Question 1

The actual burden of a tax

Accepted Answer

A) falls most heavily on the side of the market that is more elastic. 
B) falls most heavily on the side of the market that is more inelastic. 
C) falls most heavily on the side of the market that is closest to unitary elasticity. 
D) is distributed independently of relative elasticities of supply and demand. 
A) falls most heavily on the side of the market that is more elastic. 
B) falls most heavily on the side of the market that is more inelastic. 
C) falls most heavily on the side of the market that is closest to unitary elasticity. 
D) is distributed independently of relative elasticities of supply and demand.

Question 2

In the supply and demand model, a subsidy granted to sellers is illustrated by

Accepted Answer

A) a downward shift in the demand curve, by the per unit amount of the subsidy. 
B) an upward shift in the demand curve, by the per unit amount of the subsidy. 
C) a downward shift in the supply curve, by the per unit amount of the subsidy. 
D) an upward shift in the supply curve, by the per unit amount of the subsidy. 
A) a downward shift in the demand curve, by the per unit amount of the subsidy. 
B) an upward shift in the demand curve, by the per unit amount of the subsidy. 
C) a downward shift in the supply curve, by the per unit amount of the subsidy. 
D) an upward shift in the supply curve, by the per unit amount of the subsidy.

Question 3

A legally mandated minimum wage is an example of

Accepted Answer

A) the invisible hand principle. 
B) a price floor. 
C) a price ceiling. 
D) a fringe benefit. 
A) the invisible hand principle. 
B) a price floor. 
C) a price ceiling. 
D) a fringe benefit.

Question 4

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 5

The actual incidence (or burden) of a tax refers to

Accepted Answer

A) the governmental agency responsible for collecting the tax. 
B) who actually bears the burden of a tax once changes in market prices are taken into account. 
C) the degree of progressiveness in the rate structure of the tax. 
D) who the tax is legally or statutorily imposed on. 
A) the governmental agency responsible for collecting the tax. 
B) who actually bears the burden of a tax once changes in market prices are taken into account. 
C) the degree of progressiveness in the rate structure of the tax. 
D) who the tax is legally or statutorily imposed on.

Question 6

Which of the following statements about rent control is accurate?

Accepted Answer

A) Rent control has proven successful in providing low-cost housing for poor people. 
B) Rent control has produced an increase in available rental units. 
C) Many well-to-do people live in rent-controlled apartments. 
D) All of the above are accurate statements. 
A) Rent control has proven successful in providing low-cost housing for poor people. 
B) Rent control has produced an increase in available rental units. 
C) Many well-to-do people live in rent-controlled apartments. 
D) All of the above are accurate statements.

Question 7

A payment the government makes to either the buyer or seller, usually on a per-unit basis, when a good or service is purchased or sold is called a

Accepted Answer

A) black market. 
B) interest rate. 
C) subsidy. 
D) tax. 
A) black market. 
B) interest rate. 
C) subsidy. 
D) tax.

Question 8

A market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices is referred to in economics as a

Accepted Answer

A) gray market. 
B) resource market. 
C) black market. 
D) criminal market. 
A) gray market. 
B) resource market. 
C) black market. 
D) criminal market.

Question 9

Use the figure below to answer the following question(s).
Figure 4-8
  
-Refer to Figure 4-8. Which of the following is true?

Accepted Answer

A) The tax increases the price of soft coal by $40 per ton. 
B) Since the demand for soft coal is more inelastic than the supply, consumers bear most of the burden of the tax. 
C) Since the demand for soft coal is more elastic than the supply, suppliers of soft coal bear most of the burden of the tax. 
D) Since the supply of soft coal is highly inelastic, the primary burden of the tax is imposed on the consumers of soft coal. 
A) The tax increases the price of soft coal by $40 per ton. 
B) Since the demand for soft coal is more inelastic than the supply, consumers bear most of the burden of the tax. 
C) Since the demand for soft coal is more elastic than the supply, suppliers of soft coal bear most of the burden of the tax. 
D) Since the supply of soft coal is highly inelastic, the primary burden of the tax is imposed on the consumers of soft coal.

Question 10

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a

Accepted Answer

A) flat (elastic) demand curve and a steep (inelastic) supply curve. 
B) steep (inelastic) demand curve and a flat (elastic) supply curve. 
C) steep (inelastic) demand curve and steep (inelastic) supply curve. 
D) flat (elastic) demand curve and a flat (elastic) supply curve. 
A) flat (elastic) demand curve and a steep (inelastic) supply curve. 
B) steep (inelastic) demand curve and a flat (elastic) supply curve. 
C) steep (inelastic) demand curve and steep (inelastic) supply curve. 
D) flat (elastic) demand curve and a flat (elastic) supply curve.

Question 11

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, which shifts the supply curve from S₁ to S₂. Imposing the tax causes the equilibrium price of gasoline to increase from

Accepted Answer

A) $.80 to $1.40. 
B) $.80 to $1.50. 
C) $.90 to $1.50. 
D) $.90 to $1.40. 
A) $.80 to $1.40. 
B) $.80 to $1.50. 
C) $.90 to $1.50. 
D) $.90 to $1.40.

Question 12

If Heather's tax liability increases from $10,000 to $16,000 when her income increases from $30,000 to $40,000, her marginal tax rate is

Accepted Answer

A) 33 percent. 
B) 35 percent. 
C) 50 percent. 
D) 60 percent. 
A) 33 percent. 
B) 35 percent. 
C) 50 percent. 
D) 60 percent.

Question 13

Use the figure below illustrating the impact of an excise tax to answer the following question(s).
Figure 4-6
  
-The revenue generated by the tax illustrated in Figure 4-6 is given by the area

Accepted Answer

A) ACLH. 
B) BEKM. 
C) ACFG. 
D) 0AGJ. 
A) ACLH. 
B) BEKM. 
C) ACFG. 
D) 0AGJ.

Question 14

Use the figure below to answer the following question(s).
Figure 4-10
  
-Figure 4-10 shows the market for a good before and after an excise tax is imposed. What does the triangular area C represent?

Accepted Answer

A) the deadweight loss accompanying the tax 
B) the tax revenue derived from sellers 
C) the tax revenue derived from buyers 
D) the total tax revenue generated by the tax 
A) the deadweight loss accompanying the tax 
B) the tax revenue derived from sellers 
C) the tax revenue derived from buyers 
D) the total tax revenue generated by the tax

Question 15

Which tax rate measures the percent of your income paid in taxes?

Accepted Answer

A) the marginal tax rate 
B) the average tax rate 
C) progressive tax coefficient 
D) the excise tax rate 
A) the marginal tax rate 
B) the average tax rate 
C) progressive tax coefficient 
D) the excise tax rate

Question 16

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 and a $.40 excise tax is illustrated. Which of the following states the actual burden of the tax?

Accepted Answer

A) $.20 for buyers and $.20 for sellers 
B) $.30 for buyers and $.10 for sellers 
C) The entire $.40 falls on sellers. 
D) The entire $.40 falls on buyers. 
A) $.20 for buyers and $.20 for sellers 
B) $.30 for buyers and $.10 for sellers 
C) The entire $.40 falls on sellers. 
D) The entire $.40 falls on buyers.

Question 17

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 supply of labor is relatively inelastic when compared to the elasticity of the demand for labor, the burden of this tax will

Accepted Answer

A) continue to fall primarily on employees. 
B) continue to fall primarily on employers. 
C) be divided equally between employees and employers. 
D) change from primarily falling on employees to employers. 
A) continue to fall primarily on employees. 
B) continue to fall primarily on employers. 
C) be divided equally between employees and employers. 
D) change from primarily falling on employees to employers.

Question 18

If drugs such as marijuana and cocaine were legalized, it would be likely that

Accepted Answer

A) their prices would decrease. 
B) there would be a reduction in tainted or poor quality drugs. 
C) there would be less violence occurring in drug transactions. 
D) all of the above. 
A) their prices would decrease. 
B) there would be a reduction in tainted or poor quality drugs. 
C) there would be less violence occurring in drug transactions. 
D) all of the above.

Question 19

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 and a $.40 excise tax is illustrated. What does the triangular area abc represent?

Accepted Answer

A) the revenue the government derives from the tax 
B) the tax paid by consumers 
C) the tax paid by producers 
D) the deadweight loss (or excess burden) created by the tax 
A) the revenue the government derives from the tax 
B) the tax paid by consumers 
C) the tax paid by producers 
D) the deadweight loss (or excess burden) created by the tax

Question 20

Which of the following will most likely occur when government price controls fix the price of a good above market equilibrium?

Accepted Answer

A) Waiting lines to buy the good will develop. 
B) The quality of the good will deteriorate. 
C) Consumers will buy more than they would at the market equilibrium price. 
D) A surplus of the good will develop. 
A) Waiting lines to buy the good will develop. 
B) The quality of the good will deteriorate. 
C) Consumers will buy more than they would at the market equilibrium price. 
D) A surplus of the good will develop.

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

The actual burden of a tax

In the supply and demand model, a subsidy granted to sellers is illustrated by

A legally mandated minimum wage is an example of

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

The actual incidence (or burden) of a tax refers to

Which of the following statements about rent control is accurate?

A payment the government makes to either the buyer or seller, usually on a per-unit basis, when a good or service is purchased or sold is called a

A market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices is referred to in economics as a

Use the figure below to answer the following question(s). Figure 4-8 -Refer to Figure 4-8. Which of the following is true?

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a

If Heather's tax liability increases from $10,000 to $16,000 when her income increases from $30,000 to $40,000, her marginal tax rate is

Use the figure below illustrating the impact of an excise tax to answer the following question(s). Figure 4-6 -The revenue generated by the tax illustrated in Figure 4-6 is given by the area

Use the figure below to answer the following question(s). Figure 4-10 -Figure 4-10 shows the market for a good before and after an excise tax is imposed. What does the triangular area C represent?

Which tax rate measures the percent of your income paid in taxes?

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 and a $.40 excise tax is illustrated. Which of the following states the actual burden of the tax?

If drugs such as marijuana and cocaine were legalized, it would be likely that

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 and a $.40 excise tax is illustrated. What does the triangular area abc represent?

Which of the following will most likely occur when government price controls fix the price of a good above market equilibrium?

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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