Question 1

If a $2 tax per bottle of wine is imposed on wine producers, which of the following will occur?

Accepted Answer

A) The price of wine will increase, fewer bottles will be purchased, and there will be a deadweight loss from this tax. 
B) The price of wine will increase, more bottles will be purchased, and consumers will gain as the result of this tax. 
C) The price of wine will decrease, more bottles will be purchased, and there will be a deadweight loss from this tax. 
D) The price of wine and quantity sold will be unchanged. 
A) The price of wine will increase, fewer bottles will be purchased, and there will be a deadweight loss from this tax. 
B) The price of wine will increase, more bottles will be purchased, and consumers will gain as the result of this tax. 
C) The price of wine will decrease, more bottles will be purchased, and there will be a deadweight loss from this tax. 
D) The price of wine and quantity sold will be unchanged.

Question 2

If a household has $40,000 in taxable income and its tax liability is $20,000, the household's average tax rate is

Accepted Answer

A) 10 percent. 
B) 25 percent. 
C) 40 percent. 
D) 50 percent 
A) 10 percent. 
B) 25 percent. 
C) 40 percent. 
D) 50 percent

Question 3

Which of the following would tend to increase the wage of coal miners?

Accepted Answer

A) new environmental laws that make it more costly for firms to use coal in their production process 
B) an increase in the price of oil, a substitute for coal 
C) a decrease in the demand for coal 
D) an increase in the supply of coal miners 
A) new environmental laws that make it more costly for firms to use coal in their production process 
B) an increase in the price of oil, a substitute for coal 
C) a decrease in the demand for coal 
D) an increase in the supply of coal miners

Question 4

Use the figure below to answer the following question(s).
Figure 4-9
  
-Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b. If a $.40 excise tax was imposed,

Accepted Answer

A) the supply of gasoline would shift to S₂. 
B) the price of gasoline to consumers would increase from $1.20 per gallon to $1.40 per gallon. 
C) the net price received by producers of gasoline would decline from $1.20 per gallon to $1.00 per gallon. 
D) all of the above would occur. 
A) the supply of gasoline would shift to S₂. 
B) the price of gasoline to consumers would increase from $1.20 per gallon to $1.40 per gallon. 
C) the net price received by producers of gasoline would decline from $1.20 per gallon to $1.00 per gallon. 
D) all of the above would occur.

Question 5

Figure 4-5
  
-Figure 4-5 represents the market for gasoline before and after a per-gallon tax. What does the triangular area ABC represent?

Accepted Answer

A) the amount of revenue raised due to imposing the tax 
B) the loss in consumer surplus due to imposing the tax 
C) the loss in producer surplus due to imposing the tax 
D) the deadweight loss (or excess burden) caused by the tax 
A) the amount of revenue raised due to imposing the tax 
B) the loss in consumer surplus due to imposing the tax 
C) the loss in producer surplus due to imposing the tax 
D) the deadweight loss (or excess burden) caused by the tax

Question 6

Which one of the following will most likely be harmed by legislation exempting teenagers from the minimum wage?

Accepted Answer

A) a high school student seeking a part-time job 
B) a high-skilled, 30-year-old worker who is unlikely to compete with low-skilled teenagers in the employment market 
C) a large family that often employs the services of low-skilled, part-time workers 
D) an illiterate 40-year-old worker with few labor skills 
A) a high school student seeking a part-time job 
B) a high-skilled, 30-year-old worker who is unlikely to compete with low-skilled teenagers in the employment market 
C) a large family that often employs the services of low-skilled, part-time workers 
D) an illiterate 40-year-old worker with few labor skills

Question 7

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.

Question 8

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

Accepted Answer

A) the market price of the product will fall in response to the subsidy. 
B) the market price of the product will rise in response to the subsidy. 
C) the market price of the product will not change in response to the subsidy. 
D) producers will reduce the supply of the product. 
A) the market price of the product will fall in response to the subsidy. 
B) the market price of the product will rise in response to the subsidy. 
C) the market price of the product will not change in response to the subsidy. 
D) producers will reduce the supply of the product.

Question 9

Which of the following is correct?

Accepted Answer

A) An increase in the number of students choosing to major in marketing would likely lead to an increase in the wage earned by marketing graduates. 
B) A new law allowing nurses to offer patients some of the medical services that are currently only available through doctors would increase the wage rate earned by doctors. 
C) An increase in the demand for newly constructed homes would lead to a reduction in the price of lumber. 
D) New licensing requirements that substantially lowered the number of plumbers would likely lead to an increase in the wage rate of plumbers. 
A) An increase in the number of students choosing to major in marketing would likely lead to an increase in the wage earned by marketing graduates. 
B) A new law allowing nurses to offer patients some of the medical services that are currently only available through doctors would increase the wage rate earned by doctors. 
C) An increase in the demand for newly constructed homes would lead to a reduction in the price of lumber. 
D) New licensing requirements that substantially lowered the number of plumbers would likely lead to an increase in the wage rate of plumbers.

Question 10

Which of the following generalizations about the benefit of a subsidy is correct?

Accepted Answer

A) The more inelastic the supply of a product, the larger the portion of the benefit will be to buyers. 
B) The more inelastic the demand for a product, the larger the portion of the benefit will be to buyers. 
C) The more elastic the supply of a product, the smaller the portion of the benefit will be to buyers. 
D) The distribution of the benefit of a subsidy is not affected by the elasticity of the supply and demand for the product for which the subsidy is granted. 
A) The more inelastic the supply of a product, the larger the portion of the benefit will be to buyers. 
B) The more inelastic the demand for a product, the larger the portion of the benefit will be to buyers. 
C) The more elastic the supply of a product, the smaller the portion of the benefit will be to buyers. 
D) The distribution of the benefit of a subsidy is not affected by the elasticity of the supply and demand for the product for which the subsidy is granted.

Question 11

Kathy works full time during the day as an economist and faces a 50 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) $5,000 
D) $10,000 
A) $1,000 
B) $4,000 
C) $5,000 
D) $10,000

Question 12

Which of the following generalizations about the burden of an excise tax is correct?

Accepted Answer

A) The more inelastic the supply of a product, the larger the portion of an excise tax will be paid by buyers. 
B) The more inelastic the demand for a product, the larger the portion of an excise tax will be paid by buyers. 
C) The more elastic the supply of a product, the smaller the portion of an excise tax will be paid by buyers. 
D) The burden of an excise tax on a product is independent of the elasticity of the supply and demand for the product on which the tax is levied. 
A) The more inelastic the supply of a product, the larger the portion of an excise tax will be paid by buyers. 
B) The more inelastic the demand for a product, the larger the portion of an excise tax will be paid by buyers. 
C) The more elastic the supply of a product, the smaller the portion of an excise tax will be paid by buyers. 
D) The burden of an excise tax on a product is independent of the elasticity of the supply and demand for the product on which the tax is levied.

Question 13

After a natural disaster, such as a hurricane, the increased demand for certain items (like lumber, electric generators, and chainsaws) causes their prices to rise. These higher prices

Accepted Answer

A) discourage the flow of these items into the area. 
B) encourage consumers to purchase the items even if they do not plan to use them. 
C) help to direct the items toward their highest valued uses. 
D) do all of the above. 
A) discourage the flow of these items into the area. 
B) encourage consumers to purchase the items even if they do not plan to use them. 
C) help to direct the items toward their highest valued uses. 
D) do all of the above.

Question 14

If a local government enacts rent control legislation that sets the price of rental housing below equilibrium, which of the following will most likely happen in the local rental housing market?

Accepted Answer

A) Discrimination in the rental housing market will be less likely. 
B) The quality of rental housing will improve. 
C) A surplus of rental housing will develop. 
D) A shortage of rental housing will develop. 
A) Discrimination in the rental housing market will be less likely. 
B) The quality of rental housing will improve. 
C) A surplus of rental housing will develop. 
D) A shortage of rental housing will develop.

Question 15

A subsidy on a product will generate more actual benefit for producers (and less for consumers) when

Accepted Answer

A) the supply of the product is relatively inelastic. 
B) the supply of the product is relatively elastic. 
C) the demand for the product is relatively inelastic. 
D) either b or c is true 
A) the supply of the product is relatively inelastic. 
B) the supply of the product is relatively elastic. 
C) the demand for the product is relatively inelastic. 
D) either b or c is true

Question 16

Suppose the demand curve for a good is highly elastic and the supply curve is highly inelastic. If the government taxes this good,

Accepted Answer

A) buyers and sellers will each share 50 percent of the burden, regardless of the elasticities of the demand and supply curves. 
B) sellers will bear a larger share of the tax burden. 
C) the distribution of the burden will depend upon whether the buyers or the sellers are required to send the tax to the government. 
D) buyers will bear a larger share of the tax burden. 
A) buyers and sellers will each share 50 percent of the burden, regardless of the elasticities of the demand and supply curves. 
B) sellers will bear a larger share of the tax burden. 
C) the distribution of the burden will depend upon whether the buyers or the sellers are required to send the tax to the government. 
D) buyers will bear a larger share of the tax burden.

Question 17

If we observe long lines of people camping out to get tickets to a concert, this tells us

Accepted Answer

A) the ticket price is below the market equilibrium price. 
B) the ticket price is above the market equilibrium price. 
C) it is likely to be a good concert, but it doesn't tell us anything about the ticket price. 
D) the opportunity cost of time of the people in line is higher than the average for the general population. 
A) the ticket price is below the market equilibrium price. 
B) the ticket price is above the market equilibrium price. 
C) it is likely to be a good concert, but it doesn't tell us anything about the ticket price. 
D) the opportunity cost of time of the people in line is higher than the average for the general population.

Question 18

Use the figure below to answer the following question(s).
Figure 4-7
  
-Refer to Figure 4-7. The supply curve S₁ and the demand curve D indicate initial conditions in the market for gasoline. A $.60-per-gallon excise tax on gasoline is levied. How much revenue does the $.60-per-gallon tax generate for the government?

Accepted Answer

A) $40 billion 
B) $48 billion 
C) $50 billion 
D) $60 billion 
A) $40 billion 
B) $48 billion 
C) $50 billion 
D) $60 billion

Question 19

How would a decrease in lumber prices influence the home construction market?

Accepted Answer

A) The demand for newly constructed homes will increase. 
B) The demand for newly constructed homes will decrease. 
C) The supply of newly constructed homes will increase. 
D) The supply of newly constructed homes will decrease. 
A) The demand for newly constructed homes will increase. 
B) The demand for newly constructed homes will decrease. 
C) The supply of newly constructed homes will increase. 
D) The supply of newly constructed homes will decrease.

Question 20

In 2010 the federal government reduced the Social Security tax withholding rate from 12.4 percent (6.2 percent on both the employer and employee) to 8.4 percent (4.2 percent on both the employer and employee) on the wages of all workers. If the tax were redefined such that the entire 12.4 percent was statutorily levied on employers, economic analysis suggests that the actual burden of the tax would

Accepted Answer

A) remain unchanged. 
B) shift more heavily toward employers. 
C) shift more heavily toward employees. 
D) be different than if the entire 12.4 percent was statutorily imposed on employees. 
A) remain unchanged. 
B) shift more heavily toward employers. 
C) shift more heavily toward employees. 
D) be different than if the entire 12.4 percent was statutorily imposed on employees.

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

If a $2 tax per bottle of wine is imposed on wine producers, which of the following will occur?

If a household has $40,000 in taxable income and its tax liability is $20,000, the household's average tax rate is

Which of the following would tend to increase the wage of coal miners?

Use the figure below to answer the following question(s). Figure 4-9 -Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b. If a $.40 excise tax was imposed,

Figure 4-5 -Figure 4-5 represents the market for gasoline before and after a per-gallon tax. What does the triangular area ABC represent?

Which one of the following will most likely be harmed by legislation exempting teenagers from the minimum wage?

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

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

Which of the following is correct?

Which of the following generalizations about the benefit of a subsidy is correct?

Which of the following generalizations about the burden of an excise tax is correct?

After a natural disaster, such as a hurricane, the increased demand for certain items (like lumber, electric generators, and chainsaws) causes their prices to rise. These higher prices

If a local government enacts rent control legislation that sets the price of rental housing below equilibrium, which of the following will most likely happen in the local rental housing market?

A subsidy on a product will generate more actual benefit for producers (and less for consumers) when

Suppose the demand curve for a good is highly elastic and the supply curve is highly inelastic. If the government taxes this good,

If we observe long lines of people camping out to get tickets to a concert, this tells us

How would a decrease in lumber prices influence the home construction market?

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

B: 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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