Exam 4: Supply and Demand: Applications and Extensions

Suppose an excise tax is imposed on two products X and Y, both of which have identical supply elasticities. The demand for good X is highly elastic, while the demand for good Y is highly inelastic. The deadweight loss (or excess burden) will be

Use the figure below to answer the following question(s). Figure 4-8 -Refer to Figure 4-8. How much revenue does the $40-per-ton tax generate for the government?

The burden of a tax will fall primarily on buyers when the

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,

Adam Smith stated, "The man of system is apt to be very wise in his own conceit. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board." Which is true of this statement?

A law establishing a maximum legal price for a good or service is known as

Use the table below to choose the correct answer. The marginal tax rate on income in the $20,000 to $25,000 range is

Which one of the following will most likely be harmed by legislation exempting teenagers from the minimum wage?

When the price of a good is legally set below the equilibrium level, a shortage often results. This shortage

Figure 4-5 -Figure 4-5 represents the market for gasoline before and after a per-gallon tax. What does the triangular area ABC represent?

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

Use the figure below to answer the following question(s). Figure 4-13 -Refer to Figure 4-13. The supply curve S and the demand curve D₁ indicate initial conditions in the market for flu shots. A new government program is implemented that grants buyers a $25 subsidy when they buy a flu shot, shifting the demand curve from D₁ to D₂. Which of the following is true for this subsidy given the information provided in the exhibit?

Other things constant, an increase in the demand for bicycles will

Both price floors and price ceilings lead to

A deadweight loss results from the imposition of a tax on a good because the tax

If drugs such as marijuana and cocaine were legalized, it would be likely that

Figure 4-20 -Refer to Figure 4-20. The equilibrium price in the market before the tax is imposed is

A new law requiring plumbers to pass strict certification tests that reduce the number of plumbers would

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

When a price ceiling prevents a higher market price from rationing a good,