Question 1

After the ban on the production and sale of alcohol ended in 1933,

Accepted Answer

A)  the quality of alcohol sold declined. 
B)  the murder rate declined. 
C)  the profit rate for bootleg sellers of alcohol increased. 
D)  all of the above occurred. 
A)  the quality of alcohol sold declined. 
B)  the murder rate declined. 
C)  the profit rate for bootleg sellers of alcohol increased. 
D)  all of the above occurred.

Question 2

A subsidy on a product will generate more actual benefit for consumers (and less for producers) when

Accepted Answer

A)  the supply of the product is relatively inelastic. 
B)  the supply of the product is relatively elastic. 
C)  the demand for the product is relatively elastic. 
D)  either a or c is true. 
A)  the supply of the product is relatively inelastic. 
B)  the supply of the product is relatively elastic. 
C)  the demand for the product is relatively elastic. 
D)  either a or c is true.

Question 3

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 4

The benefit of a subsidy will go primarily to buyers when the

Accepted Answer

A)  demand for the product is highly inelastic and supply is relatively elastic. 
B)  demand for the product is highly elastic and the supply is relatively inelastic. 
C)  subsidy is legally (statutorily) granted to the seller of the product. 
D)  subsidy is legally (statutorily) granted to the buyer of the product. 
A)  demand for the product is highly inelastic and supply is relatively elastic. 
B)  demand for the product is highly elastic and the supply is relatively inelastic. 
C)  subsidy is legally (statutorily) granted to the seller of the product. 
D)  subsidy is legally (statutorily) granted to the buyer of the product.

Question 5

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

Accepted Answer

A)  with shortages and waiting lists, they have no incentive to maintain and improve their property. 
B)  they become resigned to the fact that many of their apartments are going to be vacant at any given time. 
C)  with rent control the government guarantees landlords a minimal level of profit. 
D)  with rent control it becomes the government's responsibility to maintain rental housing. 
A)  with shortages and waiting lists, they have no incentive to maintain and improve their property. 
B)  they become resigned to the fact that many of their apartments are going to be vacant at any given time. 
C)  with rent control the government guarantees landlords a minimal level of profit. 
D)  with rent control it becomes the government's responsibility to maintain rental housing.

Question 6

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 7

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)  The original average selling price of textbooks was $100, and after the subsidy it rises to $120. 
B)  $90 represents the net price a buyer must pay for a textbook after taking into account the subsidy payment. 
C)  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. 
D)  All of the above are true. 
A)  The original average selling price of textbooks was $100, and after the subsidy it rises to $120. 
B)  $90 represents the net price a buyer must pay for a textbook after taking into account the subsidy payment. 
C)  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. 
D)  All of the above are true.

Question 8

Use the figure below to answer the following question(s). Figure 4-12
  Refer to Figure 4-12. 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 buyers. 
B)  The subsidy results in an increase in the selling price of the good. 
C)  Sellers will receive a larger proportion of the benefit from this subsidy than buyers. 
D)  All of the above are true. 
A)  The subsidy has been statutorily (legally) paid to buyers. 
B)  The subsidy results in an increase in the selling price of the good. 
C)  Sellers will receive a larger proportion of the benefit from this subsidy than buyers. 
D)  All of the above are true.

Question 9

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

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  None of the above is correct. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  None of the above is correct.

Question 10

A legal system that provides secure private property rights and unbiased enforcement of contracts

Accepted Answer

A)  is unnecessary for the smooth operation of markets. 
B)  reduces the efficiency of markets. 
C)  enhances the efficiency of markets. 
D)  makes it easier for sellers to cheat or defraud consumers. 
A)  is unnecessary for the smooth operation of markets. 
B)  reduces the efficiency of markets. 
C)  enhances the efficiency of markets. 
D)  makes it easier for sellers to cheat or defraud consumers.

Question 11

When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because

Accepted Answer

A)  the market price of the product will fall in response to the subsidy. 
B)  the market price of the product will rise in response to the subsidy. 
C)  the market price of the product will not change in response to the subsidy. 
D)  producers will reduce the supply of the product. 
A)  the market price of the product will fall in response to the subsidy. 
B)  the market price of the product will rise in response to the subsidy. 
C)  the market price of the product will not change in response to the subsidy. 
D)  producers will reduce the supply of the product.

Question 12

Other things constant, if a labor union is able to successfully increase the wages of autoworkers, there will be

Accepted Answer

A)  an increase in the supply of automobiles causing the price of automobiles to fall. 
B)  an increase in the supply of automobiles causing the price of automobiles to rise. 
C)  a decrease in the supply of automobiles causing the price of automobiles to fall. 
D)  a decrease in the supply of automobiles causing the price of automobiles to rise. 
A)  an increase in the supply of automobiles causing the price of automobiles to fall. 
B)  an increase in the supply of automobiles causing the price of automobiles to rise. 
C)  a decrease in the supply of automobiles causing the price of automobiles to fall. 
D)  a decrease in the supply of automobiles causing the price of automobiles to rise.

Question 13

In a market economy, which of the following will most likely cause a prolonged milk shortage?

Accepted Answer

A)  an increase in the demand for milk 
B)  an increase in the supply of milk 
C)  imposition of a price floor above the equilibrium price of milk 
D)  imposition of a price ceiling below the equilibrium price of milk 
A)  an increase in the demand for milk 
B)  an increase in the supply of milk 
C)  imposition of a price floor above the equilibrium price of milk 
D)  imposition of a price ceiling below the equilibrium price of milk

Question 14

Figure 4-23       Refer to Figure 4-23. In which market will the majority of the tax burden fall on the buyer?

Accepted Answer

A)  market (a) 
B)  market (b) 
C)  market (c) 
D)  All of the above are correct. 
A)  market (a) 
B)  market (b) 
C)  market (c) 
D)  All of the above are correct.

Question 15

The Laffer Curve indicates that

Accepted Answer

A)  when tax rates are high, a rate reduction may lead to an increase in tax revenue. 
B)  when tax rates are low, an increase in tax rates will generally lead to a reduction in tax revenues. 
C)  an increase in tax rates will always lead to an increase in tax revenues. 
D)  the deadweight losses resulting from taxation are small at the tax rate that maximizes the revenues derived by the government. 
A)  when tax rates are high, a rate reduction may lead to an increase in tax revenue. 
B)  when tax rates are low, an increase in tax rates will generally lead to a reduction in tax revenues. 
C)  an increase in tax rates will always lead to an increase in tax revenues. 
D)  the deadweight losses resulting from taxation are small at the tax rate that maximizes the revenues derived by the government.

Question 16

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 17

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 18

A $10 per unit government subsidy paid directly to sellers of heaters will result in

Accepted Answer

A)  a downward shift in the demand curve for heaters by $10. 
B)  an upward shift in the demand curve for heaters by $10. 
C)  a downward shift in the supply curve for heaters by $10. 
D)  an upward shift in the supply curve for heaters by $10. 
A)  a downward shift in the demand curve for heaters by $10. 
B)  an upward shift in the demand curve for heaters by $10. 
C)  a downward shift in the supply curve for heaters by $10. 
D)  an upward shift in the supply curve for heaters by $10.

Question 19

Other things constant, a decrease in the demand for hair dryers will

Accepted Answer

A)  increase the price of hair dryers. 
B)  increase the quantity supplied of hair dryers. 
C)  increase the demand for hair dryer manufacturing workers. 
D)  decrease the demand for hair dryer manufacturing workers. 
A)  increase the price of hair dryers. 
B)  increase the quantity supplied of hair dryers. 
C)  increase the demand for hair dryer manufacturing workers. 
D)  decrease the demand for hair dryer manufacturing workers.

Question 20

An increase in the number of students attending college would tend to

Accepted Answer

A)  reduce the demand for college professors. 
B)  decrease the number of college professors employed. 
C)  increase the demand for college professors. 
D)  reduce the wage for college professors. 
A)  reduce the demand for college professors. 
B)  decrease the number of college professors employed. 
C)  increase the demand for college professors. 
D)  reduce the wage for college professors.

After the ban on the production and sale of alcohol ended in 1933,

A subsidy on a product will generate more actual benefit for consumers (and less for producers) when

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

The benefit of a subsidy will go primarily to buyers when the

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

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,

Use the figure below to answer the following question(s). Figure 4-12 Refer to Figure 4-12. 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?

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

A legal system that provides secure private property rights and unbiased enforcement of contracts

When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because

Other things constant, if a labor union is able to successfully increase the wages of autoworkers, there will be

In a market economy, which of the following will most likely cause a prolonged milk shortage?

Figure 4-23 Refer to Figure 4-23. In which market will the majority of the tax burden fall on the buyer?

The Laffer Curve indicates that

Which of the following examples illustrates a regressive income tax?

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

A $10 per unit government subsidy paid directly to sellers of heaters will result in

Other things constant, a decrease in the demand for hair dryers will

An increase in the number of students attending college would tend to

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

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters

Exam 4: Supply and Demand: Applications and Extensions

After the ban on the production and sale of alcohol ended in 1933,

A subsidy on a product will generate more actual benefit for consumers (and less for producers) when

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

The benefit of a subsidy will go primarily to buyers when the

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

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,

Use the figure below to answer the following question(s). Figure 4-12 Refer to Figure 4-12. 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?

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

A legal system that provides secure private property rights and unbiased enforcement of contracts

When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because

Other things constant, if a labor union is able to successfully increase the wages of autoworkers, there will be

In a market economy, which of the following will most likely cause a prolonged milk shortage?

Figure 4-23 Refer to Figure 4-23. In which market will the majority of the tax burden fall on the buyer?

The Laffer Curve indicates that

Which of the following examples illustrates a regressive income tax?

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

A $10 per unit government subsidy paid directly to sellers of heaters will result in

Other things constant, a decrease in the demand for hair dryers will

An increase in the number of students attending college would tend to

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

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

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,