Question 1

Which of the following would tend to increase the price of lumber?

Accepted Answer

A)  a technological advance that lowers the cost of cutting timber 
B)  an increase in the demand for newly constructed homes 
C)  a decrease in the demand for wooden rocking chairs 
D)  a decrease in the tax imposed on firms who produce lumber 
A)  a technological advance that lowers the cost of cutting timber 
B)  an increase in the demand for newly constructed homes 
C)  a decrease in the demand for wooden rocking chairs 
D)  a decrease in the tax imposed on firms who produce lumber

Question 2

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 3

Use the figure below to answer the following question(s).
Figure 4-9
 
Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. What does the triangular area abc represent?

Accepted Answer

A)  the revenue the government derives from the tax 
B)  the tax paid by consumers 
C)  the tax paid by producers 
D)  the deadweight loss (or excess burden) created by the tax 
A)  the revenue the government derives from the tax 
B)  the tax paid by consumers 
C)  the tax paid by producers 
D)  the deadweight loss (or excess burden) created by the tax

Question 4

Figure 4-17  
Refer to Figure 4-17. Suppose a price floor of $7.00 is imposed. As a result,

Accepted Answer

A)  buyers' total expenditure on the good decreases by $20.00. 
B)  the supply curve will shift to the left so as to now pass through the point (Q = 40, P = $7.00). 
C)  the quantity of the good demanded decreases by 20 units. 
D)  the price of the good continues to serve as the rationing mechanism. 
A)  buyers' total expenditure on the good decreases by $20.00. 
B)  the supply curve will shift to the left so as to now pass through the point (Q = 40, P = $7.00). 
C)  the quantity of the good demanded decreases by 20 units. 
D)  the price of the good continues to serve as the rationing mechanism.

Question 5

An effective minimum wage

Accepted Answer

A)  imposes a price ceiling on the wages of various categories of low-skill workers. 
B)  increases the demand for low-skill workers. 
C)  makes it easier for low skill workers to find jobs. 
D)  increases the earnings of some low-skill workers while reducing the employment and training opportunities available to others. 
A)  imposes a price ceiling on the wages of various categories of low-skill workers. 
B)  increases the demand for low-skill workers. 
C)  makes it easier for low skill workers to find jobs. 
D)  increases the earnings of some low-skill workers while reducing the employment and training opportunities available to others.

Question 6

Figure 4-24  
Refer to Figure 4-24. The equilibrium price before the tax is imposed is

Accepted Answer

A)  P 1. 
B)  P 2. 
C)  P 3. 
D)  None of the above is correct. 
A)  P 1. 
B)  P 2. 
C)  P 3. 
D)  None of the above is correct.

Question 7

Figure 4-25  
Refer to Figure 4-25. The benefit to the government is

Accepted Answer

A)  measured by tax revenue and is represented by area A + B. 
B)  measured by tax revenue and is represented by area B + D. 
C)  measured by the net gain in total surplus and is represented by area B + D. 
D)  measured by the net gain in total surplus and is represented by area D + E. 
A)  measured by tax revenue and is represented by area A + B. 
B)  measured by tax revenue and is represented by area B + D. 
C)  measured by the net gain in total surplus and is represented by area B + D. 
D)  measured by the net gain in total surplus and is represented by area D + E.

Question 8

Kathy works full time during the day as an economist and faces a 50 percent marginal tax rate. If Kathy were to get an offer to work a second job in the evenings doing consulting work for a local business for $10,000 per year, how much of this additional income would she be able to keep as net pay after taxes?

Accepted Answer

A)  $1,000 
B)  $4,000 
C)  $5,000 
D)  $10,000 
A)  $1,000 
B)  $4,000 
C)  $5,000 
D)  $10,000

Question 9

An income tax is progressive if the

Accepted Answer

A)  tax rate decreases as income increases. 
B)  percentage of income paid in taxes increases as income increases. 
C)  percentage of income paid in taxes stays the same regardless of the size of income. 
D)  dollar amount paid in taxes increases with income. 
A)  tax rate decreases as income increases. 
B)  percentage of income paid in taxes increases as income increases. 
C)  percentage of income paid in taxes stays the same regardless of the size of income. 
D)  dollar amount paid in taxes increases with income.

Question 10

Which of the following statements is true?

Accepted Answer

A)  The quality of products sold in black markets tends to be less reliable than the quality of products in legal markets. 
B)  For otherwise identical products, the price of products in black markets tends to be higher than in legal markets. 
C)  The rate of violence is higher in black markets than in legal markets. 
D)  All of the above are true. 
A)  The quality of products sold in black markets tends to be less reliable than the quality of products in legal markets. 
B)  For otherwise identical products, the price of products in black markets tends to be higher than in legal markets. 
C)  The rate of violence is higher in black markets than in legal markets. 
D)  All of the above are true.

Question 11

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 12

When a tax is imposed on a good, the actual incidence of the tax generally

Accepted Answer

A)  falls entirely on the buyer. 
B)  falls entirely on the seller. 
C)  is shared between the buyer and seller. 
D)  is the same as the statutory incidence. 
A)  falls entirely on the buyer. 
B)  falls entirely on the seller. 
C)  is shared between the buyer and seller. 
D)  is the same as the statutory incidence.

Question 13

The actual incidence (or burden) of a tax refers to

Accepted Answer

A)  the governmental agency responsible for collecting the tax. 
B)  who actually bears the burden of a tax once changes in market prices are taken into account. 
C)  the degree of progressiveness in the rate structure of the tax. 
D)  who the tax is legally or statutorily imposed on. 
A)  the governmental agency responsible for collecting the tax. 
B)  who actually bears the burden of a tax once changes in market prices are taken into account. 
C)  the degree of progressiveness in the rate structure of the tax. 
D)  who the tax is legally or statutorily imposed on.

Question 14

Which of the following examples illustrates a regressive income tax?

Accepted Answer

A)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $90 in taxes. 
B)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $100 in taxes. 
C)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $110 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 $90 in taxes. 
B)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $100 in taxes. 
C)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $110 in taxes. 
D)  I earn $500 and pay $50 in taxes; you earn $1,000 and pay $125 in taxes.

Question 15

A legally mandated minimum wage is an example of

Accepted Answer

A)  the invisible hand principle. 
B)  a price floor. 
C)  a price ceiling. 
D)  a fringe benefit. 
A)  the invisible hand principle. 
B)  a price floor. 
C)  a price ceiling. 
D)  a fringe benefit.

Question 16

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

Accepted Answer

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

Question 17

When a supply and demand model is used to analyze the market for labor,

Accepted Answer

A)  demand is generally no longer downward sloping. 
B)  the wage rate is used on the vertical axis as the market price. 
C)  employment is used on the horizontal axis as the market quantity. 
D)  both b and c. 
A)  demand is generally no longer downward sloping. 
B)  the wage rate is used on the vertical axis as the market price. 
C)  employment is used on the horizontal axis as the market quantity. 
D)  both b and c.

Question 18

Both price floors and price ceilings lead to

Accepted Answer

A)  shortages. 
B)  surpluses. 
C)  reductions in quality. 
D)  a reduction in the quantity traded. 
A)  shortages. 
B)  surpluses. 
C)  reductions in quality. 
D)  a reduction in the quantity traded.

Question 19

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

Accepted Answer

A)  demand for the product is highly inelastic and the supply is relatively elastic. 
B)  demand for the product is highly elastic and the supply is relatively inelastic. 
C)  tax is legally (statutorily) imposed on the seller of the product. 
D)  tax is legally (statutorily) imposed on the buyer of the product. 
A)  demand for the product is highly inelastic and the supply is relatively elastic. 
B)  demand for the product is highly elastic and the supply is relatively inelastic. 
C)  tax is legally (statutorily) imposed on the seller of the product. 
D)  tax is legally (statutorily) imposed on the buyer of the product.

Question 20

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 D 1 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 D 1 to D 2. 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.

Which of the following would tend to increase the price of lumber?

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?

Use the figure below to answer the following question(s). Figure 4-9 Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. What does the triangular area abc represent?

Figure 4-17 Refer to Figure 4-17. Suppose a price floor of $7.00 is imposed. As a result,

An effective minimum wage

Figure 4-24 Refer to Figure 4-24. The equilibrium price before the tax is imposed is

Figure 4-25 Refer to Figure 4-25. The benefit to the government is

An income tax is progressive if the

Which of the following statements is true?

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

When a tax is imposed on a good, the actual incidence of the tax generally

The actual incidence (or burden) of a tax refers to

Which of the following examples illustrates a regressive income tax?

A legally mandated minimum wage is an example of

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

When a supply and demand model is used to analyze the market for labor,

Both price floors and price ceilings lead to

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

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

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Exam 4: Supply and Demand: Applications and Extensions

Which of the following would tend to increase the price of lumber?

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?

Use the figure below to answer the following question(s). Figure 4-9 Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. What does the triangular area abc represent?

Figure 4-17 Refer to Figure 4-17. Suppose a price floor of $7.00 is imposed. As a result,

An effective minimum wage

Figure 4-24 Refer to Figure 4-24. The equilibrium price before the tax is imposed is

Figure 4-25 Refer to Figure 4-25. The benefit to the government is

An income tax is progressive if the

Which of the following statements is true?

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

When a tax is imposed on a good, the actual incidence of the tax generally

The actual incidence (or burden) of a tax refers to

Which of the following examples illustrates a regressive income tax?

A legally mandated minimum wage is an example of

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

When a supply and demand model is used to analyze the market for labor,

Both price floors and price ceilings lead to

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

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