Question 1

Figure 4-25
  
-Refer to Figure 4-25.The price that buyers pay after the tax is imposed is

Accepted Answer

A) P₁. 
B) P₂. 
C) P₃. 
D) impossible to determine from the figure. 
A) P₁. 
B) P₂. 
C) P₃. 
D) impossible to determine from the figure.

Question 2

If we observe long lines of people camping out to get tickets to a concert,this tells us

Accepted Answer

A) the ticket price is below the market equilibrium price. 
B) the ticket price is above the market equilibrium price. 
C) it is likely to be a good concert,but it doesn't tell us anything about the ticket price. 
D) the opportunity cost of time of the people in line is higher than the average for the general population. 
A) the ticket price is below the market equilibrium price. 
B) the ticket price is above the market equilibrium price. 
C) it is likely to be a good concert,but it doesn't tell us anything about the ticket price. 
D) the opportunity cost of time of the people in line is higher than the average for the general population.

Question 3

The statutory 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 4

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 5

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 6

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.

Question 7

Susan works as an advertising executive for a small business making $40,000 per year and is in a tax bracket with a 30 percent marginal rate.She currently purchases a $5,000 health insurance plan outside of her employer from her net pay.Her employer offers her the option to purchase the same health insurance plan on a pretax basis through the company (in other words,the cost of the health insurance is subtracted out of her gross pay before her taxes are computed).If she decides to do so,the purchase of the $5,000 health insurance plan through her employer would now only cost her how much in terms of a reduction in her net pay?

Accepted Answer

A) $1,000 
B) $1,500 
C) $3,500 
D) $5,000 
A) $1,000 
B) $1,500 
C) $3,500 
D) $5,000

Question 8

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 9

Use the figure below to answer the following question(s).
Figure 4-10
  
-Figure 4-10 shows the market for a good before and after an excise tax is imposed.What does the triangular area C represent?

Accepted Answer

A) the deadweight loss accompanying the tax 
B) the tax revenue derived from sellers 
C) the tax revenue derived from buyers 
D) the total tax revenue generated by the tax 
A) the deadweight loss accompanying the tax 
B) the tax revenue derived from sellers 
C) the tax revenue derived from buyers 
D) the total tax revenue generated by the tax

Question 10

Figure 4-14
  
-Figure 4-14 depicts the milk market.The horizontal line,P,represents a price ceiling imposed by the government.Which of the following is true?

Accepted Answer

A) In equilibrium,the quantity demanded is 800 gallons. 
B) At the ceiling price,there is a surplus. 
C) The quantity demanded at the price ceiling will equal the quantity supplied. 
D) The equilibrium price would be $1 per unit without the price ceiling. 
E) The quantity sold will be 500 gallons. 
A) In equilibrium,the quantity demanded is 800 gallons. 
B) At the ceiling price,there is a surplus. 
C) The quantity demanded at the price ceiling will equal the quantity supplied. 
D) The equilibrium price would be $1 per unit without the price ceiling. 
E) The quantity sold will be 500 gallons.

Question 11

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.

Exam 4: Asupply and Demand: Applications and Extensions

Figure 4-25 -Refer to Figure 4-25.The price that buyers pay after the tax is imposed is

If we observe long lines of people camping out to get tickets to a concert,this tells us

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

A proportional tax is defined as a tax for which the

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

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

Use the figure below to answer the following question(s). Figure 4-10 -Figure 4-10 shows the market for a good before and after an excise tax is imposed.What does the triangular area C represent?

Figure 4-14 -Figure 4-14 depicts the milk market.The horizontal line,P,represents a price ceiling imposed by the government.Which of the following is true?

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

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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