not an example of a public policy?

Rent-control laws dictate

The presence of a price control in a market for a good or service usually is an indication that

Which of the following is not correct?