Question 1

If Susan's income increases from $40,000 to $50,000 and her tax liability increases from $6,000 to $9,000, which of the following is true?

Accepted Answer

A) Her marginal tax rate is 18 percent in this range. 
B) Her marginal tax rate is 30 percent in this range. 
C) Her average tax rate was 22.5 percent when her income was $40,000. 
D) The tax structure must be regressive in the range between $40,000 and $50,000. 
A) Her marginal tax rate is 18 percent in this range. 
B) Her marginal tax rate is 30 percent in this range. 
C) Her average tax rate was 22.5 percent when her income was $40,000. 
D) The tax structure must be regressive in the range between $40,000 and $50,000.

Question 2

Figure 4-17
  
-Refer to Figure 4-17. If the government imposes a price ceiling in this market at a price of $5.00, the result would be a

Accepted Answer

A) shortage of 20 units. 
B) shortage of 10 units. 
C) surplus of 20 units. 
D) surplus of 10 units. 
A) shortage of 20 units. 
B) shortage of 10 units. 
C) surplus of 20 units. 
D) surplus of 10 units.

Question 3

Black markets that operate outside the legal system are often characterized by

Accepted Answer

A) low profits for suppliers. 
B) lower opportunity costs for suppliers and buyers. 
C) decreased prices. 
D) the use of violence as a means of settling disputes. 
A) low profits for suppliers. 
B) lower opportunity costs for suppliers and buyers. 
C) decreased prices. 
D) the use of violence as a means of settling disputes.

Question 4

Figure 4-22
  
-Refer to Figure 4-22. Suppose the same S and D curves apply, and a tax of the same amount per unit as shown here is imposed. Now, however, the buyers of the good, rather than the sellers, are required to pay the tax to the government. Now,
a.the burden on buyers will be larger than in the case illustrated in Figure 4-22.
b.the burden on sellers will be smaller than in the case illustrated in Figure 4-22.
c.a downward shift of the demand curve replaces the upward shift of the supply curve.
d.All of the above are correct.

Accepted Answer

The answer of Figure 4-22
  
-Refer to Figure 4-22....

Question 5

Figure 4-20
  
-Refer to Figure 4-20. The price that sellers receive after the tax is imposed is

Accepted Answer

A) $8. 
B) $6. 
C) $5. 
D) $3. 
A) $8. 
B) $6. 
C) $5. 
D) $3.

Question 6

With a price ceiling above the equilibrium price,

Accepted Answer

A) quantity demanded would exceed quantity supplied. 
B) quantity supplied would exceed quantity demanded. 
C) the market would be in equilibrium. 
D) the equilibrium price would be expected to fall over time. 
A) quantity demanded would exceed quantity supplied. 
B) quantity supplied would exceed quantity demanded. 
C) the market would be in equilibrium. 
D) the equilibrium price would be expected to fall over time.

Question 7

The market pricing system corrects an excess supply by

Accepted Answer

A) raising the product price and increasing producer profits. 
B) lowering the product price and decreasing producer profits. 
C) raising the product price and decreasing producer profits. 
D) lowering the product price and increasing producer profits. 
A) raising the product price and increasing producer profits. 
B) lowering the product price and decreasing producer profits. 
C) raising the product price and decreasing producer profits. 
D) lowering the product price and increasing producer profits.

Question 8

Figure 4-25
  
-Refer to Figure 4-25. The benefit to the government is

Accepted Answer

A) measured by tax revenue and is represented by area A + B. 
B) measured by tax revenue and is represented by area B + D. 
C) measured by the net gain in total surplus and is represented by area B + D. 
D) measured by the net gain in total surplus and is represented by area D + E. 
A) measured by tax revenue and is represented by area A + B. 
B) measured by tax revenue and is represented by area B + D. 
C) measured by the net gain in total surplus and is represented by area B + D. 
D) measured by the net gain in total surplus and is represented by area D + E.

Question 9

Figure 4-22
  
-Refer to Figure 4-22. The price paid by buyers 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 10

The average tax rate (ATR) is defined as

Accepted Answer

A) taxable income divided by tax liability. 
B) change in tax liability divided by change in taxable income. 
C) tax liability divided by taxable income. 
D) change in taxable income divided by change in tax liability. 
A) taxable income divided by tax liability. 
B) change in tax liability divided by change in taxable income. 
C) tax liability divided by taxable income. 
D) change in taxable income divided by change in tax liability.

Question 11

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) progressive up to $30,000 but regressive beyond that. 
A) regressive. 
B) proportional. 
C) progressive. 
D) progressive up to $30,000 but regressive beyond that.

Question 12

Figure 4-21
  
-Refer to Figure 4-21. The amount of the tax per unit is

Accepted Answer

A) $10. 
B) $6. 
C) $4. 
D) $2. 
A) $10. 
B) $6. 
C) $4. 
D) $2.

Question 13

Figure 4-20
  
-Refer to Figure 4-20. Suppose the same S and D curves apply, and a tax of the same amount per unit as shown here is imposed. Now, however, the sellers of the good, rather than the buyers, are required to pay the tax to the government. Now, relative to the case depicted in the figure,

Accepted Answer

A) the burden on buyers will be larger and the burden on sellers will be smaller. 
B) the burden on buyers will be smaller and the burden on sellers will be larger. 
C) the burden on buyers will be the same and the burden on sellers will be the same. 
D) The relative burdens in the two cases cannot be determined without further information. 
A) the burden on buyers will be larger and the burden on sellers will be smaller. 
B) the burden on buyers will be smaller and the burden on sellers will be larger. 
C) the burden on buyers will be the same and the burden on sellers will be the same. 
D) The relative burdens in the two cases cannot be determined without further information.

Question 14

A black market is

Accepted Answer

A) a market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices. 
B) a market where goods and services can be obtained at lower prices. 
C) a government-mandated market where controls are placed on prices. 
D) a market where exchanges are made using bartering. 
A) a market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices. 
B) a market where goods and services can be obtained at lower prices. 
C) a government-mandated market where controls are placed on prices. 
D) a market where exchanges are made using bartering.

Question 15

Figure 4-24
  
-Refer to Figure 4-24. 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 16

The Laffer curve illustrates the principle that

Accepted Answer

A) when tax rates are quite high, reducing tax rates will increase tax revenue. 
B) when tax rates are quite low, reducing tax rates will increase tax revenue. 
C) when tax rates are quite high, reducing tax rates will decrease tax revenue. 
D) increasing tax rates always increases tax revenue. 
A) when tax rates are quite high, reducing tax rates will increase tax revenue. 
B) when tax rates are quite low, reducing tax rates will increase tax revenue. 
C) when tax rates are quite high, reducing tax rates will decrease tax revenue. 
D) increasing tax rates always increases tax revenue.

Question 17

If Joan pays $5,000 in taxes when she earns $20,000 and must pay $12,000 in taxes when she earns $30,000, she faces a marginal tax rate in this income range of

Accepted Answer

A) 25 percent. 
B) 30 percent. 
C) 40 percent. 
D) 70 percent. 
A) 25 percent. 
B) 30 percent. 
C) 40 percent. 
D) 70 percent.

Question 18

When the price of a good is legally set below the equilibrium level, a shortage often results. This shortage

Accepted Answer

A) is a temporary failure of the market mechanism. 
B) is the result of a shift in demand. 
C) is the result of a shift in supply. 
D) occurs because the price ceiling prevents the market mechanism from establishing an equilibrium price. 
A) is a temporary failure of the market mechanism. 
B) is the result of a shift in demand. 
C) is the result of a shift in supply. 
D) occurs because the price ceiling prevents the market mechanism from establishing an equilibrium price.

Question 19

Figure 4-18
  
-Refer to Figure 4-18. In this market, which of the following price controls would be binding?

Accepted Answer

A) a price ceiling of $2.00, and it would cause a shortage 
B) a price ceiling of $5.00, and it would cause a surplus 
C) a price floor of $2.00, and it would cause a shortage 
D) All of the above are correct. 
A) a price ceiling of $2.00, and it would cause a shortage 
B) a price ceiling of $5.00, and it would cause a surplus 
C) a price floor of $2.00, and it would cause a shortage 
D) All of the above are correct.

Question 20

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

Accepted Answer

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

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

If Susan's income increases from $40,000 to $50,000 and her tax liability increases from $6,000 to $9,000, which of the following is true?

Figure 4-17 -Refer to Figure 4-17. If the government imposes a price ceiling in this market at a price of $5.00, the result would be a

Black markets that operate outside the legal system are often characterized by

Figure 4-20 -Refer to Figure 4-20. The price that sellers receive after the tax is imposed is

With a price ceiling above the equilibrium price,

The market pricing system corrects an excess supply by

Figure 4-25 -Refer to Figure 4-25. The benefit to the government is

Figure 4-22 -Refer to Figure 4-22. The price paid by buyers after the tax is imposed is

The average tax rate (ATR) is defined as

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

Figure 4-21 -Refer to Figure 4-21. The amount of the tax per unit is

Figure 4-20 -Refer to Figure 4-20. Suppose the same S and D curves apply, and a tax of the same amount per unit as shown here is imposed. Now, however, the sellers of the good, rather than the buyers, are required to pay the tax to the government. Now, relative to the case depicted in the figure,

A black market is

Figure 4-24 -Refer to Figure 4-24. The price that sellers receive after the tax is imposed is

The Laffer curve illustrates the principle that

If Joan pays $5,000 in taxes when she earns $20,000 and must pay $12,000 in taxes when she earns $30,000, she faces a marginal tax rate in this income range of

When the price of a good is legally set below the equilibrium level, a shortage often results. This shortage

Figure 4-18 -Refer to Figure 4-18. In this market, which of the following price controls would be binding?

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

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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