Question 1

A tax for which the average tax rate rises with income is defined as a

Accepted Answer

A) regressive tax. 
B) proportional tax. 
C) neutral tax. 
D) progressive tax. 
A) regressive tax. 
B) proportional tax. 
C) neutral tax. 
D) progressive tax.

Question 2

The term "deadweight loss" or "excess burden" is used to describe the

Accepted Answer

A) expenditures on exercise and weight-reducing programs by individuals who are overweight. 
B) loss from the elimination of mutually beneficial exchanges that results from the imposition of a tax in a market. 
C) difference between the value consumers place on a good and the price they have to pay for it. 
D) reduction in consumer welfare that occurs when the firms in a market make a profit. 
A) expenditures on exercise and weight-reducing programs by individuals who are overweight. 
B) loss from the elimination of mutually beneficial exchanges that results from the imposition of a tax in a market. 
C) difference between the value consumers place on a good and the price they have to pay for it. 
D) reduction in consumer welfare that occurs when the firms in a market make a profit.

Question 3

Use the table below to choose the correct answer.  
The marginal tax rate on income in the $25,000 to $30,000 range is

Accepted Answer

A) 10 percent. 
B) 20 percent. 
C) 50 percent. 
D) 70 percent. 
A) 10 percent. 
B) 20 percent. 
C) 50 percent. 
D) 70 percent.

Question 4

A price ceiling that sets the price of a good below market equilibrium will cause

Accepted Answer

A) an increase in quantity demanded of the good. 
B) a decrease in quantity supplied of the good. 
C) a shortage of the good. 
D) all of the above. 
A) an increase in quantity demanded of the good. 
B) a decrease in quantity supplied of the good. 
C) a shortage of the good. 
D) all of the above.

Question 5

The more inelastic the demand for a product, the more likely that the actual benefit of a subsidy granted on the product will

Accepted Answer

A) go to sellers. 
B) go to buyers. 
C) go equally to both buyers and sellers. 
D) do none of the above. 
A) go to sellers. 
B) go to buyers. 
C) go equally to both buyers and sellers. 
D) do none of the above.

Question 6

Figure 4-2
  
-Given the demand and supply conditions shown in Figure 4-2, if the government imposes a price ceiling of a, indicate the quantity consumers would like to buy and the amount producers would be willing to supply.

Accepted Answer

A) Consumers would want to buy t; producers would be willing to sell r. 
B) Consumers would want to buy r; producers would be willing to sell t. 
C) Consumers would want to buy t; producers would be willing to sell s. 
D) Consumers would want to buy s; producers would be willing to sell s. 
A) Consumers would want to buy t; producers would be willing to sell r. 
B) Consumers would want to buy r; producers would be willing to sell t. 
C) Consumers would want to buy t; producers would be willing to sell s. 
D) Consumers would want to buy s; producers would be willing to sell s.

Question 7

A price floor set above an equilibrium price tends to cause persistent imbalances in the market because

Accepted Answer

A) Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B) Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C) Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D) Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus. 
A) Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B) Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C) Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D) Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Question 8

Use the figure below to answer the following question(s).
Figure 4-13
  
-Refer to Figure 4-13. The supply curve S and the demand curve D₁ indicate initial conditions in the market for flu shots. A new government program is implemented that grants buyers a $25 subsidy when they buy a flu shot, shifting the demand curve from D₁ to D₂. Which of the following is true for this subsidy given the information provided in the exhibit?

Accepted Answer

A) Buyers of flu shots will receive an actual benefit of $10 from the subsidy, while sellers of flu shots will receive an actual benefit of $15 from the subsidy. 
B) Buyers of flu shots will receive an actual benefit of $15 from the subsidy, while sellers of flu shots will receive an actual benefit of $10 from the subsidy. 
C) Buyers of flu shots will receive the full $25 benefit from the subsidy. 
D) Sellers of flu shots will receive the full $25 benefit from the subsidy. 
A) Buyers of flu shots will receive an actual benefit of $10 from the subsidy, while sellers of flu shots will receive an actual benefit of $15 from the subsidy. 
B) Buyers of flu shots will receive an actual benefit of $15 from the subsidy, while sellers of flu shots will receive an actual benefit of $10 from the subsidy. 
C) Buyers of flu shots will receive the full $25 benefit from the subsidy. 
D) Sellers of flu shots will receive the full $25 benefit from the subsidy.

Question 9

Kathy works full time during the day as an economist and faces a 90 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) $6,000 
D) $10,000 
A) $1,000 
B) $4,000 
C) $6,000 
D) $10,000

Question 10

A law establishing a minimum legal price for a good or service (the minimum wage for example) is known as

Accepted Answer

A) an equilibrium price. 
B) a price floor. 
C) a price ceiling. 
D) a price wall. 
A) an equilibrium price. 
B) a price floor. 
C) a price ceiling. 
D) a price wall.

Question 11

A price ceiling set below an equilibrium price tends to cause persistent imbalances in the market because

Accepted Answer

A) Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B) Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C) Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D) Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus. 
A) Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. 
B) Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus. 
C) Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. 
D) Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

Question 12

If the supply of health care services is highly inelastic, programs that subsidize the cost of purchasing medical services will

Accepted Answer

A) lead to higher prices for medical services. 
B) lead to lower prices for medical services. 
C) not affect the price of medical services. 
D) help the buyers of medical services more than the sellers of those services. 
A) lead to higher prices for medical services. 
B) lead to lower prices for medical services. 
C) not affect the price of medical services. 
D) help the buyers of medical services more than the sellers of those services.

Question 13

A law establishing a maximum legal price for a good or service (rent controls for example) is known as

Accepted Answer

A) an equilibrium price. 
B) a price floor. 
C) a price ceiling. 
D) a price wall. 
A) an equilibrium price. 
B) a price floor. 
C) a price ceiling. 
D) a price wall.

Question 14

An income tax is defined as regressive if

Accepted Answer

A) the tax liability of those with higher incomes exceeds the tax liability of those with low incomes. 
B) the tax liability of those with higher incomes is less than the tax liability of those with low incomes. 
C) those with higher incomes pay a higher percentage of their incomes in taxes than those with low incomes. 
D) those with higher incomes pay a lower percentage of their incomes in taxes than those with low incomes. 
A) the tax liability of those with higher incomes exceeds the tax liability of those with low incomes. 
B) the tax liability of those with higher incomes is less than the tax liability of those with low incomes. 
C) those with higher incomes pay a higher percentage of their incomes in taxes than those with low incomes. 
D) those with higher incomes pay a lower percentage of their incomes in taxes than those with low incomes.

Question 15

The excess burden or deadweight loss of a tax refers to the

Accepted Answer

A) increase in product price as a result of the tax. 
B) growth in government funded programs as a result of the revenue generated by the tax. 
C) loss of disposable income consumers suffer from the tax. 
D) reduction in gains from mutually beneficial exchanges that are eliminated as a result of the tax. 
A) increase in product price as a result of the tax. 
B) growth in government funded programs as a result of the revenue generated by the tax. 
C) loss of disposable income consumers suffer from the tax. 
D) reduction in gains from mutually beneficial exchanges that are eliminated as a result of the tax.

Question 16

A new law requiring plumbers to pass strict certification tests that reduce the number of plumbers would

Accepted Answer

A) increase the wage rate of plumbers. 
B) decrease the wage rate of plumbers. 
C) increase the employment of plumbers. 
D) cause no change in the labor market for plumbers. 
A) increase the wage rate of plumbers. 
B) decrease the wage rate of plumbers. 
C) increase the employment of plumbers. 
D) cause no change in the labor market for plumbers.

Question 17

A deadweight loss results from the imposition of a tax on a good because the tax

Accepted Answer

A) induces the government to increase its expenditures. 
B) reduces the quantity of exchanges between buyers and sellers. 
C) causes a disequilibrium in the market. 
D) imposes a loss on buyers that is greater than the loss to sellers. 
A) induces the government to increase its expenditures. 
B) reduces the quantity of exchanges between buyers and sellers. 
C) causes a disequilibrium in the market. 
D) imposes a loss on buyers that is greater than the loss to sellers.

Question 18

The more elastic the supply of a product, the more likely that the actual benefit of a subsidy granted of the product will

Accepted Answer

A) go to sellers. 
B) go to buyers. 
C) go equally to both buyers and sellers. 
D) do none of the above. 
A) go to sellers. 
B) go to buyers. 
C) go equally to both buyers and sellers. 
D) do none of the above.

Question 19

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that the below-equilibrium prices established by rent controls would

Accepted Answer

A) create a surplus of rental housing. 
B) promote a rapid increase in the future supply of housing. 
C) result in poor service and quality deterioration of many rental units. 
D) lead to a reduction in housing discrimination against minorities. 
A) create a surplus of rental housing. 
B) promote a rapid increase in the future supply of housing. 
C) result in poor service and quality deterioration of many rental units. 
D) lead to a reduction in housing discrimination against minorities.

Question 20

Use the figure below to answer the following question(s).
Figure 4-4
  
-Given the demand and supply conditions shown in Figure 4-4, if the government imposes a price ceiling of a, which of the following would be true?

Accepted Answer

A) Consumers would want to buy r units. 
B) Consumers would want to buy s units. 
C) Producers would wish to sell s units. 
D) Producers would wish to sell r units. 
A) Consumers would want to buy r units. 
B) Consumers would want to buy s units. 
C) Producers would wish to sell s units. 
D) Producers would wish to sell r units.

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

A tax for which the average tax rate rises with income is defined as a

The term "deadweight loss" or "excess burden" is used to describe the

Use the table below to choose the correct answer. The marginal tax rate on income in the $25,000 to $30,000 range is

A price ceiling that sets the price of a good below market equilibrium will cause

The more inelastic the demand for a product, the more likely that the actual benefit of a subsidy granted on the product will

Figure 4-2 -Given the demand and supply conditions shown in Figure 4-2, if the government imposes a price ceiling of a, indicate the quantity consumers would like to buy and the amount producers would be willing to supply.

A price floor set above an equilibrium price tends to cause persistent imbalances in the market because

A law establishing a minimum legal price for a good or service (the minimum wage for example) is known as

A price ceiling set below an equilibrium price tends to cause persistent imbalances in the market because

If the supply of health care services is highly inelastic, programs that subsidize the cost of purchasing medical services will

A law establishing a maximum legal price for a good or service (rent controls for example) is known as

An income tax is defined as regressive if

The excess burden or deadweight loss of a tax refers to the

A new law requiring plumbers to pass strict certification tests that reduce the number of plumbers would

A deadweight loss results from the imposition of a tax on a good because the tax

The more elastic the supply of a product, the more likely that the actual benefit of a subsidy granted of the product will

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that the below-equilibrium prices established by rent controls would

Use the figure below to answer the following question(s). Figure 4-4 -Given the demand and supply conditions shown in Figure 4-4, if the government imposes a price ceiling of a, which of the following would be true?

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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