Question 1

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

Accepted Answer

A)  an increase in both the quantity of labor supplied by workers and the quantity of labor demanded by firms 
B)  an increase in the quantity of labor supplied by workers and a decrease in the quantity of labor demanded by firms 
C)  a decrease in the quantity of labor supplied by workers and an increase in the quantity of labor demanded by firms 
D)  a decrease in both the quantity of labor supplied by workers and the quantity of labor demanded by firms 
A)  an increase in both the quantity of labor supplied by workers and the quantity of labor demanded by firms 
B)  an increase in the quantity of labor supplied by workers and a decrease in the quantity of labor demanded by firms 
C)  a decrease in the quantity of labor supplied by workers and an increase in the quantity of labor demanded by firms 
D)  a decrease in both the quantity of labor supplied by workers and the quantity of labor demanded by firms

Question 2

Bill the butcher is upset because the government plans to tax beef $.10 a pound. "I hate paying taxes," he says. "Because of this, I'm raising all my beef prices by $.10 a pound. The consumers will bear this burden, not me." Do you see anything wrong with this way of thinking? Explain.

Accepted Answer

The demand for Bill's beef is probably l

Question 3

The term "deadweight loss" or "excess burden" is used to describe the

Accepted Answer

A)  expenditures on exercise and weight-reducing programs by individuals who are overweight. 
B)  loss from the elimination of mutually beneficial exchanges that results from the imposition of a tax in a market. 
C)  difference between the value consumers place on a good and the price they have to pay for it. 
D)  reduction in consumer welfare that occurs when the firms in a market make a profit. 
A)  expenditures on exercise and weight-reducing programs by individuals who are overweight. 
B)  loss from the elimination of mutually beneficial exchanges that results from the imposition of a tax in a market. 
C)  difference between the value consumers place on a good and the price they have to pay for it. 
D)  reduction in consumer welfare that occurs when the firms in a market make a profit.

Question 4

If the demand for a good is very price elastic, the imposition of a tax on that good

Accepted Answer

A)  places the largest portion of the burden on the sellers of that product 
B)  places the burden of the tax equally on buyers and sellers 
C)  places the largest portion of the tax on consumers 
D)  will make demand more elastic than it was before the tax 
E)  will make demand more inelastic than it was before the tax 
A)  places the largest portion of the burden on the sellers of that product 
B)  places the burden of the tax equally on buyers and sellers 
C)  places the largest portion of the tax on consumers 
D)  will make demand more elastic than it was before the tax 
E)  will make demand more inelastic than it was before the tax

Question 5

Figure 4-17  
-Refer to Figure 4-17. If the government imposes a price ceiling in this market at a price of $5.00, the result would be a

Accepted Answer

A)  shortage of 20 units. 
B)  shortage of 10 units. 
C)  surplus of 20 units. 
D)  surplus of 10 units. 
A)  shortage of 20 units. 
B)  shortage of 10 units. 
C)  surplus of 20 units. 
D)  surplus of 10 units.

Question 6

Use the figure below to answer the following question(s).
Figure 4-12  
-Refer to Figure 4-12. The supply curve S and the demand curve D1 indicate initial conditions in the market for college textbooks. A new government program is implemented that grants students a $30 per textbook subsidy on every textbook they purchase, shifting the demand curve from D1 to D2. Which of the following is true for this subsidy given the information provided in the exhibit?

Accepted Answer

A)  The original average selling price of textbooks was $100, and after the subsidy it rises to $120. 
B)  $90 represents the net price a buyer must pay for a textbook after taking into account the subsidy payment. 
C)  Textbook buyers will receive an actual benefit of $10 from the subsidy, while textbook sellers will receive an actual benefit of $20 from the subsidy. 
D)  All of the above are true. 
A)  The original average selling price of textbooks was $100, and after the subsidy it rises to $120. 
B)  $90 represents the net price a buyer must pay for a textbook after taking into account the subsidy payment. 
C)  Textbook buyers will receive an actual benefit of $10 from the subsidy, while textbook sellers will receive an actual benefit of $20 from the subsidy. 
D)  All of the above are true.

Question 7

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?

Accepted Answer

A)  The subsidy has been statutorily (legally) paid to sellers. 
B)  The subsidy results in a decrease in the market selling price of the good. 
C)  Sellers will receive a larger proportion of the benefit from this subsidy than buyers. 
D)  The subsidy results in a reduction in the quantity purchased. 
A)  The subsidy has been statutorily (legally) paid to sellers. 
B)  The subsidy results in a decrease in the market selling price of the good. 
C)  Sellers will receive a larger proportion of the benefit from this subsidy than buyers. 
D)  The subsidy results in a reduction in the quantity purchased.

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

The more inelastic the demand for a product, the more likely that the actual benefit of a subsidy granted on the product will

Accepted Answer

A)  go to sellers. 
B)  go to buyers. 
C)  go equally to both buyers and sellers. 
D)  do none of the above. 
A)  go to sellers. 
B)  go to buyers. 
C)  go equally to both buyers and sellers. 
D)  do none of the above.

Question 10

An increase in the demand for a product will cause the

Accepted Answer

A)  demand for and prices of the resources used to produce the product to increase. 
B)  demand for and prices of the resources used to produce the product to decrease. 
C)  demand for and prices of the resources used to produce the product to remain unchanged. 
D)  price of the product to decrease. 
A)  demand for and prices of the resources used to produce the product to increase. 
B)  demand for and prices of the resources used to produce the product to decrease. 
C)  demand for and prices of the resources used to produce the product to remain unchanged. 
D)  price of the product to decrease.

Question 11

The Laffer Curve indicates that

Accepted Answer

A)  when tax rates are high, a rate reduction may lead to an increase in tax revenue. 
B)  when tax rates are low, an increase in tax rates will generally lead to a reduction in tax revenues. 
C)  an increase in tax rates will always lead to an increase in tax revenues. 
D)  the deadweight losses resulting from taxation are small at the tax rate that maximizes the revenues derived by the government. 
A)  when tax rates are high, a rate reduction may lead to an increase in tax revenue. 
B)  when tax rates are low, an increase in tax rates will generally lead to a reduction in tax revenues. 
C)  an increase in tax rates will always lead to an increase in tax revenues. 
D)  the deadweight losses resulting from taxation are small at the tax rate that maximizes the revenues derived by the government.

Question 12

Figure 4-25  
-Refer to Figure 4-25. Consumer surplus before the tax was levied is represented by area

Accepted Answer

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

Question 13

Figure 4-21  
-Refer to Figure 4-21. How much tax revenue does this tax produce for the government?

Accepted Answer

A)  $480 
B)  $600 
C)  $800 
D)  $1,080 
A)  $480 
B)  $600 
C)  $800 
D)  $1,080

Question 14

A minimum wage that is set above a market's equilibrium wage will result in

Accepted Answer

A)  an excess demand for labor, that is, unemployment. 
B)  an excess demand for labor, that is, a shortage of workers. 
C)  an excess supply of labor, that is, unemployment. 
D)  an excess supply of labor, that is, a shortage of workers. 
A)  an excess demand for labor, that is, unemployment. 
B)  an excess demand for labor, that is, a shortage of workers. 
C)  an excess supply of labor, that is, unemployment. 
D)  an excess supply of labor, that is, a shortage of workers.

Question 15

An income tax is defined as regressive if

Accepted Answer

A)  the tax liability of those with higher incomes exceeds the tax liability of those with low incomes. 
B)  the tax liability of those with higher incomes is less than the tax liability of those with low incomes. 
C)  those with higher incomes pay a higher percentage of their incomes in taxes than those with low incomes. 
D)  those with higher incomes pay a lower percentage of their incomes in taxes than those with low incomes. 
A)  the tax liability of those with higher incomes exceeds the tax liability of those with low incomes. 
B)  the tax liability of those with higher incomes is less than the tax liability of those with low incomes. 
C)  those with higher incomes pay a higher percentage of their incomes in taxes than those with low incomes. 
D)  those with higher incomes pay a lower percentage of their incomes in taxes than those with low incomes.

Question 16

When the top marginal tax rates were lowered substantially during the 1980s, the inflation-adjusted income tax revenue collected from the top 1 percent of all income earners

Accepted Answer

A)  declined sharply. 
B)  remained approximately constant. 
C)  increased substantially. 
D)  did none of the above. 
A)  declined sharply. 
B)  remained approximately constant. 
C)  increased substantially. 
D)  did none of the above.

Question 17

Figure 4-18  
-Refer to Figure 4-18. The price of the good would continue to serve as the rationing mechanism if

Accepted Answer

A)  a price ceiling of $4.00 were imposed. 
B)  a price ceiling of $5.00 were imposed. 
C)  a price floor of $3.00 were imposed. 
D)  All of the above are correct. 
A)  a price ceiling of $4.00 were imposed. 
B)  a price ceiling of $5.00 were imposed. 
C)  a price floor of $3.00 were imposed. 
D)  All of the above are correct.

Question 18

Use the figure below to answer the following question(s).
Figure 4-8  
-Refer to Figure 4-8. The supply curve S1 and the demand curve D indicate initial conditions in the market for soft coal. A $40-per-ton tax on soft coal is levied, shifting the supply curve from S1 to S2. Which of the following states the actual burden of the tax?

Accepted Answer

A)  $10 for buyers and $30 for sellers 
B)  $30 for buyers and $10 for sellers 
C)  The entire $40 falls on sellers. 
D)  The entire $40 falls on buyers. 
A)  $10 for buyers and $30 for sellers 
B)  $30 for buyers and $10 for sellers 
C)  The entire $40 falls on sellers. 
D)  The entire $40 falls on buyers.

Question 19

A tax for which the average tax rate rises 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 20

Use the figure below to answer the following question(s).
Figure 4-10  
-Refer to Figure 4-10. The accompanying graph shows the market for a good before and after an excise tax is imposed. The total tax revenue generated is indicated by

Accepted Answer

A)  area A + area B + area D. 
B)  area A + area B + area C. 
C)  area A + area B. 
D)  area D only. 
A)  area A + area B + area D. 
B)  area A + area B + area C. 
C)  area A + area B. 
D)  area D only.

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

Bill the butcher is upset because the government plans to tax beef $.10 a pound. "I hate paying taxes," he says. "Because of this, I'm raising all my beef prices by $.10 a pound. The consumers will bear this burden, not me." Do you see anything wrong with this way of thinking? Explain.

The term "deadweight loss" or "excess burden" is used to describe the

If the demand for a good is very price elastic, the imposition of a tax on that good

Figure 4-17 -Refer to Figure 4-17. If the government imposes a price ceiling in this market at a price of $5.00, the result would be a

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?

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

The more inelastic the demand for a product, the more likely that the actual benefit of a subsidy granted on the product will

An increase in the demand for a product will cause the

The Laffer Curve indicates that

Figure 4-25 -Refer to Figure 4-25. Consumer surplus before the tax was levied is represented by area

Figure 4-21 -Refer to Figure 4-21. How much tax revenue does this tax produce for the government?

A minimum wage that is set above a market's equilibrium wage will result in

An income tax is defined as regressive if

When the top marginal tax rates were lowered substantially during the 1980s, the inflation-adjusted income tax revenue collected from the top 1 percent of all income earners

Figure 4-18 -Refer to Figure 4-18. The price of the good would continue to serve as the rationing mechanism if

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

Use the figure below to answer the following question(s). Figure 4-10 -Refer to Figure 4-10. The accompanying graph shows the market for a good before and after an excise tax is imposed. The total tax revenue generated is indicated by

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

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

Bill the butcher is upset because the government plans to tax beef $.10 a pound. "I hate paying taxes," he says. "Because of this, I'm raising all my beef prices by $.10 a pound. The consumers will bear this burden, not me." Do you see anything wrong with this way of thinking? Explain.

The term "deadweight loss" or "excess burden" is used to describe the

If the demand for a good is very price elastic, the imposition of a tax on that good

Figure 4-17 -Refer to Figure 4-17. If the government imposes a price ceiling in this market at a price of $5.00, the result would be a

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?

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

The more inelastic the demand for a product, the more likely that the actual benefit of a subsidy granted on the product will

An increase in the demand for a product will cause the

The Laffer Curve indicates that

Figure 4-25 -Refer to Figure 4-25. Consumer surplus before the tax was levied is represented by area

Figure 4-21 -Refer to Figure 4-21. How much tax revenue does this tax produce for the government?

A minimum wage that is set above a market's equilibrium wage will result in

An income tax is defined as regressive if

When the top marginal tax rates were lowered substantially during the 1980s, the inflation-adjusted income tax revenue collected from the top 1 percent of all income earners

Figure 4-18 -Refer to Figure 4-18. The price of the good would continue to serve as the rationing mechanism if

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

Use the figure below to answer the following question(s). Figure 4-10 -Refer to Figure 4-10. The accompanying graph shows the market for a good before and after an excise tax is imposed. The total tax revenue generated is indicated by

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