Question 1

After the ban on the production and sale of alcohol ended in 1933,

Accepted Answer

A)  the quality of alcohol sold declined. 
B)  the murder rate declined. 
C)  the profit rate for bootleg sellers of alcohol increased. 
D)  all of the above occurred. 
A)  the quality of alcohol sold declined. 
B)  the murder rate declined. 
C)  the profit rate for bootleg sellers of alcohol increased. 
D)  all of the above occurred. B

Question 2

A subsidy on a product will generate more actual benefit for consumers (and less for producers) when

Accepted Answer

A)  the supply of the product is relatively inelastic. 
B)  the supply of the product is relatively elastic. 
C)  the demand for the product is relatively elastic. 
D)  either a or c is true. 
A)  the supply of the product is relatively inelastic. 
B)  the supply of the product is relatively elastic. 
C)  the demand for the product is relatively elastic. 
D)  either a or c is true. B

Question 3

Figure 4-22  
-Refer to Figure 4-22. The price paid by buyers after the tax is imposed is

Accepted Answer

A)  $1.00. 
B)  $3.50. 
C)  $5.00. 
D)  $6.00. 
A)  $1.00. 
B)  $3.50. 
C)  $5.00. 
D)  $6.00. D

Question 4

Use the figure below to answer the following question(s).
Figure 4-7  
-Refer to Figure 4-7. The supply curve S1 and the demand curve D indicate initial conditions in the market for gasoline. A $.60-per-gallon excise tax on gasoline is levied, which shifts the supply curve from S1 to S2. Which of the following states the actual burden of the tax?

Accepted Answer

A)  $.50 for buyers and $.10 for sellers 
B)  $.50 for sellers and $.10 for buyers 
C)  The entire $.60 falls on sellers. 
D)  The entire $.60 falls on buyers. 
A)  $.50 for buyers and $.10 for sellers 
B)  $.50 for sellers and $.10 for buyers 
C)  The entire $.60 falls on sellers. 
D)  The entire $.60 falls on buyers.

Question 5

Use the figure below to answer the following question(s).
Figure 4-8  
-Refer to Figure 4-8. Which of the following is true?

Accepted Answer

A)  The tax increases the price of soft coal by $40 per ton. 
B)  Since the demand for soft coal is more inelastic than the supply, consumers bear most of the burden of the tax. 
C)  Since the demand for soft coal is more elastic than the supply, suppliers of soft coal bear most of the burden of the tax. 
D)  Since the supply of soft coal is highly inelastic, the primary burden of the tax is imposed on the consumers of soft coal. 
A)  The tax increases the price of soft coal by $40 per ton. 
B)  Since the demand for soft coal is more inelastic than the supply, consumers bear most of the burden of the tax. 
C)  Since the demand for soft coal is more elastic than the supply, suppliers of soft coal bear most of the burden of the tax. 
D)  Since the supply of soft coal is highly inelastic, the primary burden of the tax is imposed on the consumers of soft coal.

Question 6

When a price floor is imposed above the equilibrium price of a commodity,

Accepted Answer

A)  quantity demanded will be greater than quantity supplied for the good. 
B)  the quantity demanded by consumers will be greater than at the equilibrium price. 
C)  a shortage of the good will develop. 
D)  a surplus of the good will develop. 
A)  quantity demanded will be greater than quantity supplied for the good. 
B)  the quantity demanded by consumers will be greater than at the equilibrium price. 
C)  a shortage of the good will develop. 
D)  a surplus of the good will develop.

Question 7

Figure 4-20  
-Refer to Figure 4-20. The burden of the tax on buyers 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 8

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 9

Other things constant, if a labor union is able to successfully increase the wages of autoworkers, there will be

Accepted Answer

A)  an increase in the supply of automobiles causing the price of automobiles to fall. 
B)  an increase in the supply of automobiles causing the price of automobiles to rise. 
C)  a decrease in the supply of automobiles causing the price of automobiles to fall. 
D)  a decrease in the supply of automobiles causing the price of automobiles to rise. 
A)  an increase in the supply of automobiles causing the price of automobiles to fall. 
B)  an increase in the supply of automobiles causing the price of automobiles to rise. 
C)  a decrease in the supply of automobiles causing the price of automobiles to fall. 
D)  a decrease in the supply of automobiles causing the price of automobiles to rise.

Question 10

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 11

Figure 4-18  
-Refer to Figure 4-18. In this market, which of the following price controls would be binding?

Accepted Answer

A)  a price ceiling of $2.00, and it would cause a shortage 
B)  a price ceiling of $5.00, and it would cause a surplus 
C)  a price floor of $2.00, and it would cause a shortage 
D)  All of the above are correct. 
A)  a price ceiling of $2.00, and it would cause a shortage 
B)  a price ceiling of $5.00, and it would cause a surplus 
C)  a price floor of $2.00, and it would cause a shortage 
D)  All of the above are correct.

Question 12

John Maynard Keynes and Friedrich Hayek

Accepted Answer

A)  had similar views with regard to the cause of the Great Depression and what might be done to prevent it from happening again. 
B)  both believed that perverse monetary policy was the primary cause of the ups and downs of the business cycle. 
C)  both believed that budget deficits and surpluses could be used to smooth the ups and downs of the business cycle. 
D)  had polar opposite views with regard to the underlying causes of economic booms and bust, but nonetheless their scholarly work commanded widespread respect among economists. 
A)  had similar views with regard to the cause of the Great Depression and what might be done to prevent it from happening again. 
B)  both believed that perverse monetary policy was the primary cause of the ups and downs of the business cycle. 
C)  both believed that budget deficits and surpluses could be used to smooth the ups and downs of the business cycle. 
D)  had polar opposite views with regard to the underlying causes of economic booms and bust, but nonetheless their scholarly work commanded widespread respect among economists.

Question 13

Figure 4-24  
-Refer to Figure 4-24. The equilibrium price before the tax is imposed is

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  None of the above is correct. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  None of the above is correct.

Question 14

Which of the following generalizations about the burden of an excise tax is correct?

Accepted Answer

A)  The more inelastic the supply of a product, the larger the portion of an excise tax will be paid by buyers. 
B)  The more inelastic the demand for a product, the larger the portion of an excise tax will be paid by buyers. 
C)  The more elastic the supply of a product, the smaller the portion of an excise tax will be paid by buyers. 
D)  The burden of an excise tax on a product is independent of the elasticity of the supply and demand for the product on which the tax is levied. 
A)  The more inelastic the supply of a product, the larger the portion of an excise tax will be paid by buyers. 
B)  The more inelastic the demand for a product, the larger the portion of an excise tax will be paid by buyers. 
C)  The more elastic the supply of a product, the smaller the portion of an excise tax will be paid by buyers. 
D)  The burden of an excise tax on a product is independent of the elasticity of the supply and demand for the product on which the tax is levied.

Question 15

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

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) demand 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) demand curve. 
D)  flat (elastic) demand curve and a flat (elastic) supply curve.

Question 16

Rent controls tend to cause persistent imbalances in the market for housing because

Accepted Answer

A)  Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B)  Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C)  Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D)  Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus. 
A)  Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B)  Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C)  Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D)  Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Question 17

When a price ceiling is imposed below the equilibrium price of a commodity,

Accepted Answer

A)  quantity supplied will be greater than quantity demanded for the good. 
B)  the problem of scarcity will be solved. 
C)  a shortage of the good will develop. 
D)  a surplus of the good will develop. 
A)  quantity supplied will be greater than quantity demanded for the good. 
B)  the problem of scarcity will be solved. 
C)  a shortage of the good will develop. 
D)  a surplus of the good will develop.

Question 18

A black market is

Accepted Answer

A)  a market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices. 
B)  a market where goods and services can be obtained at lower prices. 
C)  a government-mandated market where controls are placed on prices. 
D)  a market where exchanges are made using bartering. 
A)  a market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices. 
B)  a market where goods and services can be obtained at lower prices. 
C)  a government-mandated market where controls are placed on prices. 
D)  a market where exchanges are made using bartering.

Question 19

Price controls will tend to cause misallocation of resources because

Accepted Answer

A)  production (or opportunity) cost no longer corresponds to market price. 
B)  people are unable to determine their preferences at the high or low price. 
C)  producers no longer have incentive to be profitable. 
D)  consumers no longer have incentive to spend their income efficiently. 
A)  production (or opportunity) cost no longer corresponds to market price. 
B)  people are unable to determine their preferences at the high or low price. 
C)  producers no longer have incentive to be profitable. 
D)  consumers no longer have incentive to spend their income efficiently.

Question 20

Figure 4-22  
-Refer to Figure 4-22. The effective price sellers receive after the tax is imposed is

Accepted Answer

A)  $1.00. 
B)  $3.50. 
C)  $5.00. 
D)  $6.00. 
A)  $1.00. 
B)  $3.50. 
C)  $5.00. 
D)  $6.00.

After the ban on the production and sale of alcohol ended in 1933,

A subsidy on a product will generate more actual benefit for consumers (and less for producers) when

Figure 4-22 -Refer to Figure 4-22. The price paid by buyers after the tax is imposed is

Use the figure below to answer the following question(s). Figure 4-8 -Refer to Figure 4-8. Which of the following is true?

When a price floor is imposed above the equilibrium price of a commodity,

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

The Laffer curve illustrates the concept that

Other things constant, if a labor union is able to successfully increase the wages of autoworkers, there will be

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

Figure 4-18 -Refer to Figure 4-18. In this market, which of the following price controls would be binding?

John Maynard Keynes and Friedrich Hayek

Figure 4-24 -Refer to Figure 4-24. The equilibrium price before the tax is imposed is

Which of the following generalizations about the burden of an excise tax is correct?

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

Rent controls tend to cause persistent imbalances in the market for housing because

When a price ceiling is imposed below the equilibrium price of a commodity,

A black market is

Price controls will tend to cause misallocation of resources because

Figure 4-22 -Refer to Figure 4-22. The effective price sellers receive after the tax is imposed is

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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 4: Supply and Demand: Applications and Extensions

After the ban on the production and sale of alcohol ended in 1933,

A subsidy on a product will generate more actual benefit for consumers (and less for producers) when

Figure 4-22 -Refer to Figure 4-22. The price paid by buyers after the tax is imposed is

Use the figure below to answer the following question(s). Figure 4-8 -Refer to Figure 4-8. Which of the following is true?

When a price floor is imposed above the equilibrium price of a commodity,

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

The Laffer curve illustrates the concept that

Other things constant, if a labor union is able to successfully increase the wages of autoworkers, there will be

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

Figure 4-18 -Refer to Figure 4-18. In this market, which of the following price controls would be binding?

John Maynard Keynes and Friedrich Hayek

Figure 4-24 -Refer to Figure 4-24. The equilibrium price before the tax is imposed is

Which of the following generalizations about the burden of an excise tax is correct?

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

Rent controls tend to cause persistent imbalances in the market for housing because

When a price ceiling is imposed below the equilibrium price of a commodity,

A black market is

Price controls will tend to cause misallocation of resources because

Figure 4-22 -Refer to Figure 4-22. The effective price sellers receive after the tax is imposed is

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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters