Question 1

Figure 4-24
  
-Refer to Figure 4-24. The per unit burden of the tax on buyers 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. B

Question 2

Figure 4-17
  
-Refer to Figure 4-17. Suppose a price ceiling of $4.50 is imposed. As a result,

Accepted Answer

A) there is a shortage of 15 units of the good. 
B) the demand curve will shift to the left so as to now pass through the point (Q = 35, P = $4.50). 
C) the situation is very much like the one created by a binding minimum wage. 
D) the quantity of the good that is bought and sold is the same as it would have been had a price floor of $7.50 been imposed. 
A) there is a shortage of 15 units of the good. 
B) the demand curve will shift to the left so as to now pass through the point (Q = 35, P = $4.50). 
C) the situation is very much like the one created by a binding minimum wage. 
D) the quantity of the good that is bought and sold is the same as it would have been had a price floor of $7.50 been imposed. D

Question 3

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

Accepted Answer

A) A. 
B) A + B + C. 
C) D + E + F. 
D) F. 
A) A. 
B) A + B + C. 
C) D + E + F. 
D) F. C

Question 4

If there was an increase in the excise tax on beer, what would be the effect on the equilibrium price and quantity of beer?

Accepted Answer

A) price increases, quantity decreases 
B) price decreases, quantity decreases 
C) price increases, quantity increases 
D) price decreases, quantity increases 
A) price increases, quantity decreases 
B) price decreases, quantity decreases 
C) price increases, quantity increases 
D) price decreases, quantity increases

Question 5

Figure 4-23

-Refer to Figure 4-23. In which market will the tax burden be most equally divided between the buyer and the seller?

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 6

The City of Greenville needs to raise revenue. Alderman Black has proposed a $10 tax on red cars in the city, currently numbering 2,000. Mayor White, who wants more than $20,000 in revenue, proposes taxing these cars at $100 each. Councilwoman Bluestone goes even farther, suggesting a $1,000 per red car tax, arguing that her proposal will raise $2 million. If maximizing tax revenue is the only consideration, which proposal should pass? Why?

Accepted Answer

It is an economic fact that if you tax s

Question 7

Figure 4-18
  
-Refer to Figure 4-18. The price of the good would continue to serve as the rationing mechanism if

Accepted Answer

A) a price ceiling of $4.00 were imposed. 
B) a price ceiling of $5.00 were imposed. 
C) a price floor of $3.00 were imposed. 
D) All of the above are correct. 
A) a price ceiling of $4.00 were imposed. 
B) a price ceiling of $5.00 were imposed. 
C) a price floor of $3.00 were imposed. 
D) All of the above are correct.

Question 8

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 9

A legal minimum wage is an example of

Accepted Answer

A) the invisible hand principle. 
B) a price floor. 
C) a price ceiling. 
D) a fringe benefit. 
A) the invisible hand principle. 
B) a price floor. 
C) a price ceiling. 
D) a fringe benefit.

Question 10

Figure 4-25
  
-Refer to Figure 4-25. The price that sellers receive 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 11

Suppose there is an increase in the excise tax imposed on cigarettes, a good for which the demand is relatively inelastic. The short-run burden of the tax increase will be borne primarily by

Accepted Answer

A) consumers, because the increase in market price will be large relative to the increase in the excise tax. 
B) firms, because the increase in market price will be large relative to the increase in the excise tax. 
C) consumers, because the increase in market price will be small relative to the increase in the excise tax. 
D) firms, because the increase in market price will be small relative to the increase in the excise tax. 
A) consumers, because the increase in market price will be large relative to the increase in the excise tax. 
B) firms, because the increase in market price will be large relative to the increase in the excise tax. 
C) consumers, because the increase in market price will be small relative to the increase in the excise tax. 
D) firms, because the increase in market price will be small relative to the increase in the excise tax.

Question 12

Figure 4-22
  
-Refer to Figure 4-22. The effective price sellers receive after the tax is imposed is

Accepted Answer

A) $1.00. 
B) $3.50. 
C) $5.00. 
D) $6.00. 
A) $1.00. 
B) $3.50. 
C) $5.00. 
D) $6.00.

Question 13

Figure 4-21
  
-Refer to Figure 4-21. The price received by sellers after the tax is imposed is

Accepted Answer

A) $18. 
B) $14. 
C) $12. 
D) $8. 
A) $18. 
B) $14. 
C) $12. 
D) $8.

Question 14

Suppose the U.S. government banned the sale and production of cigarettes. Which of the following would be most likely to occur?

Accepted Answer

A) No one would smoke anymore. 
B) The amount of violence involved in the buying and selling of cigarettes would increase. 
C) The price of cigarettes would decrease. 
D) The supply for cigarettes would become elastic. 
A) No one would smoke anymore. 
B) The amount of violence involved in the buying and selling of cigarettes would increase. 
C) The price of cigarettes would decrease. 
D) The supply for cigarettes would become elastic.

Question 15

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 16

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 17

Joanne states, "If raising the minimum wage to $10 an hour is good, like Senator Largess suggests, then raising it to $20 an hour would be twice as good." Is Joanne correct? Why or why not?

Accepted Answer

The minimum wage is a price floor that c

Question 18

Figure 4-20
  
-Refer to Figure 4-20. The amount of the tax per unit is

Accepted Answer

A) $1. 
B) $2. 
C) $3. 
D) $5. 
A) $1. 
B) $2. 
C) $3. 
D) $5.

Question 19

Figure 4-23

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

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 20

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.

Exam 4: B: Supply and Demand: Applications and Extensions

Figure 4-24 -Refer to Figure 4-24. The per unit burden of the tax on buyers is

Figure 4-17 -Refer to Figure 4-17. Suppose a price ceiling of $4.50 is imposed. As a result,

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

If there was an increase in the excise tax on beer, what would be the effect on the equilibrium price and quantity of beer?

Figure 4-23 -Refer to Figure 4-23. In which market will the tax burden be most equally divided between the buyer and the seller?

Figure 4-18 -Refer to Figure 4-18. The price of the good would continue to serve as the rationing mechanism if

The Laffer Curve indicates that

A legal minimum wage is an example of

Figure 4-25 -Refer to Figure 4-25. The price that sellers receive after the tax is imposed is

Suppose there is an increase in the excise tax imposed on cigarettes, a good for which the demand is relatively inelastic. The short-run burden of the tax increase will be borne primarily by

Figure 4-22 -Refer to Figure 4-22. The effective price sellers receive after the tax is imposed is

Figure 4-21 -Refer to Figure 4-21. The price received by sellers after the tax is imposed is

Suppose the U.S. government banned the sale and production of cigarettes. Which of the following would be most likely to occur?

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

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

Joanne states, "If raising the minimum wage to $10 an hour is good, like Senator Largess suggests, then raising it to $20 an hour would be twice as good." Is Joanne correct? Why or why not?

Figure 4-20 -Refer to Figure 4-20. The amount of the tax per unit is

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

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

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

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

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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