Question 1

Suppose the United Auto Workers union obtains a substantial wage increase for auto workers. How will this affect the market for automobiles?

Accepted Answer

The higher wages will shift th

Question 2

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 3

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, the resulting quantity of gasoline that is bought and sold is

Accepted Answer

A)  less than Q3. 
B)  Q3 
C)  between Q1 and Q3. 
D)  at least Q1. 
A)  less than Q3. 
B)  Q3 
C)  between Q1 and Q3. 
D)  at least Q1.

Question 4

The large amount of violence associated with the current drug trade is mostly caused by

Accepted Answer

A)  the fact that drug markets must operate outside the normal legal system. 
B)  buyers and sellers often being under the influence of drugs at the time of the transaction. 
C)  buyers and sellers who are often unfamiliar with conducting normal transactions within the legal system. 
D)  the lack of quantity supplied and quantity demand being in balance in black markets because there is no equilibrium price in these markets. 
A)  the fact that drug markets must operate outside the normal legal system. 
B)  buyers and sellers often being under the influence of drugs at the time of the transaction. 
C)  buyers and sellers who are often unfamiliar with conducting normal transactions within the legal system. 
D)  the lack of quantity supplied and quantity demand being in balance in black markets because there is no equilibrium price in these markets.

Question 5

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

Accepted Answer

A)  the market price of the product will fall in response to the subsidy. 
B)  the market price of the product will rise in response to the subsidy. 
C)  the market price of the product will not change in response to the subsidy. 
D)  producers will reduce the supply of the product. 
A)  the market price of the product will fall in response to the subsidy. 
B)  the market price of the product will rise in response to the subsidy. 
C)  the market price of the product will not change in response to the subsidy. 
D)  producers will reduce the supply of the product.

Question 6

Ava states, "If raising the minimum wage to $10 an hour is good, like Senator Largess suggests, then raising it to $20 an hour would be twice as good." Is Ava correct? Why or why not?

Accepted Answer

The minimum wage is a price floor that c

Question 7

When a shortage of a good is present due to a price ceiling,

Accepted Answer

A)  the amount supplied will be greater than the amount demanded. 
B)  the quality of the good will generally improve. 
C)  non-price factors, such as discrimination or waiting in line, will play a greater role in the allocation of the good. 
D)  the demand for the product will increase and, thereby, eliminate the shortage. 
A)  the amount supplied will be greater than the amount demanded. 
B)  the quality of the good will generally improve. 
C)  non-price factors, such as discrimination or waiting in line, will play a greater role in the allocation of the good. 
D)  the demand for the product will increase and, thereby, eliminate the shortage.

Question 8

The presence of price controls in a market usually is an indication that

Accepted Answer

A)  an insufficient quantity of a good or service was being produced in that market to meet the public's need. 
B)  the usual forces of supply and demand were not able to establish an equilibrium price in that market. 
C)  policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. 
D)  policymakers correctly believed that, in that market, price controls would generate no inequities of their own. 
A)  an insufficient quantity of a good or service was being produced in that market to meet the public's need. 
B)  the usual forces of supply and demand were not able to establish an equilibrium price in that market. 
C)  policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. 
D)  policymakers correctly believed that, in that market, price controls would generate no inequities of their own.

Question 9

An effective minimum wage

Accepted Answer

A)  imposes a price ceiling on the wages of various categories of low-skill workers. 
B)  increases the demand for low-skill workers. 
C)  makes it easier for low skill workers to find jobs. 
D)  increases the earnings of some low-skill workers while reducing the employment and training opportunities available to others. 
A)  imposes a price ceiling on the wages of various categories of low-skill workers. 
B)  increases the demand for low-skill workers. 
C)  makes it easier for low skill workers to find jobs. 
D)  increases the earnings of some low-skill workers while reducing the employment and training opportunities available to others.

Question 10

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

Accepted Answer

A)  P3 − P1. 
B)  P3 − P2. 
C)  P2 − P1. 
D)  Q2 − Q1. 
A)  P3 − P1. 
B)  P3 − P2. 
C)  P2 − P1. 
D)  Q2 − Q1.

Question 11

Figure 4-14  
-Figure 4-14 depicts the milk market. The horizontal line, P, represents a price ceiling imposed by the government. Which of the following is true?

Accepted Answer

A)  In equilibrium, the quantity demanded is 800 gallons. 
B)  At the ceiling price, there is a surplus. 
C)  The quantity demanded at the price ceiling will equal the quantity supplied. 
D)  The equilibrium price would be $1 per unit without the price ceiling. 
E)  The quantity sold will be 500 gallons. 
A)  In equilibrium, the quantity demanded is 800 gallons. 
B)  At the ceiling price, there is a surplus. 
C)  The quantity demanded at the price ceiling will equal the quantity supplied. 
D)  The equilibrium price would be $1 per unit without the price ceiling. 
E)  The quantity sold will be 500 gallons.

Question 12

If Aisha were to get a $3,000 bonus from her employer, which of the following tax rates would most accurately reflect the percent of this additional income that she would owe in taxes?

Accepted Answer

A)  her marginal tax rate 
B)  her average tax rate 
C)  her progressive tax coefficient 
D)  the rate of excess burden 
A)  her marginal tax rate 
B)  her average tax rate 
C)  her progressive tax coefficient 
D)  the rate of excess burden

Question 13

An income tax is progressive if the

Accepted Answer

A)  tax rate decreases as income increases. 
B)  percentage of income paid in taxes increases as income increases. 
C)  percentage of income paid in taxes stays the same regardless of the size of income. 
D)  dollar amount paid in taxes increases with income. 
A)  tax rate decreases as income increases. 
B)  percentage of income paid in taxes increases as income increases. 
C)  percentage of income paid in taxes stays the same regardless of the size of income. 
D)  dollar amount paid in taxes increases with income.

Question 14

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

Accepted Answer

A)  gray market. 
B)  resource market. 
C)  black market. 
D)  criminal market. 
A)  gray market. 
B)  resource market. 
C)  black market. 
D)  criminal market.

Question 15

An income tax is proportional if

Accepted Answer

A)  the tax liability of high-income earners exceeds the tax liability of those with low incomes. 
B)  the tax liability of high-income earners is less than the tax liability of those with low incomes. 
C)  high-income earners pay a higher percentage of their incomes in taxes than those with low incomes. 
D)  everyone pays the same percentage of their income in the form of income taxes. 
A)  the tax liability of high-income earners exceeds the tax liability of those with low incomes. 
B)  the tax liability of high-income earners is less than the tax liability of those with low incomes. 
C)  high-income earners pay a higher percentage of their incomes in taxes than those with low incomes. 
D)  everyone pays the same percentage of their income in the form of income taxes.

Question 16

When a price floor is above the equilibrium price,

Accepted Answer

A)  quantity demanded will exceed quantity supplied, so there will be a shortage. 
B)  quantity supplied will exceed quantity demanded, so there will be a surplus. 
C)  the market will be in equilibrium. 
D)  This is a trick question because price floors are generally set below the equilibrium price. 
A)  quantity demanded will exceed quantity supplied, so there will be a shortage. 
B)  quantity supplied will exceed quantity demanded, so there will be a surplus. 
C)  the market will be in equilibrium. 
D)  This is a trick question because price floors are generally set below the equilibrium price.

Question 17

Taxes adversely affect the allocation of resources because

Accepted Answer

A)  they do not always fall more heavily on the rich than on the poor. 
B)  the taxes collected are not enough to finance government spending. 
C)  not everyone pays taxes. 
D)  they distort prices and thus distort the decisions of households and firms. 
A)  they do not always fall more heavily on the rich than on the poor. 
B)  the taxes collected are not enough to finance government spending. 
C)  not everyone pays taxes. 
D)  they distort prices and thus distort the decisions of households and firms.

Question 18

Figure 4-25  
-Refer to Figure 4-25. The tax causes a reduction in consumer surplus that is represented by area

Accepted Answer

A)  A. 
B)  B + C. 
C)  D + E. 
D)  F. 
A)  A. 
B)  B + C. 
C)  D + E. 
D)  F.

Question 19

If political officials want to minimize the excess burden accompanying a tax, they should set the tax at a rate

Accepted Answer

A)  that will maximize the revenue derived from the tax. 
B)  slightly above the rate that will maximize the revenue derived from the tax. 
C)  well below the rate that will maximize the revenue derived from the tax. 
D)  that is the highest that could possibly be imposed. 
A)  that will maximize the revenue derived from the tax. 
B)  slightly above the rate that will maximize the revenue derived from the tax. 
C)  well below the rate that will maximize the revenue derived from the tax. 
D)  that is the highest that could possibly be imposed.

Question 20

If the federal government began granting a subsidy of 10 cents per apple to apple growers and as a result the price of apples to consumers falls by 8 cents,

Accepted Answer

A)  the actual benefit of this subsidy goes mostly to consumers. 
B)  the actual benefit of this subsidy goes mostly to producers. 
C)  the actual benefit of this subsidy would be shared equally by producers and consumers. 
D)  nobody would benefit from the subsidy. 
A)  the actual benefit of this subsidy goes mostly to consumers. 
B)  the actual benefit of this subsidy goes mostly to producers. 
C)  the actual benefit of this subsidy would be shared equally by producers and consumers. 
D)  nobody would benefit from the subsidy.

Suppose the United Auto Workers union obtains a substantial wage increase for auto workers. How will this affect the market for automobiles?

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

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, the resulting quantity of gasoline that is bought and sold is

The large amount of violence associated with the current drug trade is mostly caused by

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

Ava states, "If raising the minimum wage to $10 an hour is good, like Senator Largess suggests, then raising it to $20 an hour would be twice as good." Is Ava correct? Why or why not?

When a shortage of a good is present due to a price ceiling,

The presence of price controls in a market usually is an indication that

An effective minimum wage

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

Figure 4-14 -Figure 4-14 depicts the milk market. The horizontal line, P, represents a price ceiling imposed by the government. Which of the following is true?

If Aisha were to get a $3,000 bonus from her employer, which of the following tax rates would most accurately reflect the percent of this additional income that she would owe in taxes?

An income tax is progressive if the

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

An income tax is proportional if

When a price floor is above the equilibrium price,

Taxes adversely affect the allocation of resources because

Figure 4-25 -Refer to Figure 4-25. The tax causes a reduction in consumer surplus that is represented by area

If political officials want to minimize the excess burden accompanying a tax, they should set the tax at a rate

If the federal government began granting a subsidy of 10 cents per apple to apple growers and as a result the price of apples to consumers falls by 8 cents,

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

Suppose the United Auto Workers union obtains a substantial wage increase for auto workers. How will this affect the market for automobiles?

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

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, the resulting quantity of gasoline that is bought and sold is

The large amount of violence associated with the current drug trade is mostly caused by

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

Ava states, "If raising the minimum wage to $10 an hour is good, like Senator Largess suggests, then raising it to $20 an hour would be twice as good." Is Ava correct? Why or why not?

When a shortage of a good is present due to a price ceiling,

The presence of price controls in a market usually is an indication that

An effective minimum wage

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

Figure 4-14 -Figure 4-14 depicts the milk market. The horizontal line, P, represents a price ceiling imposed by the government. Which of the following is true?

If Aisha were to get a $3,000 bonus from her employer, which of the following tax rates would most accurately reflect the percent of this additional income that she would owe in taxes?

An income tax is progressive if the

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

An income tax is proportional if

When a price floor is above the equilibrium price,

Taxes adversely affect the allocation of resources because

Figure 4-25 -Refer to Figure 4-25. The tax causes a reduction in consumer surplus that is represented by area

If political officials want to minimize the excess burden accompanying a tax, they should set the tax at a rate

If the federal government began granting a subsidy of 10 cents per apple to apple growers and as a result the price of apples to consumers falls by 8 cents,

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

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, the resulting quantity of gasoline that is bought and sold is