Question 1

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 2

Lowincomesville, North Carolina, is a poor town. The mayor has decided to impose a law to cut all rental rates on apartments in half and to fix them at this level. Will this help the poor? Why or why not? Be sure to distinguish between the short run and the long run.

Accepted Answer

The immediate effect will be a benefit t

Question 3

Rent controls generally fix the price of rental housing below market equilibrium. Economic analysis suggests these controls

Accepted Answer

A) are effective in helping the poor find housing. 
B) improve the quality of housing available to consumers. 
C) create a surplus of rental housing. 
D) reduce the future supply of rental housing. 
A) are effective in helping the poor find housing. 
B) improve the quality of housing available to consumers. 
C) create a surplus of rental housing. 
D) reduce the future supply of rental housing.

Question 4

Which of the following is a true statement regarding the economic impact of a subsidy?

Accepted Answer

A) The distribution of the benefits from a subsidy will depend on whether the subsidy is legally granted to the buyer or seller. 
B) When demand is relatively inelastic, the benefits of a subsidy will mainly accrue to sellers. 
C) When supply is relatively elastic, the benefits of a subsidy will mainly accrue to buyers. 
D) When demand is relatively elastic, the benefits of a subsidy will mainly accrue to buyers. 
A) The distribution of the benefits from a subsidy will depend on whether the subsidy is legally granted to the buyer or seller. 
B) When demand is relatively inelastic, the benefits of a subsidy will mainly accrue to sellers. 
C) When supply is relatively elastic, the benefits of a subsidy will mainly accrue to buyers. 
D) When demand is relatively elastic, the benefits of a subsidy will mainly accrue to buyers.

Question 5

Figure 4-22
  
-Refer to Figure 4-22. The equilibrium price in the market before 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 6

Figure 4-25
  
-Refer to Figure 4-25. The equilibrium price before 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 7

Which of the following statements regarding black markets is true?

Accepted Answer

A) The reliability of products sold in black markets is generally higher than the reliability of products sold in legal markets. 
B) The prices of goods in black markets are generally lower than the prices of similar products in legal markets. 
C) The laws of supply and demand do not affect the prices of goods exchanged in black markets. 
D) The rate of violence is higher in black markets than in legal markets. 
A) The reliability of products sold in black markets is generally higher than the reliability of products sold in legal markets. 
B) The prices of goods in black markets are generally lower than the prices of similar products in legal markets. 
C) The laws of supply and demand do not affect the prices of goods exchanged in black markets. 
D) The rate of violence is higher in black markets than in legal markets.

Question 8

Figure 4-24
  
-Refer to Figure 4-24. The amount of the tax on each unit of the good 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.

Question 9

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,

Accepted Answer

A) the price will increase to P₃. 
B) a surplus will occur at the new market price of P₂. 
C) the market price will stay at P₁ due to the price ceiling. 
D) a shortage will occur at the price ceiling of P₂. 
A) the price will increase to P₃. 
B) a surplus will occur at the new market price of P₂. 
C) the market price will stay at P₁ due to the price ceiling. 
D) a shortage will occur at the price ceiling of P₂.

Question 10

The more elastic the supply of a product, the more likely it is that the burden of a tax will

Accepted Answer

A) fall on sellers. 
B) fall on buyers. 
C) fall equally on both buyers and sellers. 
D) be borne by the public sector, and not by market participants. 
A) fall on sellers. 
B) fall on buyers. 
C) fall equally on both buyers and sellers. 
D) be borne by the public sector, and not by market participants.

Question 11

Figure 4-22
  
-Refer to Figure 4-22. From this tax the government will collect a total of

Accepted Answer

A) $125.00. 
B) $175.00. 
C) $200.00. 
D) $250.00. 
A) $125.00. 
B) $175.00. 
C) $200.00. 
D) $250.00.

Question 12

Figure 4-14
  
-In Figure 4-14, which of the following is true at the price ceiling, P?

Accepted Answer

A) The excess quantity supplied equals 300 gallons. 
B) The excess quantity demanded equals 300 gallons. 
C) The excess quantity supplied equals 500 gallons. 
D) The excess quantity demanded equals 800 gallons. 
E) Sales will be equal to 800 gallons. 
A) The excess quantity supplied equals 300 gallons. 
B) The excess quantity demanded equals 300 gallons. 
C) The excess quantity supplied equals 500 gallons. 
D) The excess quantity demanded equals 800 gallons. 
E) Sales will be equal to 800 gallons.

Question 13

Figure 4-24
  
-Refer to Figure 4-24. The amount of deadweight loss associated with the tax is equal to

Accepted Answer

A) P₃ A C P₁. 
B) A B C. 
C) P₂ A D P₃. 
D) P₁ D C P₂. 
A) P₃ A C P₁. 
B) A B C. 
C) P₂ A D P₃. 
D) P₁ D C P₂.

Question 14

Suppose the U.S. Government banned the sale and production of cigarettes. What are likely effects of this action on the market for cigarettes?

Accepted Answer

Several changes are likely to happen in

Question 15

The more elastic the supply of a product, the more likely it is that the burden of a tax will

Accepted Answer

A) fall on sellers. 
B) fall on buyers. 
C) fall equally on both buyers and sellers. 
D) be borne by the public sector, and not by market participants. 
A) fall on sellers. 
B) fall on buyers. 
C) fall equally on both buyers and sellers. 
D) be borne by the public sector, and not by market participants.

Question 16

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 17

Figure 4-24
  
-Refer to Figure 4-24. The amount of tax revenue received by the government is equal to the area

Accepted Answer

A) P₃ A C P₁. 
B) A B C. 
C) P₂ D A P₃. 
D) P₁ C D P₂. 
A) P₃ A C P₁. 
B) A B C. 
C) P₂ D A P₃. 
D) P₁ C D P₂.

Question 18

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

Accepted Answer

A) $4 on buyers and $4 on sellers. 
B) $5 on buyers and $5 on sellers. 
C) $4 on buyers and $6 on sellers. 
D) $6 on buyers and $4 on sellers. 
A) $4 on buyers and $4 on sellers. 
B) $5 on buyers and $5 on sellers. 
C) $4 on buyers and $6 on sellers. 
D) $6 on buyers and $4 on sellers.

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

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

Lowincomesville, North Carolina, is a poor town. The mayor has decided to impose a law to cut all rental rates on apartments in half and to fix them at this level. Will this help the poor? Why or why not? Be sure to distinguish between the short run and the long run.

Rent controls generally fix the price of rental housing below market equilibrium. Economic analysis suggests these controls

Which of the following is a true statement regarding the economic impact of a subsidy?

Figure 4-22 -Refer to Figure 4-22. The equilibrium price in the market before the tax is imposed is

Figure 4-25 -Refer to Figure 4-25. The equilibrium price before the tax is imposed is

Which of the following statements regarding black markets is true?

Figure 4-24 -Refer to Figure 4-24. The amount of the tax on each unit of the good 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 more elastic the supply of a product, the more likely it is that the burden of a tax will

Figure 4-22 -Refer to Figure 4-22. From this tax the government will collect a total of

Figure 4-14 -In Figure 4-14, which of the following is true at the price ceiling, P?

Figure 4-24 -Refer to Figure 4-24. The amount of deadweight loss associated with the tax is equal to

Suppose the U.S. Government banned the sale and production of cigarettes. What are likely effects of this action on the market for cigarettes?

The more elastic the supply of a product, the more likely it is that the burden of a tax will

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

Figure 4-24 -Refer to Figure 4-24. The amount of tax revenue received by the government is equal to the area

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

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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