Question 1

According to the Keynesian view, capitalism

Accepted Answer

A)  is a highly productive form of economic organization that works best when government intervention is least. 
B)  experiences booms and busts because of the instability of private investment that is driven by fickle changes in business optimism. 
C)  experiences booms and busts that are primarily the result of inappropriate monetary policy. 
D)  experiences fluctuations in aggregate demand that cannot be controlled with fiscal policy. 
A)  is a highly productive form of economic organization that works best when government intervention is least. 
B)  experiences booms and busts because of the instability of private investment that is driven by fickle changes in business optimism. 
C)  experiences booms and busts that are primarily the result of inappropriate monetary policy. 
D)  experiences fluctuations in aggregate demand that cannot be controlled with fiscal policy.

Question 2

Figure 4-20  
-Refer to Figure 4-20. The price that buyers pay after the tax is imposed is

Accepted Answer

A)  $8. 
B)  $6. 
C)  $5. 
D)  $3. 
A)  $8. 
B)  $6. 
C)  $5. 
D)  $3.

Question 3

The marginal tax rate is defined as

Accepted Answer

A)  tax liability divided by taxable income. 
B)  tax liability multiplied by taxable income. 
C)  the change in tax liability divided by the change in taxable income. 
D)  the change in tax liability minus the change in taxable income. 
A)  tax liability divided by taxable income. 
B)  tax liability multiplied by taxable income. 
C)  the change in tax liability divided by the change in taxable income. 
D)  the change in tax liability minus the change in taxable income.

Question 4

Which of the following examples illustrates a progressive income tax?

Accepted Answer

A)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $100 in taxes. 
B)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $50 in taxes. 
C)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $80 in taxes. 
D)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $125 in taxes. 
A)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $100 in taxes. 
B)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $50 in taxes. 
C)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $80 in taxes. 
D)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $125 in taxes.

Question 5

A tax imposed on the sellers of a good will

Accepted Answer

A)  raise the price paid by buyers and lower the equilibrium quantity. 
B)  raise the price paid by buyers and raise the equilibrium quantity. 
C)  raise the net price received by sellers and raise the equilibrium quantity. 
D)  raise the net price received by sellers and lower the equilibrium quantity. 
A)  raise the price paid by buyers and lower the equilibrium quantity. 
B)  raise the price paid by buyers and raise the equilibrium quantity. 
C)  raise the net price received by sellers and raise the equilibrium quantity. 
D)  raise the net price received by sellers and lower the equilibrium quantity.

Question 6

Figure 4-24  
-Refer to Figure 4-24. The amount of the tax on each unit of the good 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 7

Use the figure below illustrating the impact of an excise tax to answer the following question(s).
Figure 4-6  
-The deadweight loss of the tax illustrated in Figure 4-6 is given by the area

Accepted Answer

A)  ABEH. 
B)  DFE. 
C)  EKG. 
D)  EFG. 
A)  ABEH. 
B)  DFE. 
C)  EKG. 
D)  EFG.

Question 8

If the supply of health care services is highly inelastic, programs that subsidize the cost of purchasing medical services will

Accepted Answer

A)  lead to higher prices for medical services. 
B)  lead to lower prices for medical services. 
C)  not affect the price of medical services. 
D)  help the buyers of medical services more than the sellers of those services. 
A)  lead to higher prices for medical services. 
B)  lead to lower prices for medical services. 
C)  not affect the price of medical services. 
D)  help the buyers of medical services more than the sellers of those services.

Question 9

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)  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. 
B)  Textbook buyers will receive an actual benefit of $20 from the subsidy, while textbook sellers will receive an actual benefit of $10 from the subsidy. 
C)  Textbook buyers will receive the full $30 benefit from the subsidy. 
D)  Textbook sellers will receive the full $30 benefit from the subsidy. 
A)  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. 
B)  Textbook buyers will receive an actual benefit of $20 from the subsidy, while textbook sellers will receive an actual benefit of $10 from the subsidy. 
C)  Textbook buyers will receive the full $30 benefit from the subsidy. 
D)  Textbook sellers will receive the full $30 benefit from the subsidy.

Question 10

Figure 4-16  
-Refer to Figure 4-16. Some policymakers have argued that the government should establish a "living wage." A living wage would provide workers a reasonable standard of living in their city or region. If a living wage of $10 per hour is established in the market pictured here, we would expect

Accepted Answer

A)  employment will increase to 14 million. 
B)  employment will decrease to 8 million. 
C)  the wage will actually rise to $20 per hour. 
D)  there will be a surplus of 14 million workers. 
A)  employment will increase to 14 million. 
B)  employment will decrease to 8 million. 
C)  the wage will actually rise to $20 per hour. 
D)  there will be a surplus of 14 million workers.

Question 11

About 35,000 general aviation multiengine airplanes are licensed to operate in the United States. If an additional $1,000-per-year tax was levied on each plane to raise general revenue, economic thinking suggests the

Accepted Answer

A)  annual revenue from this tax would be less than $35,000,000. 
B)  annual revenue from this tax would be $35,000,000. 
C)  annual revenue from this tax would be more than $35,000,000. 
D)  number of airplanes would increase dramatically. 
A)  annual revenue from this tax would be less than $35,000,000. 
B)  annual revenue from this tax would be $35,000,000. 
C)  annual revenue from this tax would be more than $35,000,000. 
D)  number of airplanes would increase dramatically.

Question 12

Figure 4-24  
-Refer to Figure 4-24. The price that buyers pay 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 13

After a natural disaster, such as a hurricane, the increased demand for certain items (like lumber, electric generators, and chainsaws) causes their prices to rise. These higher prices

Accepted Answer

A)  discourage the flow of these items into the area. 
B)  encourage consumers to purchase the items even if they do not plan to use them. 
C)  help to direct the items toward their highest valued uses. 
D)  do all of the above. 
A)  discourage the flow of these items into the area. 
B)  encourage consumers to purchase the items even if they do not plan to use them. 
C)  help to direct the items toward their highest valued uses. 
D)  do all of the above.

Question 14

The actual benefit of a government subsidy is determined primarily by

Accepted Answer

A)  the elasticities of demand and supply. 
B)  the legal (or statutory) assignment of the subsidy 
C)  the number of exchanges that are made possible as a result of the subsidy. 
D)  whether the subsidy is paid by cash or check. 
A)  the elasticities of demand and supply. 
B)  the legal (or statutory) assignment of the subsidy 
C)  the number of exchanges that are made possible as a result of the subsidy. 
D)  whether the subsidy is paid by cash or check.

Question 15

Use the figure below illustrating the impact of an excise tax to answer the following question(s).
Figure 4-6  
-Refer to Figure 4-6. The amount of the actual tax burden paid by consumers and producers is

Accepted Answer

A)  $1.00 for consumers and $.50 for producers 
B)  $1.00 for consumers and $1.00 for producers. 
C)  $.25 for consumers and $.75 for producers. 
D)  $.50 for consumers and $.50 for producers. 
A)  $1.00 for consumers and $.50 for producers 
B)  $1.00 for consumers and $1.00 for producers. 
C)  $.25 for consumers and $.75 for producers. 
D)  $.50 for consumers and $.50 for producers.

Question 16

Figure 4-22  
-Refer to Figure 4-22. Buyers pay how much of the tax per unit?

Accepted Answer

A)  $1.00. 
B)  $1.50. 
C)  $2.50. 
D)  $3.00. 
A)  $1.00. 
B)  $1.50. 
C)  $2.50. 
D)  $3.00.

Question 17

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,

Accepted Answer

A)  the price will increase to P3. 
B)  a surplus will occur at the new market price of P2. 
C)  the market price will stay at P1 due to the price ceiling. 
D)  a shortage will occur at the price ceiling of P2. 
A)  the price will increase to P3. 
B)  a surplus will occur at the new market price of P2. 
C)  the market price will stay at P1 due to the price ceiling. 
D)  a shortage will occur at the price ceiling of P2.

Question 18

Figure 4-21  
-Refer to Figure 4-21. The price paid by buyers after the tax is imposed is

Accepted Answer

A)  $18. 
B)  $14. 
C)  $12. 
D)  $8. 
A)  $18. 
B)  $14. 
C)  $12. 
D)  $8.

Question 19

Many economists believe a general sales tax (particularly on items such as food) takes a larger proportion of income from low-income households than from high-income households. If this is true, a general sales tax is 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

Which of the following would tend to increase the wage of coal miners?

Accepted Answer

A)  new environmental laws that make it more costly for firms to use coal in their production process 
B)  an increase in the price of oil, a substitute for coal 
C)  a decrease in the demand for coal 
D)  an increase in the supply of coal miners 
A)  new environmental laws that make it more costly for firms to use coal in their production process 
B)  an increase in the price of oil, a substitute for coal 
C)  a decrease in the demand for coal 
D)  an increase in the supply of coal miners

According to the Keynesian view, capitalism

Figure 4-20 -Refer to Figure 4-20. The price that buyers pay after the tax is imposed is

The marginal tax rate is defined as

Which of the following examples illustrates a progressive income tax?

A tax imposed on the sellers of a good will

Figure 4-24 -Refer to Figure 4-24. The amount of the tax on each unit of the good is

Use the figure below illustrating the impact of an excise tax to answer the following question(s). Figure 4-6 -The deadweight loss of the tax illustrated in Figure 4-6 is given by the area

If the supply of health care services is highly inelastic, programs that subsidize the cost of purchasing medical services will

About 35,000 general aviation multiengine airplanes are licensed to operate in the United States. If an additional $1,000-per-year tax was levied on each plane to raise general revenue, economic thinking suggests the

Figure 4-24 -Refer to Figure 4-24. The price that buyers pay after the tax is imposed is

After a natural disaster, such as a hurricane, the increased demand for certain items (like lumber, electric generators, and chainsaws) causes their prices to rise. These higher prices

The actual benefit of a government subsidy is determined primarily by

Use the figure below illustrating the impact of an excise tax to answer the following question(s). Figure 4-6 -Refer to Figure 4-6. The amount of the actual tax burden paid by consumers and producers is

Figure 4-22 -Refer to Figure 4-22. Buyers pay how much of the tax per unit?

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,

Figure 4-21 -Refer to Figure 4-21. The price paid by buyers after the tax is imposed is

Many economists believe a general sales tax (particularly on items such as food) takes a larger proportion of income from low-income households than from high-income households. If this is true, a general sales tax is a

Which of the following would tend to increase the wage of coal miners?

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

According to the Keynesian view, capitalism

Figure 4-20 -Refer to Figure 4-20. The price that buyers pay after the tax is imposed is

The marginal tax rate is defined as

Which of the following examples illustrates a progressive income tax?

A tax imposed on the sellers of a good will

Figure 4-24 -Refer to Figure 4-24. The amount of the tax on each unit of the good is

Use the figure below illustrating the impact of an excise tax to answer the following question(s). Figure 4-6 -The deadweight loss of the tax illustrated in Figure 4-6 is given by the area

If the supply of health care services is highly inelastic, programs that subsidize the cost of purchasing medical services will

About 35,000 general aviation multiengine airplanes are licensed to operate in the United States. If an additional $1,000-per-year tax was levied on each plane to raise general revenue, economic thinking suggests the

Figure 4-24 -Refer to Figure 4-24. The price that buyers pay after the tax is imposed is

After a natural disaster, such as a hurricane, the increased demand for certain items (like lumber, electric generators, and chainsaws) causes their prices to rise. These higher prices

The actual benefit of a government subsidy is determined primarily by

Use the figure below illustrating the impact of an excise tax to answer the following question(s). Figure 4-6 -Refer to Figure 4-6. The amount of the actual tax burden paid by consumers and producers is

Figure 4-22 -Refer to Figure 4-22. Buyers pay how much of the tax per unit?

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,

Figure 4-21 -Refer to Figure 4-21. The price paid by buyers after the tax is imposed is

Many economists believe a general sales tax (particularly on items such as food) takes a larger proportion of income from low-income households than from high-income households. If this is true, a general sales tax is a

Which of the following would tend to increase the wage of coal miners?

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,