Question 1

Figure 4-20  
-Refer to Figure 4-20. The burden of the tax on sellers is

Accepted Answer

A) $1.00 per unit. 
B) $1.50 per unit. 
C) $2.00 per unit. 
D) $3.00 per unit. 
A) $1.00 per unit. 
B) $1.50 per unit. 
C) $2.00 per unit. 
D) $3.00 per unit.

Question 2

Which of the following would tend to increase the price of lumber?

Accepted Answer

A) a technological advance that lowers the cost of cutting timber 
B) an increase in the demand for newly constructed homes 
C) a decrease in the demand for wooden rocking chairs 
D) a decrease in the tax imposed on firms who produce lumber 
A) a technological advance that lowers the cost of cutting timber 
B) an increase in the demand for newly constructed homes 
C) a decrease in the demand for wooden rocking chairs 
D) a decrease in the tax imposed on firms who produce lumber

Question 3

If the demand for a good is highly inelastic, a tax on the good

Accepted Answer

A) places the burden of the tax equally on buyers and sellers 
B) permits sellers to pass most of the cost increase resulting from the tax on to the consumers of the product 
C) reduces the profits earned by sellers since they must write the check to pay the tax 
D) makes the demand more inelastic 
E) makes the demand more elastic 
A) places the burden of the tax equally on buyers and sellers 
B) permits sellers to pass most of the cost increase resulting from the tax on to the consumers of the product 
C) reduces the profits earned by sellers since they must write the check to pay the tax 
D) makes the demand more inelastic 
E) makes the demand more elastic

Question 4

Figure 4-23      
-Refer to Figure 4-23. In which market will the tax burden be most equally divided between the buyer and the seller?

Accepted Answer

A) market (a) 
B) market (b) 
C) market (c) 
D) All of the above are correct. 
A) market (a) 
B) market (b) 
C) market (c) 
D) All of the above are correct.

Question 5

If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen?

Accepted Answer

A) The quantity of beef demanded will decrease. 
B) The quantity of beef supplied will increase. 
C) There will be a surplus of beef. 
D) There will be a shortage of beef. 
A) The quantity of beef demanded will decrease. 
B) The quantity of beef supplied will increase. 
C) There will be a surplus of beef. 
D) There will be a shortage of beef.

Question 6

Many economists believe a general sales tax (particularly on items such as food) takes a larger proportion of income from low-income households than from high-income households. If this is true, a general sales tax is a

Accepted Answer

A) regressive tax. 
B) proportional tax. 
C) neutral tax. 
D) progressive tax. 
A) regressive tax. 
B) proportional tax. 
C) neutral tax. 
D) progressive tax.

Question 7

Figure 4-1  
-Figure 4-1 illustrates the market for compact discs. If the government imposes a price floor of $25 for compact discs, which of the following will be true?

Accepted Answer

A) Consumers would wish to purchase 1,000 compact discs. 
B) Producers would wish to sell 5,000 compact discs. 
C) There would be a surplus of 4,000 compact discs. 
D) All of the above are true. 
A) Consumers would wish to purchase 1,000 compact discs. 
B) Producers would wish to sell 5,000 compact discs. 
C) There would be a surplus of 4,000 compact discs. 
D) All of the above are true.

Question 8

Figure 4-21  
-Refer to Figure 4-21. The amount of the tax per unit is

Accepted Answer

A) $10. 
B) $6. 
C) $4. 
D) $2. 
A) $10. 
B) $6. 
C) $4. 
D) $2.

Question 9

Use the table below to choose the correct answer.   The marginal tax rate on income in the $20,000 to $25,000 range is

Accepted Answer

A) 10 percent. 
B) 12 percent. 
C) 20 percent. 
D) 30 percent. 
A) 10 percent. 
B) 12 percent. 
C) 20 percent. 
D) 30 percent.

Question 10

The actual benefit of a government subsidy is determined primarily by

Accepted Answer

A) the elasticities of demand and supply. 
B) the legal (or statutory) assignment of the subsidy 
C) the number of exchanges that are made possible as a result of the subsidy. 
D) whether the subsidy is paid by cash or check. 
A) the elasticities of demand and supply. 
B) the legal (or statutory) assignment of the subsidy 
C) the number of exchanges that are made possible as a result of the subsidy. 
D) whether the subsidy is paid by cash or check.

Question 11

Economists have argued that rent control is "the best way to destroy a city, other than bombing." Why would economists say this?

Accepted Answer

A) They anticipate that low rents will cause low-income people to move into the city, reducing the quality of life for other people. 
B) They anticipate that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. 
C) They anticipate that rent controls will cause a construction boom, which will make the city crowded and more polluted. 
D) They anticipate that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city. 
A) They anticipate that low rents will cause low-income people to move into the city, reducing the quality of life for other people. 
B) They anticipate that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. 
C) They anticipate that rent controls will cause a construction boom, which will make the city crowded and more polluted. 
D) They anticipate that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.

Question 12

A progressive tax

Accepted Answer

A) is one that taxes those with higher incomes at a higher rate than those with lower incomes. 
B) takes a similar percentage in the form of taxes from those with higher incomes as it does from those with lower incomes. 
C) takes a higher percentage of income in the form of taxes from those with lower incomes than from those with higher incomes. 
D) is any tax in which the dollar amount of taxes paid increases with income. 
A) is one that taxes those with higher incomes at a higher rate than those with lower incomes. 
B) takes a similar percentage in the form of taxes from those with higher incomes as it does from those with lower incomes. 
C) takes a higher percentage of income in the form of taxes from those with lower incomes than from those with higher incomes. 
D) is any tax in which the dollar amount of taxes paid increases with income.

Question 13

Suppose that a tax is placed on a particular good. If the buyers end up bearing most of the tax burden, this indicates that the

Accepted Answer

A) demand is more inelastic than the supply. 
B) supply is more inelastic than the demand. 
C) government has required that buyers remit the tax payments. 
A) demand is more inelastic than the supply. 
B) supply is more inelastic than the demand. 
C) government has required that buyers remit the tax payments.

Question 14

If a $500 tax is placed legally (statutorily) on the buyers of new couches and as a result the price of couches at stores rises by $200, the actual burden of the tax

Accepted Answer

A) falls completely on couch buyers. 
B) falls completely on couch sellers. 
C) is $200 on couch buyers and $300 on sellers. 
D) is $300 on couch buyers and $200 on sellers. 
A) falls completely on couch buyers. 
B) falls completely on couch sellers. 
C) is $200 on couch buyers and $300 on sellers. 
D) is $300 on couch buyers and $200 on sellers.

Question 15

The Laffer curve illustrates the concept that

Accepted Answer

A) an increase in marginal tax rates will always cause tax revenues to increase. 
B) an increase in marginal tax rates will always cause tax revenues to decrease. 
C) when marginal tax rates are quite high, a decrease in the tax rate may cause tax revenues to increase. 
D) when marginal taxes are quite low, an increase in the tax rate will probably cause tax revenues to decline. 
A) an increase in marginal tax rates will always cause tax revenues to increase. 
B) an increase in marginal tax rates will always cause tax revenues to decrease. 
C) when marginal tax rates are quite high, a decrease in the tax rate may cause tax revenues to increase. 
D) when marginal taxes are quite low, an increase in the tax rate will probably cause tax revenues to decline.

Question 16

A tax for which the average tax rate decreases with income is defined as a

Accepted Answer

A) regressive tax. 
B) proportional tax. 
C) neutral tax. 
D) progressive tax. 
A) regressive tax. 
B) proportional tax. 
C) neutral tax. 
D) progressive tax.

Question 17

The benefit of a subsidy will go primarily to buyers when the

Accepted Answer

A) demand for the product is highly inelastic and supply is relatively elastic. 
B) demand for the product is highly elastic and the supply is relatively inelastic. 
C) subsidy is legally (statutorily) granted to the seller of the product. 
D) subsidy is legally (statutorily) granted to the buyer of the product. 
A) demand for the product is highly inelastic and supply is relatively elastic. 
B) demand for the product is highly elastic and the supply is relatively inelastic. 
C) subsidy is legally (statutorily) granted to the seller of the product. 
D) subsidy is legally (statutorily) granted to the buyer of the product.

Question 18

The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the

Accepted Answer

A) tax revenue raised by the government as the result of the tax. 
B) loss of potential gains from trade from activities forgone because of the tax. 
C) increase in the price of an activity as the result of the tax levied on it. 
D) marginal benefits derived from the expansion in government activities made possible by the increase in tax revenues. 
A) tax revenue raised by the government as the result of the tax. 
B) loss of potential gains from trade from activities forgone because of the tax. 
C) increase in the price of an activity as the result of the tax levied on it. 
D) marginal benefits derived from the expansion in government activities made possible by the increase in tax revenues.

Question 19

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a

Accepted Answer

A) flat (elastic) demand curve and a steep (inelastic) supply curve. 
B) steep (inelastic) demand curve and a flat (elastic) supply curve. 
C) steep (inelastic) demand curve and steep (inelastic) supply curve. 
D) flat (elastic) demand curve and a flat (elastic) supply curve. 
A) flat (elastic) demand curve and a steep (inelastic) supply curve. 
B) steep (inelastic) demand curve and a flat (elastic) supply curve. 
C) steep (inelastic) demand curve and steep (inelastic) supply curve. 
D) flat (elastic) demand curve and a flat (elastic) supply curve.

Question 20

Figure 4-22  
-Refer to Figure 4-22. Buyers pay how much of the tax per unit?

Accepted Answer

A) $1.00. 
B) $1.50. 
C) $2.50. 
D) $3.00. 
A) $1.00. 
B) $1.50. 
C) $2.50. 
D) $3.00.

Figure 4-20 -Refer to Figure 4-20. The burden of the tax on sellers is

Which of the following would tend to increase the price of lumber?

If the demand for a good is highly inelastic, a tax on the good

Figure 4-23 -Refer to Figure 4-23. In which market will the tax burden be most equally divided between the buyer and the seller?

If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen?

Many economists believe a general sales tax (particularly on items such as food) takes a larger proportion of income from low-income households than from high-income households. If this is true, a general sales tax is a

Figure 4-1 -Figure 4-1 illustrates the market for compact discs. If the government imposes a price floor of $25 for compact discs, which of the following will be true?

Figure 4-21 -Refer to Figure 4-21. The amount of the tax per unit is

Use the table below to choose the correct answer. The marginal tax rate on income in the $20,000 to $25,000 range is

The actual benefit of a government subsidy is determined primarily by

Economists have argued that rent control is "the best way to destroy a city, other than bombing." Why would economists say this?

A progressive tax

Suppose that a tax is placed on a particular good. If the buyers end up bearing most of the tax burden, this indicates that the

If a $500 tax is placed legally (statutorily) on the buyers of new couches and as a result the price of couches at stores rises by $200, the actual burden of the tax

The Laffer curve illustrates the concept that

A tax for which the average tax rate decreases with income is defined as a

The benefit of a subsidy will go primarily to buyers when the

The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a

Figure 4-22 -Refer to Figure 4-22. Buyers pay how much of the tax per unit?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 4: Supply and Demand: Applications and Extensions

Figure 4-20 -Refer to Figure 4-20. The burden of the tax on sellers is

Which of the following would tend to increase the price of lumber?

If the demand for a good is highly inelastic, a tax on the good

Figure 4-23 -Refer to Figure 4-23. In which market will the tax burden be most equally divided between the buyer and the seller?

If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen?

Many economists believe a general sales tax (particularly on items such as food) takes a larger proportion of income from low-income households than from high-income households. If this is true, a general sales tax is a

Figure 4-1 -Figure 4-1 illustrates the market for compact discs. If the government imposes a price floor of $25 for compact discs, which of the following will be true?

Figure 4-21 -Refer to Figure 4-21. The amount of the tax per unit is

Use the table below to choose the correct answer. The marginal tax rate on income in the $20,000 to $25,000 range is

The actual benefit of a government subsidy is determined primarily by

Economists have argued that rent control is "the best way to destroy a city, other than bombing." Why would economists say this?

A progressive tax

Suppose that a tax is placed on a particular good. If the buyers end up bearing most of the tax burden, this indicates that the

If a $500 tax is placed legally (statutorily) on the buyers of new couches and as a result the price of couches at stores rises by $200, the actual burden of the tax

The Laffer curve illustrates the concept that

A tax for which the average tax rate decreases with income is defined as a

The benefit of a subsidy will go primarily to buyers when the

The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a

Figure 4-22 -Refer to Figure 4-22. Buyers pay how much of the tax per unit?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters