Question 1

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 2

When government imposes price controls in a market,

Accepted Answer

A)  non-price factors become more important in the rationing of the good. 
B)  efficiency in the market is enhanced. 
C)  shortages and surpluses are eliminated. 
D)  buyers and sellers both become better off. 
A)  non-price factors become more important in the rationing of the good. 
B)  efficiency in the market is enhanced. 
C)  shortages and surpluses are eliminated. 
D)  buyers and sellers both become better off.

Question 3

If Sally 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 4

According to the Laffer curve,

Accepted Answer

A)  an increase in tax rates will always cause tax revenues to increase. 
B)  when marginal tax rates are high, an increase in tax rates is likely to cause tax revenues to increase. 
C)  when marginal taxes are low, an increase in tax rates will probably cause tax revenues to decline. 
D)  when marginal tax rates are high, a reduction in tax rates may increase tax revenue. 
A)  an increase in tax rates will always cause tax revenues to increase. 
B)  when marginal tax rates are high, an increase in tax rates is likely to cause tax revenues to increase. 
C)  when marginal taxes are low, an increase in tax rates will probably cause tax revenues to decline. 
D)  when marginal tax rates are high, a reduction in tax rates may increase tax revenue.

Question 5

If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?

Accepted Answer

A)  The quantity of milk demanded will increase. 
B)  The quantity of milk supplied will decrease. 
C)  There will be a surplus of milk. 
D)  There will be a shortage of milk. 
A)  The quantity of milk demanded will increase. 
B)  The quantity of milk supplied will decrease. 
C)  There will be a surplus of milk. 
D)  There will be a shortage of milk.

Question 6

Use the figure below to answer the following question(s).
Figure 4-8
 
Refer to Figure 4-8. The supply curve S 1 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 S 1 to S 2. 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 7

Figure 4-25  
Refer to Figure 4-25. Producer 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 8

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 9

Figure 4-24  
Refer to Figure 4-24. The amount of tax revenue received by the government is equal to the area

Accepted Answer

A)  P 3 A C P 1. 
B)  A B C. 
C)  P 2 D A P 3. 
D)  P 1 C D P 2. 
A)  P 3 A C P 1. 
B)  A B C. 
C)  P 2 D A P 3. 
D)  P 1 C D P 2.

Question 10

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 11

Suppose that a tax is placed on DVDs. If the sellers end up bearing most of the tax burden, this indicates that the

Accepted Answer

A)  demand is more inelastic than supply. 
B)  supply is more inelastic than demand. 
C)  government has required that buyers remit the tax payments. 
D)  government has required that sellers remit the tax payments. 
A)  demand is more inelastic than supply. 
B)  supply is more inelastic than demand. 
C)  government has required that buyers remit the tax payments. 
D)  government has required that sellers remit the tax payments.

Question 12

When a price ceiling is imposed below the equilibrium price of a commodity,

Accepted Answer

A)  quantity supplied will be greater than quantity demanded for the good. 
B)  the problem of scarcity will be solved. 
C)  a shortage of the good will develop. 
D)  a surplus of the good will develop. 
A)  quantity supplied will be greater than quantity demanded for the good. 
B)  the problem of scarcity will be solved. 
C)  a shortage of the good will develop. 
D)  a surplus of the good will develop.

Question 13

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 14

In the two decades following 1990, subsidized federal loans per full-time student more than tripled. Economic analysis indicates that this expansion in subsidies

Accepted Answer

A)  reduced the cost of a college education by the amount of the subsidies. 
B)  increased the cost of a college education by the amount of the subsidies. 
C)  reduced the cost of a college education of the students receiving the subsidies, but this gain was partially offset by increases in the cost of education resulting from the subsidies. 
D)  reduced the cost of a college education for students who did not accept the subsidies, but the net cost of education of those receiving the subsidies rose. 
A)  reduced the cost of a college education by the amount of the subsidies. 
B)  increased the cost of a college education by the amount of the subsidies. 
C)  reduced the cost of a college education of the students receiving the subsidies, but this gain was partially offset by increases in the cost of education resulting from the subsidies. 
D)  reduced the cost of a college education for students who did not accept the subsidies, but the net cost of education of those receiving the subsidies rose.

Question 15

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 16

The state of Florida is considering putting an excise tax on either good X or good Y. An economist discovers the supply of good X is more elastic than the supply of good Y, while the demand elasticities are identical. Which good should Florida tax in order to minimize the deadweight loss of the tax?

Accepted Answer

The state of Florida should ta

Question 17

The Laffer curve illustrates the relationship between

Accepted Answer

A)  supply and demand. 
B)  tax rates and tax revenues. 
C)  opportunity cost and inflation. 
D)  tax liability and taxable income. 
A)  supply and demand. 
B)  tax rates and tax revenues. 
C)  opportunity cost and inflation. 
D)  tax liability and taxable income.

Question 18

If a $5,000 tax is placed legally (statutorily) on the sellers of new automobiles and as a result the price of automobiles to consumers rises by $4,000, then the actual burden of the tax

Accepted Answer

A)  falls completely on automobile buyers. 
B)  falls completely on automobile sellers. 
C)  is $4,000 on automobile buyers and $1,000 on sellers. 
D)  is $1,000 on automobile buyers and $4,000 on sellers. 
A)  falls completely on automobile buyers. 
B)  falls completely on automobile sellers. 
C)  is $4,000 on automobile buyers and $1,000 on sellers. 
D)  is $1,000 on automobile buyers and $4,000 on sellers.

Question 19

Price controls will tend to cause misallocation of resources because

Accepted Answer

A)  production (or opportunity) cost no longer corresponds to market price. 
B)  people are unable to determine their preferences at the high or low price. 
C)  producers no longer have incentive to be profitable. 
D)  consumers no longer have incentive to spend their income efficiently. 
A)  production (or opportunity) cost no longer corresponds to market price. 
B)  people are unable to determine their preferences at the high or low price. 
C)  producers no longer have incentive to be profitable. 
D)  consumers no longer have incentive to spend their income efficiently.

Question 20

Figure 4-20  
Refer to Figure 4-20. As the figure is drawn, who sends the tax payments to the government?

Accepted Answer

A)  the buyers 
B)  the sellers 
C)  A portion of the tax payments is sent by the buyers and the remaining portion is sent by the sellers. 
D)  The question of who sends the tax payments cannot be determined from the figure. 
A)  the buyers 
B)  the sellers 
C)  A portion of the tax payments is sent by the buyers and the remaining portion is sent by the sellers. 
D)  The question of who sends the tax payments cannot be determined from the figure.

The marginal tax rate is defined as

When government imposes price controls in a market,

If Sally 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?

According to the Laffer curve,

If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?

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

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

Figure 4-24 Refer to Figure 4-24. The amount of tax revenue received by the government is equal to the area

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

Suppose that a tax is placed on DVDs. If the sellers end up bearing most of the tax burden, this indicates that the

When a price ceiling is imposed below the equilibrium price of a commodity,

A proportional tax is defined as a tax for which the

In the two decades following 1990, subsidized federal loans per full-time student more than tripled. Economic analysis indicates that this expansion in subsidies

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

The state of Florida is considering putting an excise tax on either good X or good Y. An economist discovers the supply of good X is more elastic than the supply of good Y, while the demand elasticities are identical. Which good should Florida tax in order to minimize the deadweight loss of the tax?

The Laffer curve illustrates the relationship between

If a $5,000 tax is placed legally (statutorily) on the sellers of new automobiles and as a result the price of automobiles to consumers rises by $4,000, then the actual burden of the tax

Price controls will tend to cause misallocation of resources because

Figure 4-20 Refer to Figure 4-20. As the figure is drawn, who sends the tax payments to the government?

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

Applying the Basics: Special Topics in Economics

Filters

Exam 4: Supply and Demand: Applications and Extensions

The marginal tax rate is defined as

When government imposes price controls in a market,

If Sally 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?

According to the Laffer curve,

If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?

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

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

Figure 4-24 Refer to Figure 4-24. The amount of tax revenue received by the government is equal to the area

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

Suppose that a tax is placed on DVDs. If the sellers end up bearing most of the tax burden, this indicates that the

When a price ceiling is imposed below the equilibrium price of a commodity,

A proportional tax is defined as a tax for which the

In the two decades following 1990, subsidized federal loans per full-time student more than tripled. Economic analysis indicates that this expansion in subsidies

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

The Laffer curve illustrates the relationship between

If a $5,000 tax is placed legally (statutorily) on the sellers of new automobiles and as a result the price of automobiles to consumers rises by $4,000, then the actual burden of the tax

Price controls will tend to cause misallocation of resources because

Figure 4-20 Refer to Figure 4-20. As the figure is drawn, who sends the tax payments to the government?

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

Applying the Basics: Special Topics in Economics

Filters