Question 1

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 2

A price ceiling that sets the price of a good below market equilibrium will cause

Accepted Answer

A) an increase in quantity demanded of the good. 
B) a decrease in quantity supplied of the good. 
C) a shortage of the good. 
D) all of the above. 
A) an increase in quantity demanded of the good. 
B) a decrease in quantity supplied of the good. 
C) a shortage of the good. 
D) all of the above.

Question 3

A $25 government subsidy paid directly to buyers of jeans will result in

Accepted Answer

A) a downward shift in the demand curve for jeans by $25. 
B) an upward shift in the demand curve for jeans by $25. 
C) a downward shift in the supply curve for jeans by $25. 
D) an upward shift in the supply curve for jeans by $25. 
A) a downward shift in the demand curve for jeans by $25. 
B) an upward shift in the demand curve for jeans by $25. 
C) a downward shift in the supply curve for jeans by $25. 
D) an upward shift in the supply curve for jeans by $25.

Question 4

Use the figure below to answer the following question(s).
Figure 4-13
  
-Refer to Figure 4-13.The supply curve S and the demand curve D₁ indicate initial conditions in the market for flu shots.A new government program is implemented that grants buyers a $25 subsidy when they buy a flu shot,shifting the demand curve from D₁ to D₂.Which of the following is true for this subsidy given the information provided in the figure?

Accepted Answer

A) The original price of a flu shot was $75,and after the subsidy,it rises to $90. 
B) $65 represents the net price a buyer must pay for a flu shot after taking into account the subsidy payment. 
C) Buyers of flu shots will receive an actual benefit of $10 from the subsidy,while sellers of flu shots will receive an actual benefit of $15 from the subsidy. 
D) All of the above are true. 
A) The original price of a flu shot was $75,and after the subsidy,it rises to $90. 
B) $65 represents the net price a buyer must pay for a flu shot after taking into account the subsidy payment. 
C) Buyers of flu shots will receive an actual benefit of $10 from the subsidy,while sellers of flu shots will receive an actual benefit of $15 from the subsidy. 
D) All of the above are true.

Question 5

A price ceiling set below an equilibrium price tends to cause persistent imbalances in the market because

Accepted Answer

A) Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B) Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C) Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D) Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus. 
A) Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B) Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C) Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D) Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Question 6

Kathy works full time during the day as an economist and faces a 90 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) $6,000 
D) $10,000 
A) $1,000 
B) $4,000 
C) $6,000 
D) $10,000

Question 7

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 8

An increase in the demand for a product will cause output to

Accepted Answer

A) increase and both the demand for and prices of the resources used to produce the product to increase. 
B) increase and both the demand for and prices of the resources used to produce the product to decrease. 
C) decrease;the demand for the resources used to produce the product will remain constant. 
D) decrease;the price of resources used to produce the product will decrease. 
A) increase and both the demand for and prices of the resources used to produce the product to increase. 
B) increase and both the demand for and prices of the resources used to produce the product to decrease. 
C) decrease;the demand for the resources used to produce the product will remain constant. 
D) decrease;the price of resources used to produce the product will decrease.

Question 9

Which of the following statements about rent control is accurate?

Accepted Answer

A) Rent control has proven successful in providing low-cost housing for poor people. 
B) Rent control has produced an increase in available rental units. 
C) Many well-to-do people live in rent-controlled apartments. 
D) All of the above are accurate statements. 
A) Rent control has proven successful in providing low-cost housing for poor people. 
B) Rent control has produced an increase in available rental units. 
C) Many well-to-do people live in rent-controlled apartments. 
D) All of the above are accurate statements.

Question 10

If Heather's tax liability increases from $10,000 to $13,500 when her income increases from $30,000 to $40,000,her marginal tax rate is

Accepted Answer

A) 33 percent. 
B) 35 percent. 
C) 50 percent. 
D) 60 percent. 
A) 33 percent. 
B) 35 percent. 
C) 50 percent. 
D) 60 percent.

Question 11

Suppose the United Auto Workers union obtains a substantial wage increase for auto workers.How will this affect the market for automobiles?

Accepted Answer

The higher wages will shift th

Question 12

A tax tends to

Accepted Answer

A) increase formal market activity because it decreases prices 
B) reduce formal market activity because it increases work incentives 
C) reduce formal market activity because it lowers the return on such activity 
D) reduce activity in the underground economy because people are afraid of being connected with tax fraud 
A) increase formal market activity because it decreases prices 
B) reduce formal market activity because it increases work incentives 
C) reduce formal market activity because it lowers the return on such activity 
D) reduce activity in the underground economy because people are afraid of being connected with tax fraud

Question 13

The actual burden of a tax

Accepted Answer

A) falls most heavily on the side of the market that is more elastic. 
B) falls most heavily on the side of the market that is more inelastic. 
C) falls most heavily on the side of the market that is closest to unitary elasticity. 
D) is distributed independently of relative elasticities of supply and demand. 
A) falls most heavily on the side of the market that is more elastic. 
B) falls most heavily on the side of the market that is more inelastic. 
C) falls most heavily on the side of the market that is closest to unitary elasticity. 
D) is distributed independently of relative elasticities of supply and demand.

Question 14

The burden of a tax will fall primarily on sellers 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 15

Figure 4-18
  
-Refer to Figure 4-18.If the government imposes a price ceiling of $2.00 in this market,the result is a

Accepted Answer

A) surplus of 30 units of the good. 
B) shortage of 20 units of the good. 
C) shortage of 30 units of the good. 
D) shortage of 50 units of the good. 
A) surplus of 30 units of the good. 
B) shortage of 20 units of the good. 
C) shortage of 30 units of the good. 
D) shortage of 50 units of the good.

Question 16

Suppose that the federal government grants a 50 cent per gallon subsidy to buyers of gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic.Under these circumstances,the benefit of the subsidy

Accepted Answer

A) will go primarily to producers. 
B) will go primarily to consumers. 
C) will be split equally between consumers and producers. 
D) cannot be determined because the actual benefit of a subsidy is not influenced by the elasticities of supply and demand. 
A) will go primarily to producers. 
B) will go primarily to consumers. 
C) will be split equally between consumers and producers. 
D) cannot be determined because the actual benefit of a subsidy is not influenced by the elasticities of supply and demand.

Question 17

The "incidence of a tax" is the term used to indicate

Accepted Answer

A) the responsibility for collecting the tax. 
B) who actually bears the tax burden. 
C) who the tax is initially levied on. 
D) the regressive rate structure of the tax. 
A) the responsibility for collecting the tax. 
B) who actually bears the tax burden. 
C) who the tax is initially levied on. 
D) the regressive rate structure of the tax.

Question 18

Currently,federal and state gasoline taxes (imposed statutorily on the sellers of gasoline)amount to about $.45 per gallon.Suppose the current price of gasoline is $1.20 per gallon,and that if the tax was not in place,the price would be only $.80.

Accepted Answer

A) The full incidence of the tax is falling on consumers. 
B) The full incidence of the tax is falling on suppliers. 
C) A $.05 burden is being borne by sellers and $.40 by consumers. 
D) A $.05 burden is being borne by consumers and $.40 by sellers. 
A) The full incidence of the tax is falling on consumers. 
B) The full incidence of the tax is falling on suppliers. 
C) A $.05 burden is being borne by sellers and $.40 by consumers. 
D) A $.05 burden is being borne by consumers and $.40 by sellers.

Question 19

Use the table below to choose the correct answer.
 
The marginal tax rate on income in the $25,000 to $30,000 range is

Accepted Answer

A) 10 percent. 
B) 20 percent. 
C) 50 percent. 
D) 70 percent. 
A) 10 percent. 
B) 20 percent. 
C) 50 percent. 
D) 70 percent.

Question 20

In the two decades following 1990,subsidized federal loans per full-time student more than tripled.Economic analysis indicates that this expansion in subsidies

Accepted Answer

A) reduced the cost of a college education by the amount of the subsidies. 
B) increased the cost of a college education by the amount of the subsidies. 
C) reduced the cost of a college education of the students receiving the subsidies,but this gain was partially offset by increases in the cost of education resulting from the subsidies. 
D) reduced the cost of a college education for students who did not accept the subsidies,but the net cost of education of those receiving the subsidies rose. 
A) reduced the cost of a college education by the amount of the subsidies. 
B) increased the cost of a college education by the amount of the subsidies. 
C) reduced the cost of a college education of the students receiving the subsidies,but this gain was partially offset by increases in the cost of education resulting from the subsidies. 
D) reduced the cost of a college education for students who did not accept the subsidies,but the net cost of education of those receiving the subsidies rose.

Exam 4: Asupply and Demand: Applications and Extensions

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

A price ceiling that sets the price of a good below market equilibrium will cause

A $25 government subsidy paid directly to buyers of jeans will result in

A price ceiling set below an equilibrium price tends to cause persistent imbalances in the market because

Which of the following examples illustrates a regressive income tax?

An increase in the demand for a product will cause output to

Which of the following statements about rent control is accurate?

If Heather's tax liability increases from $10,000 to $13,500 when her income increases from $30,000 to $40,000,her marginal tax rate is

Suppose the United Auto Workers union obtains a substantial wage increase for auto workers.How will this affect the market for automobiles?

A tax tends to

The actual burden of a tax

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

Figure 4-18 -Refer to Figure 4-18.If the government imposes a price ceiling of $2.00 in this market,the result is a

Suppose that the federal government grants a 50 cent per gallon subsidy to buyers of gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic.Under these circumstances,the benefit of the subsidy

The "incidence of a tax" is the term used to indicate

Currently,federal and state gasoline taxes (imposed statutorily on the sellers of gasoline)amount to about $.45 per gallon.Suppose the current price of gasoline is $1.20 per gallon,and that if the tax was not in place,the price would be only $.80.

Use the table below to choose the correct answer. The marginal tax rate on income in the $25,000 to $30,000 range is

In the two decades following 1990,subsidized federal loans per full-time student more than tripled.Economic analysis indicates that this expansion in subsidies

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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