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

Figure 4-25 -Refer to Figure 4-25. The tax causes a reduction in producer surplus that is represented by area

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

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

During the imposition of price controls in the 1970s, long gasoline lines were common. In the absence of price controls, markets would have eliminated such excess demand by

Figure 4-25 -Refer to Figure 4-25. After the tax is levied, producer surplus is represented by area

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

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

Government programs such as Medicare substantially subsidize health care purchases by some consumers in the U.S. economy. Who benefits from these subsidies? How do they affect the price of health care? If you are not a recipient of this program, are you made better or worse off by the subsidy? Explain.

Figure 4-15 -In Figure 4-15, suppose a price floor is established at $20.00. What is the result?

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?

An effective minimum wage

Bill the butcher is upset because the government plans to tax beef $.10 a pound. "I hate paying taxes," he says. "Because of this, I'm raising all my beef prices by $.10 a pound. The consumers will bear this burden, not me." Do you see anything wrong with this way of thinking? Explain.

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.

In the mid-1940s, the marginal income tax rate in the top income tax bracket was 94 percent. In the 1960s, the top rate was lowered to 70 percent, and in the 1980s, the top rate was again lowered to 28 percent. The data show that as a result of these tax rate reductions, tax revenue (particularly from the rich) increased. This is consistent with the idea illustrated with the

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

Figure 4-21 -Refer to Figure 4-21. The price paid by buyers after the tax is imposed is

Figure 4-20 -Refer to Figure 4-20. The equilibrium price in the market before the tax is imposed is

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

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

Figure 4-17 -Refer to Figure 4-17. Suppose a price floor of $7.00 is imposed. As a result,