Question 1

Figure 4-24  
-Refer to Figure 4-24. The per-unit burden of the tax on sellers 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 2

Which of the following about minimum wage is true?

Accepted Answer

A)  Most minimum wage workers are employed more than 40 hours per week. 
B)  Economic analysis indicates an increase in the minimum wage would increase the training opportunities available to inexperienced workers. 
C)  Most minimum wage workers are heads of families with incomes below the poverty level. 
D)  Most minimum wage workers are employed part-time, and they are often members of a household with an income well above the poverty level. 
A)  Most minimum wage workers are employed more than 40 hours per week. 
B)  Economic analysis indicates an increase in the minimum wage would increase the training opportunities available to inexperienced workers. 
C)  Most minimum wage workers are heads of families with incomes below the poverty level. 
D)  Most minimum wage workers are employed part-time, and they are often members of a household with an income well above the poverty level.

Question 3

Figure 4-18  
-Refer to Figure 4-18. If the government imposes a price ceiling of $2.00 in this market, the result is a

Accepted Answer

A)  surplus of 30 units of the good. 
B)  shortage of 20 units of the good. 
C)  shortage of 30 units of the good. 
D)  shortage of 50 units of the good. 
A)  surplus of 30 units of the good. 
B)  shortage of 20 units of the good. 
C)  shortage of 30 units of the good. 
D)  shortage of 50 units of the good.

Question 4

Figure 4-25  
-Refer to Figure 4-25. After the tax is levied, consumer surplus 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 5

The market pricing system corrects an excess supply by

Accepted Answer

A)  raising the product price and increasing producer profits. 
B)  lowering the product price and decreasing producer profits. 
C)  raising the product price and decreasing producer profits. 
D)  lowering the product price and increasing producer profits. 
A)  raising the product price and increasing producer profits. 
B)  lowering the product price and decreasing producer profits. 
C)  raising the product price and decreasing producer profits. 
D)  lowering the product price and increasing producer profits.

Question 6

Use the table below to choose the correct answer.  
The marginal tax rate on income in the $25,000 to $30,000 range is

Accepted Answer

A)  10 percent. 
B)  20 percent. 
C)  50 percent. 
D)  70 percent. 
A)  10 percent. 
B)  20 percent. 
C)  50 percent. 
D)  70 percent.

Question 7

A proportional tax is defined as a tax for which the

Accepted Answer

A)  average tax rate rises as income increases. 
B)  average tax rate falls as income increases. 
C)  average tax rate remains constant at all levels of income. 
D)  dollar tax liability of those with higher income is the same as the dollar tax liability of those with lower income. 
A)  average tax rate rises as income increases. 
B)  average tax rate falls as income increases. 
C)  average tax rate remains constant at all levels of income. 
D)  dollar tax liability of those with higher income is the same as the dollar tax liability of those with lower income.

Question 8

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?

Accepted Answer

A)  an increase in the demand for accountants 
B)  an increase in the employment of accountants 
C)  a decrease in the wage rate of accountants 
D)  an increase in the number of students choosing to major in accounting 
A)  an increase in the demand for accountants 
B)  an increase in the employment of accountants 
C)  a decrease in the wage rate of accountants 
D)  an increase in the number of students choosing to major in accounting

Question 9

Suppose that the federal government grants a 50 cent per gallon subsidy to buyers of gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the benefit of the subsidy

Accepted Answer

A)  will go primarily to producers. 
B)  will go primarily to consumers. 
C)  will be split equally between consumers and producers. 
D)  cannot be determined because the actual benefit of a subsidy is not influenced by the elasticities of supply and demand. 
A)  will go primarily to producers. 
B)  will go primarily to consumers. 
C)  will be split equally between consumers and producers. 
D)  cannot be determined because the actual benefit of a subsidy is not influenced by the elasticities of supply and demand.

Question 10

If a government price control succeeds in affecting price, it can be expected to lead to a corresponding

Accepted Answer

A)  decrease in the quantity of sales only if the price is forced down. 
B)  decrease in the quantity of sales if the price is forced down and an increase in the volume of sales if the price is forced up. 
C)  decrease in the quantity of sales whether the price is forced up or down. 
D)  increase in the quantity of sales whether the price is forced up or down. 
A)  decrease in the quantity of sales only if the price is forced down. 
B)  decrease in the quantity of sales if the price is forced down and an increase in the volume of sales if the price is forced up. 
C)  decrease in the quantity of sales whether the price is forced up or down. 
D)  increase in the quantity of sales whether the price is forced up or down.

Question 11

Figure 4-25  
-Refer to Figure 4-25. The price that sellers receive after the tax is imposed is

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  impossible to determine from the figure. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  impossible to determine from the figure.

Question 12

In the supply and demand model, a subsidy granted to sellers is illustrated by

Accepted Answer

A)  a downward shift in the demand curve, by the per unit amount of the subsidy. 
B)  an upward shift in the demand curve, by the per unit amount of the subsidy. 
C)  a downward shift in the supply curve, by the per unit amount of the subsidy. 
D)  an upward shift in the supply curve, by the per unit amount of the subsidy. 
A)  a downward shift in the demand curve, by the per unit amount of the subsidy. 
B)  an upward shift in the demand curve, by the per unit amount of the subsidy. 
C)  a downward shift in the supply curve, by the per unit amount of the subsidy. 
D)  an upward shift in the supply curve, by the per unit amount of the subsidy.

Question 13

The Laffer curve indicates that

Accepted Answer

A)  when tax rates are low, a decrease in tax rates is likely to increase tax revenues. 
B)  when tax rates are high, an increase in tax rates is likely to a decrease in tax revenues. 
C)  tax revenue will always increase when tax rates are increased. 
D)  tax revenue will always decrease when tax rates are lowered. 
A)  when tax rates are low, a decrease in tax rates is likely to increase tax revenues. 
B)  when tax rates are high, an increase in tax rates is likely to a decrease in tax revenues. 
C)  tax revenue will always increase when tax rates are increased. 
D)  tax revenue will always decrease when tax rates are lowered.

Question 14

Taxes create deadweight losses because they

Accepted Answer

A)  reduce profits of firms. 
B)  distort incentives. 
C)  cause prices to rise. 
D)  create revenue for the government. 
A)  reduce profits of firms. 
B)  distort incentives. 
C)  cause prices to rise. 
D)  create revenue for the government.

Question 15

Figure 4-14  
-In Figure 4-14, which of the following is true at the price ceiling, P?

Accepted Answer

A)  The excess quantity supplied equals 300 gallons. 
B)  The excess quantity demanded equals 300 gallons. 
C)  The excess quantity supplied equals 500 gallons. 
D)  The excess quantity demanded equals 800 gallons. 
E)  Sales will be equal to 800 gallons. 
A)  The excess quantity supplied equals 300 gallons. 
B)  The excess quantity demanded equals 300 gallons. 
C)  The excess quantity supplied equals 500 gallons. 
D)  The excess quantity demanded equals 800 gallons. 
E)  Sales will be equal to 800 gallons.

Question 16

If a household has $40,000 in taxable income and its tax liability is $4,000, the household's average tax rate is

Accepted Answer

A)  10 percent. 
B)  25 percent. 
C)  40 percent. 
D)  50 percent 
A)  10 percent. 
B)  25 percent. 
C)  40 percent. 
D)  50 percent

Question 17

Other things constant, as the price of a resource increases,

Accepted Answer

A)  the quantity of the resource demanded falls. 
B)  the quantity of the resource supplied falls. 
C)  the price of the product the resource helps to produce falls. 
D)  there is less of an incentive for users of the resource to find substitute resources. 
A)  the quantity of the resource demanded falls. 
B)  the quantity of the resource supplied falls. 
C)  the price of the product the resource helps to produce falls. 
D)  there is less of an incentive for users of the resource to find substitute resources.

Question 18

The more elastic the supply of a product, the more likely that the actual benefit of a subsidy granted of 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 19

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. How much revenue does the $.60-per-gallon tax generate for the government?

Accepted Answer

A)  $40 billion 
B)  $48 billion 
C)  $50 billion 
D)  $60 billion 
A)  $40 billion 
B)  $48 billion 
C)  $50 billion 
D)  $60 billion

Question 20

Figure 4-22  
-Refer to Figure 4-22. The amount of the tax per unit is

Accepted Answer

A)  $1.00. 
B)  $1.50. 
C)  $2.50. 
D)  $3.50. 
A)  $1.00. 
B)  $1.50. 
C)  $2.50. 
D)  $3.50.

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

Which of the following about minimum wage is true?

Figure 4-18 -Refer to Figure 4-18. If the government imposes a price ceiling of $2.00 in this market, the result is a

Figure 4-25 -Refer to Figure 4-25. After the tax is levied, consumer surplus is represented by area

The market pricing system corrects an excess supply by

Use the table below to choose the correct answer. The marginal tax rate on income in the $25,000 to $30,000 range is

A proportional tax is defined as a tax for which the

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?

Suppose that the federal government grants a 50 cent per gallon subsidy to buyers of gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the benefit of the subsidy

If a government price control succeeds in affecting price, it can be expected to lead to a corresponding

Figure 4-25 -Refer to Figure 4-25. The price that sellers receive after the tax is imposed is

In the supply and demand model, a subsidy granted to sellers is illustrated by

The Laffer curve indicates that

Taxes create deadweight losses because they

Figure 4-14 -In Figure 4-14, which of the following is true at the price ceiling, P?

If a household has $40,000 in taxable income and its tax liability is $4,000, the household's average tax rate is

Other things constant, as the price of a resource increases,

The more elastic the supply of a product, the more likely that the actual benefit of a subsidy granted of the product will

Figure 4-22 -Refer to Figure 4-22. The amount of the tax per unit 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

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

Which of the following about minimum wage is true?

Figure 4-18 -Refer to Figure 4-18. If the government imposes a price ceiling of $2.00 in this market, the result is a

Figure 4-25 -Refer to Figure 4-25. After the tax is levied, consumer surplus is represented by area

The market pricing system corrects an excess supply by

Use the table below to choose the correct answer. The marginal tax rate on income in the $25,000 to $30,000 range is

A proportional tax is defined as a tax for which the

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?

Suppose that the federal government grants a 50 cent per gallon subsidy to buyers of gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the benefit of the subsidy

If a government price control succeeds in affecting price, it can be expected to lead to a corresponding

Figure 4-25 -Refer to Figure 4-25. The price that sellers receive after the tax is imposed is

In the supply and demand model, a subsidy granted to sellers is illustrated by

The Laffer curve indicates that

Taxes create deadweight losses because they

Figure 4-14 -In Figure 4-14, which of the following is true at the price ceiling, P?

If a household has $40,000 in taxable income and its tax liability is $4,000, the household's average tax rate is

Other things constant, as the price of a resource increases,

The more elastic the supply of a product, the more likely that the actual benefit of a subsidy granted of the product will

Figure 4-22 -Refer to Figure 4-22. The amount of the tax per unit 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