Where must the government set a price ceiling for it to be a binding constraint on the market?
Correct answer C. Below the equilibrium price
Topic / 19 questions
Prices, Wages & Taxes MCQs
Prices, Wages & Taxes MCQs cover how government controls such as price ceilings, price floors, minimum wages and taxes affect markets, and who bears the burden of a tax. They help economics students, CSS candidates and lecturer test takers. Every question shows its correct answer instantly, so you can check your supply and demand reasoning.
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The equilibrium rent for apartments is Rs500 a month, but the government imposes a rent control of Rs250. Which result is unlikely?
Correct answer C. The quality of apartments will improve
Which statement about a binding price ceiling is true?
Correct answer B. The shortage created by the price ceiling is greater in the long run than in the short run
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When will the surplus caused by a binding price floor be largest?
Correct answer A. When both supply and demand are elastic
The government sets a price ceiling on petrol of Rs150 per litre while the equilibrium price is Rs100 per litre. Which statement is true?
Correct answer A. A significant increase in the demand for petrol could cause the price ceiling to become a binding constraint
In the supply and demand model, how does a tax collected from buyers shift the curves?
Correct answer D. The demand curve shifts downward by the size of the tax per unit
What happens when a tax is imposed on a good?
Correct answer D. An increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold
When does the burden of a tax fall more heavily on sellers?
Correct answer A. When demand is elastic and supply is inelastic
When does the burden of a tax fall more heavily on buyers?
Correct answer D. When demand is inelastic and supply is elastic
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For which product would the burden of a tax probably fall more heavily on sellers?
Correct answer B. Entertainment
What does a binding price ceiling create?
Correct answer B. A shortage
What does a price floor do?
Correct answer A. It sets a legal minimum on the price at which a good can be sold
Which side of a market is more likely to lobby the government for a price floor?
Correct answer A. The sellers
Which of the following is an example of a price floor?
Correct answer B. The minimum wage
After a rise in the minimum wage, which worker is most likely to find it harder to get a job?
Correct answer C. A teenage worker with few qualifications
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In the supply and demand model, how does a tax collected from sellers shift the curves?
Correct answer C. The supply curve shifts upward by the size of the tax per unit
What happens when a tax is collected from the buyers in a market?
Correct answer A. The tax burden on buyers and sellers is the same as with an equivalent tax collected from the sellers
If a tax is imposed on a good that consumers regard as a necessity, how is the burden likely to be shared?
Correct answer B. It falls more heavily on buyers
Which statement about the burden of a tax is correct?
Correct answer C. The distribution of the burden of a tax is determined by the relative elasticities of supply and demand, not by legislation
About Prices, Wages & Taxes MCQs
Questions here apply the supply and demand model to policy. You will see items on when a price ceiling is binding, which happens only if it is set below the equilibrium price, and why a binding ceiling creates a shortage while a binding floor creates a surplus. Other questions examine tax incidence: the burden falls more heavily on the side of the market that is less elastic, so buyers of necessities bear more of the tax. Items on the minimum wage ask which workers, often the young and less skilled, find jobs harder to get.
Exams that include Prices, Wages & Taxes MCQs
Pakistan
- CSS
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- PPSC Lecturer tests
- FPSC
India
- UGC NET
- UPSC CSE
- State PSC exams
Bangladesh
- BCS
- University admission tests (DU, RU, JU)
Frequently asked questions
Who bears the burden of a tax?
The burden, or incidence, of a tax falls more heavily on whichever side of the market is less elastic. If demand is inelastic, as for necessities, buyers pay most of the tax through higher prices. It does not matter whether the tax is legally collected from buyers or sellers.
When is a price ceiling binding?
A price ceiling is binding only when it is set below the equilibrium price. It then prevents the market from reaching equilibrium and creates a shortage, because quantity demanded exceeds quantity supplied. A ceiling above equilibrium has no effect on the market.
How many Prices, Wages and Taxes MCQs are on MCQs360?
MCQs360 has 19 Prices, Wages and Taxes MCQs, free to practise with no sign-up and with answers shown instantly. They are a focused way to revise price controls and tax incidence for economics papers. Sketching a quick supply and demand diagram for each makes them easier.
Last reviewed October 2026