Question 1

Which one of the following will most likely be harmed by legislation exempting teenagers from the minimum wage?

Accepted Answer

A) a high school student seeking a part-time job 
B) a high-skilled,30-year-old worker who is unlikely to compete with low-skilled teenagers in the employment market 
C) a large family that often employs the services of low-skilled,part-time workers 
D) an illiterate 40-year-old worker with few labor skills 
A) a high school student seeking a part-time job 
B) a high-skilled,30-year-old worker who is unlikely to compete with low-skilled teenagers in the employment market 
C) a large family that often employs the services of low-skilled,part-time workers 
D) an illiterate 40-year-old worker with few labor skills

Question 2

If an increase in the government-imposed minimum wage pushes the price (wage)of unskilled labor above market equilibrium,which of the following will most likely occur in the unskilled labor market?

Accepted Answer

A) an increase in demand for unskilled labor 
B) a decrease in the supply of unskilled labor 
C) a shortage of unskilled labor 
D) a surplus of unskilled labor 
A) an increase in demand for unskilled labor 
B) a decrease in the supply of unskilled labor 
C) a shortage of unskilled labor 
D) a surplus of unskilled labor

Question 3

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 4

The imposition of price ceilings on a market often results in

Accepted Answer

A) an increase in investment in the industry. 
B) a persistent surplus in the market. 
C) an increase in expenditures in the black-market. 
D) lower prices being offered on the black market. 
A) an increase in investment in the industry. 
B) a persistent surplus in the market. 
C) an increase in expenditures in the black-market. 
D) lower prices being offered on the black market.

Question 5

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

Accepted Answer

A) regressive. 
B) proportional. 
C) progressive. 
D) regressive up to $20,000 but progressive beyond that. 
A) regressive. 
B) proportional. 
C) progressive. 
D) regressive up to $20,000 but progressive beyond that.

Question 6

Which of the following is the most likely result of an increase in the minimum wage?

Accepted Answer

A) an increase in the employment of unskilled workers 
B) a decrease in the number of workers seeking minimum wage jobs 
C) an increase in the demand for unskilled workers 
D) a decrease in the employment of unskilled workers 
A) an increase in the employment of unskilled workers 
B) a decrease in the number of workers seeking minimum wage jobs 
C) an increase in the demand for unskilled workers 
D) a decrease in the employment of unskilled workers

Question 7

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 8

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 9

Which tax rate measures the percent of your income paid in taxes?

Accepted Answer

A) the marginal tax rate 
B) the average tax rate 
C) progressive tax coefficient 
D) the excise tax rate 
A) the marginal tax rate 
B) the average tax rate 
C) progressive tax coefficient 
D) the excise tax rate

Question 10

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.How much revenue would the $.40 gasoline tax raise?

Accepted Answer

A) $18 million 
B) $36 million 
C) $72 million 
D) $100 million 
A) $18 million 
B) $36 million 
C) $72 million 
D) $100 million

Question 11

Use the figure below to answer the following question(s).
Figure 4-8
  
-Refer to Figure 4-8.The supply curve S₁ 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 S₁ to S₂.Imposing the tax increases the equilibrium price of soft coal from

Accepted Answer

A) $20 to $60 per ton. 
B) $20 to $50 per ton. 
C) $50 to $60 per ton. 
D) $50 to $90 per ton. 
A) $20 to $60 per ton. 
B) $20 to $50 per ton. 
C) $50 to $60 per ton. 
D) $50 to $90 per ton.

Question 12

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a

Accepted Answer

A) flat (elastic)demand curve and a steep (inelastic)supply curve. 
B) steep (inelastic)demand curve and a flat (elastic)supply curve. 
C) steep (inelastic)demand curve and steep (inelastic)supply curve. 
D) flat (elastic)demand curve and a flat (elastic)supply curve. 
A) flat (elastic)demand curve and a steep (inelastic)supply curve. 
B) steep (inelastic)demand curve and a flat (elastic)supply curve. 
C) steep (inelastic)demand curve and steep (inelastic)supply curve. 
D) flat (elastic)demand curve and a flat (elastic)supply curve.

Question 13

The deadweight loss resulting from levying a tax on an economic activity is

Accepted Answer

A) the tax revenue directed to the government as the result of the tax. 
B) the loss of potential gains from trade from activities forgone because of the tax. 
C) the increase in the price of an activity as the result of the tax levied on it. 
D) the marginal benefits derived from the expansion in government activities made possible by the increase in tax revenues. 
A) the tax revenue directed to the government as the result of the tax. 
B) the loss of potential gains from trade from activities forgone because of the tax. 
C) the increase in the price of an activity as the result of the tax levied on it. 
D) the marginal benefits derived from the expansion in government activities made possible by the increase in tax revenues.

Question 14

A progressive 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 more than 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 more than the dollar tax liability of those with lower income.

Question 15

Which of the following is a true statement regarding the economic impact of a subsidy?

Accepted Answer

A) The distribution of the benefits from a subsidy will depend on whether the subsidy is legally granted to the buyer or seller. 
B) When demand is relatively inelastic,the benefits of a subsidy will mainly accrue to sellers. 
C) When supply is relatively elastic,the benefits of a subsidy will mainly accrue to buyers. 
D) When demand is relatively elastic,the benefits of a subsidy will mainly accrue to buyers. 
A) The distribution of the benefits from a subsidy will depend on whether the subsidy is legally granted to the buyer or seller. 
B) When demand is relatively inelastic,the benefits of a subsidy will mainly accrue to sellers. 
C) When supply is relatively elastic,the benefits of a subsidy will mainly accrue to buyers. 
D) When demand is relatively elastic,the benefits of a subsidy will mainly accrue to buyers.

Question 16

The more elastic the supply of a product,the more likely it is that the burden of a tax will

Accepted Answer

A) fall on sellers. 
B) fall on buyers. 
C) fall equally on both buyers and sellers. 
D) be borne by the public sector,and not by market participants. 
A) fall on sellers. 
B) fall on buyers. 
C) fall equally on both buyers and sellers. 
D) be borne by the public sector,and not by market participants.

Question 17

If the demand for a good is highly inelastic,a tax on the good

Accepted Answer

A) places the burden of the tax equally on buyers and sellers 
B) permits sellers to pass most of the cost increase resulting from the tax on to the consumers of the product 
C) reduces the profits earned by sellers since they must write the check to pay the tax 
D) makes the demand more inelastic 
E) makes the demand more elastic 
A) places the burden of the tax equally on buyers and sellers 
B) permits sellers to pass most of the cost increase resulting from the tax on to the consumers of the product 
C) reduces the profits earned by sellers since they must write the check to pay the tax 
D) makes the demand more inelastic 
E) makes the demand more elastic

Question 18

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,the resulting quantity of gasoline that is bought and sold is

Accepted Answer

A) less than Q₃. 
B) Q₃ 
C) between Q₁ and Q₃. 
D) at least Q₁. 
A) less than Q₃. 
B) Q₃ 
C) between Q₁ and Q₃. 
D) at least Q₁.

Question 19

Suppose a property tax of $300 per month is legally (statutorily)imposed on the owners of rental housing.Which of the following is likely to occur?

Accepted Answer

A) The monthly rental rate paid by tenants would increase. 
B) The quantity of rental housing available would decline. 
C) There would be a deadweight loss (or excess burden)created in the rental housing market. 
D) All of the above are likely to happen. 
A) The monthly rental rate paid by tenants would increase. 
B) The quantity of rental housing available would decline. 
C) There would be a deadweight loss (or excess burden)created in the rental housing market. 
D) All of the above are likely to happen.

Question 20

Under rent control,tenants can expect

Accepted Answer

A) lower rent and higher quality housing. 
B) lower rent and lower quality housing. 
C) higher rent and a shortage of rental housing. 
D) higher rent and a surplus of rental housing. 
A) lower rent and higher quality housing. 
B) lower rent and lower quality housing. 
C) higher rent and a shortage of rental housing. 
D) higher rent and a surplus of rental housing.

Exam 4: Asupply and Demand: Applications and Extensions

Which one of the following will most likely be harmed by legislation exempting teenagers from the minimum wage?

If an increase in the government-imposed minimum wage pushes the price (wage)of unskilled labor above market equilibrium,which of the following will most likely occur in the unskilled labor market?

A tax imposed on the sellers of a good will

The imposition of price ceilings on a market often results in

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

Which of the following is the most likely result of an increase in the minimum wage?

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

Which of the following examples illustrates a progressive income tax?

Which tax rate measures the percent of your income paid in taxes?

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.How much revenue would the $.40 gasoline tax raise?

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a

The deadweight loss resulting from levying a tax on an economic activity is

A progressive tax is defined as a tax for which the

Which of the following is a true statement regarding the economic impact of a subsidy?

The more elastic the supply of a product,the more likely it is that the burden of a tax will

If the demand for a good is highly inelastic,a tax on the good

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,the resulting quantity of gasoline that is bought and sold is

Suppose a property tax of $300 per month is legally (statutorily)imposed on the owners of rental housing.Which of the following is likely to occur?

Under rent control,tenants can expect

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

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

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney 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

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-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

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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