Question

6. A binding price floor government policy leads to excess demand, which is more inefficient than market discipline. ( )
7. Whoever is willing and able to pay the price gets scarce resources in a market economy. ( )
8. A decrease in supply will cause the largest increase in price when demand is very inelastic. ( )
9. If the government removes a tax on a good, then the price paid by buyers and the price received by sellers both will decrease. ( )
10. For inelastic demand curves, total revenue moves in the same direction as the price. ( )

Answer 1

6. False
(A binding price floor means minimum price is set above the equilibrium price. So, quantity supplied exceeds quantity demanded which creates excess supply.)

7. True
(In a amrket economy, quantity demanded equals quantity supplied.)

8. True
(When demand is inelastic, then decrease in supply will cause a greater increase in price.)

9. False
(Price paid by buyers fall but price received by sellers increase.)

10. True
(When demand is inelastic then percentage change in quantity demanded is less than the percentage change in price so TR will move in same direction as price.)