Exam 4: Supply and Demand: Applications and Extensions

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

Rent controls tend to cause persistent imbalances in the market for housing because

Use the table below to choose the correct answer. For the income range illustrated, the tax shown here is

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, which shifts the supply curve from S₁ to S₂. Imposing the tax causes the equilibrium price of gasoline to increase from

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

The presence of price controls in a market usually is an indication that

Lowincomesville is a poor town. The mayor has decided to impose a law to cut all rental rates on apartments in half and to fix them at this level. Will this help the poor? Why or why not? Be sure to distinguish between the short run and the long run.

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

Use the figure below to answer the following question(s). Figure 4-11 Refer to Figure 4-11. On the Laffer curve shown, which of the following is true?

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

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

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

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 progressive tax is defined as a tax for which the

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

Suppose that the federal government levies a 50 cent excise tax on gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the burden of the tax

A regressive tax

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 supply of labor is relatively inelastic when compared to the elasticity of the demand for labor, the burden of this tax will

According to the Laffer curve,

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