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True or False?

I’ll give the answers in class on Wednesday. This is a good thing to put into your notebook!

  1. A government-imposed tax on a market reduces the size of the market.
  2. The incidence of a tax depends on whether the tax is imposed on buyers or sellers.
  3. Economic policies, like price controls, and taxes, often have effects that the people who created them did not expect them to have.
  4. A price ceiling is a legal minimum on the price of a good or service.
  5. If a price ceiling of RMB10 per litre is imposed on petrol, and the market equilibrium price is RMB7, the price ceiling is a binding constraint on the market.
  6. If a price ceiling is below equilibrium price, the quantity supplied will exceed the quantity demanded.
  7. Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price.
  8. Prices are an efficient and impersonal way to decide who gets what.
  9. Because both the supply of housing and the demand for housing are more elastic in the long run, housing shortages caused by rent controls grow larger in the long run than in the short run.
  10. Rent control may lead to lower rents for those who get housing, but the quality of the housing may also be worse.
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