Exam 4: Supply and Demand: Applications and Extensions

In 2010 the federal government reduced the Social Security tax withholding rate from 12.4 percent (6.2 percent on both the employer and employee) to 8.4 percent (4.2 percent on both the employer and employee) on the wages of all workers. If the tax were redefined such that the entire 12.4 percent was statutorily levied on employers, economic analysis suggests that the actual burden of the tax would

Use the figure below to answer the following question(s). Figure 4-4 -Given the demand and supply conditions shown in Figure 4-4, if the government imposes a price ceiling of a, which of the following would be true?

Figure 4-15 -In Figure 4-15, suppose a price floor is established at $20.00. What is the result?

The City of Greenville needs to raise revenue. Alderman Black has proposed a $10 tax on red cars in the city, currently numbering 2,000. Mayor White, who wants more than $20,000 in revenue, proposes taxing these cars at $100 each. Councilwoman Bluestone goes even farther, suggesting a $1,000 per red car tax, arguing that her proposal will raise $2 million. If maximizing tax revenue is the only consideration, which proposal should pass? Why?

According to the Laffer curve,

Figure 4-19 -Refer to Figure 4-19. When the price ceiling applies in this market and the supply curve for gasoline shifts from S₁ to S₂,

Use the figure below to answer the following question(s). Figure 4-13 -Refer to Figure 4-13. The exhibit illustrates the impact of granting a subsidy on a particular good. Which of the following is true for this subsidy given the information provided in the exhibit?

Under rent control, tenants can expect

Lowincomesville is a poor town. The mayor has decided to impose a law to cut all rental rates on apartments in half and to fix them at this level. Will this help the poor? Why or why not? Be sure to distinguish between the short run and the long run.

Emma works full time during the day as an economist and faces a 90 percent marginal tax rate. If Emma were to get an offer to work a second job in the evenings doing consulting work for a local business for $10,000 per year, how much of this additional income would she be able to keep as net pay after taxes?

Figure 4-24 -Refer to Figure 4-24. The per-unit burden of the tax on sellers is

Figure 4-21 -Refer to Figure 4-21. The price paid by buyers after the tax is imposed is

When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because

A market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices is referred to in economics as a

Figure 4-20 -Refer to Figure 4-20. Suppose the same S and D curves apply, and a tax of the same amount per unit as shown here is imposed. Now, however, the sellers of the good, rather than the buyers, are required to pay the tax to the government. Now, relative to the case depicted in the figure,

If Jayla's tax liability increases from $10,000 to $16,000 when her income increases from $30,000 to $40,000, her marginal tax rate is

Suppose that the minimum wage was increased to $10 per hour. Which of the following would be most likely to result from the minimum wage increase?

Which of the following is the most likely outcome of minimum wage laws?

An income tax is proportional if

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