Question 1

Which of the following statements is true?

Accepted Answer

A) In both black markets and legal markets, supply and demand determine price. 
B) The quality of products sold in black markets and legal markets are similar. 
C) The price of products in black markets tends to be the same as those in legal markets for otherwise identical products. 
D) The rate of violence is similar in black markets and legal markets. 
A) In both black markets and legal markets, supply and demand determine price. 
B) The quality of products sold in black markets and legal markets are similar. 
C) The price of products in black markets tends to be the same as those in legal markets for otherwise identical products. 
D) The rate of violence is similar in black markets and legal markets.

Question 2

After the ban on the production and sale of alcohol ended in 1933,

Accepted Answer

A) the quality of alcohol sold declined. 
B) the murder rate declined. 
C) the profit rate for bootleg sellers of alcohol increased. 
D) all of the above occurred. 
A) the quality of alcohol sold declined. 
B) the murder rate declined. 
C) the profit rate for bootleg sellers of alcohol increased. 
D) all of the above occurred.

Question 3

When a tax is levied on the sale of an item,

Accepted Answer

A) consumers will generally buy more of it. 
B) producers will generally supply more of it. 
C) the price (including the tax) of the product will generally decline. 
D) less of the item will generally be bought and sold. 
A) consumers will generally buy more of it. 
B) producers will generally supply more of it. 
C) the price (including the tax) of the product will generally decline. 
D) less of the item will generally be bought and sold.

Question 4

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

Accepted Answer

A) with shortages and waiting lists, they have no incentive to maintain and improve their property. 
B) they become resigned to the fact that many of their apartments are going to be vacant at any given time. 
C) with rent control the government guarantees landlords a minimal level of profit. 
D) with rent control it becomes the government's responsibility to maintain rental housing. 
A) with shortages and waiting lists, they have no incentive to maintain and improve their property. 
B) they become resigned to the fact that many of their apartments are going to be vacant at any given time. 
C) with rent control the government guarantees landlords a minimal level of profit. 
D) with rent control it becomes the government's responsibility to maintain rental housing.

Question 5

If Lex's income increases from $30,000 to $40,000 and his tax liability increases from $6,000 to $10,000, which of the following is true?

Accepted Answer

A) His marginal tax rate is 20 percent in this range. 
B) His average tax rate is 40 percent at his new income level of $40,000. 
C) He faces a regressive tax in this income range. 
D) He faces a progressive tax in this income range. 
A) His marginal tax rate is 20 percent in this range. 
B) His average tax rate is 40 percent at his new income level of $40,000. 
C) He faces a regressive tax in this income range. 
D) He faces a progressive tax in this income range.

Question 6

An excise tax levied on a product will impose a larger relative burden on consumers (and a smaller relative burden on sellers) 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 7

If the demand for a good is highly inelastic, a tax on the good

Accepted Answer

A) places the burden of the tax equally on buyers and sellers 
B) permits sellers to pass most of the cost increase resulting from the tax on to the consumers of the product 
C) reduces the profits earned by sellers since they must write the check to pay the tax 
D) makes the demand more inelastic 
E) makes the demand more elastic 
A) places the burden of the tax equally on buyers and sellers 
B) permits sellers to pass most of the cost increase resulting from the tax on to the consumers of the product 
C) reduces the profits earned by sellers since they must write the check to pay the tax 
D) makes the demand more inelastic 
E) makes the demand more elastic

Question 8

The presence of price controls in a market usually is an indication that

Accepted Answer

A) an insufficient quantity of a good or service was being produced in that market to meet the public's need. 
B) the usual forces of supply and demand were not able to establish an equilibrium price in that market. 
C) policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. 
D) policymakers correctly believed that, in that market, price controls would generate no inequities of their own. 
A) an insufficient quantity of a good or service was being produced in that market to meet the public's need. 
B) the usual forces of supply and demand were not able to establish an equilibrium price in that market. 
C) policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. 
D) policymakers correctly believed that, in that market, price controls would generate no inequities of their own.

Question 9

Other things constant, how will a decrease in the wages of teenagers affect the market for fast food hamburgers?

Accepted Answer

A) The supply of fast food hamburgers will increase, leading to an increase in the price of hamburgers. 
B) The supply of fast food hamburgers will increase, leading to a reduction in the price of hamburgers. 
C) The supply of fast food hamburgers will decrease, leading to an increase in the price of hamburgers. 
D) The supply of fast food hamburgers will decrease, leading to a reduction in the price of hamburgers. 
A) The supply of fast food hamburgers will increase, leading to an increase in the price of hamburgers. 
B) The supply of fast food hamburgers will increase, leading to a reduction in the price of hamburgers. 
C) The supply of fast food hamburgers will decrease, leading to an increase in the price of hamburgers. 
D) The supply of fast food hamburgers will decrease, leading to a reduction in the price of hamburgers.

Question 10

The large amount of violence associated with the current drug trade is mostly caused by

Accepted Answer

A) the fact that drug markets must operate outside the normal legal system. 
B) buyers and sellers often being under the influence of drugs at the time of the transaction. 
C) buyers and sellers who are often unfamiliar with conducting normal transactions within the legal system. 
D) the lack of quantity supplied and quantity demand being in balance in black markets because there is no equilibrium price in these markets. 
A) the fact that drug markets must operate outside the normal legal system. 
B) buyers and sellers often being under the influence of drugs at the time of the transaction. 
C) buyers and sellers who are often unfamiliar with conducting normal transactions within the legal system. 
D) the lack of quantity supplied and quantity demand being in balance in black markets because there is no equilibrium price in these markets.

Question 11

Use the figure below to answer the following question(s).
Figure 4-10
  
-Refer to Figure 4-10. The accompanying graph shows the market for a good before and after an excise tax is imposed. The total tax revenue generated is indicated by

Accepted Answer

A) area A + area B + area D. 
B) area A + area B + area C. 
C) area A + area B. 
D) area D only. 
A) area A + area B + area D. 
B) area A + area B + area C. 
C) area A + area B. 
D) area D only.

Question 12

Use the figure below to answer the following question(s).
Figure 4-4
  
-Given the demand and supply conditions shown in Figure 4-4, what will happen as the result of imposing a price ceiling of a?

Accepted Answer

A) Demand for the product will decline. 
B) Supply will increase. 
C) There will be a shortage of the product. 
D) Over time, the quality of the product offered by suppliers will increase. 
A) Demand for the product will decline. 
B) Supply will increase. 
C) There will be a shortage of the product. 
D) Over time, the quality of the product offered by suppliers will increase.

Question 13

The actual incidence of a tax

Accepted Answer

A) depends on the statutory incidence. 
B) is entirely random. 
C) depends on the elasticities of supply and demand. 
D) falls entirely on buyers or entirely on sellers. 
A) depends on the statutory incidence. 
B) is entirely random. 
C) depends on the elasticities of supply and demand. 
D) falls entirely on buyers or entirely on sellers.

Question 14

Which of the following is true?

Accepted Answer

A) An increase in the minimum wage will reduce the training opportunities available to inexperienced workers. 
B) The minimum wage is an example of a price floor. 
C) Most minimum wage workers are employed part-time, and they are generally either a spouse or a teenage member of a household with an income well above the poverty level. 
D) All of the above are true. 
A) An increase in the minimum wage will reduce the training opportunities available to inexperienced workers. 
B) The minimum wage is an example of a price floor. 
C) Most minimum wage workers are employed part-time, and they are generally either a spouse or a teenage member of a household with an income well above the poverty level. 
D) All of the above are true.

Question 15

Which of the following examples illustrates a proportional income tax?

Accepted Answer

A) I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,000 in taxes. 
B) I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $500 in taxes. 
C) I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $800 in taxes. 
D) I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,200 in taxes. 
A) I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,000 in taxes. 
B) I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $500 in taxes. 
C) I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $800 in taxes. 
D) I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,200 in taxes.

Question 16

A politician was recently quoted as saying, "Our country can only reach full employment by raising the minimum wage, which would cause the demand for products to increase . . . and eventually cause production to expand." His analysis overlooks the fact that

Accepted Answer

A) minimum wage legislation increases costs of production (and thus product prices) and creates an excess supply (unemployment) of unskilled labor. 
B) automation is the prime cause of unemployment. 
C) full employment can only be reached by increasing the minimum wage substantially. 
D) minimum wage legislation may increase the employment of low-skilled workers, but this will be offset by an equal reduction in the employment of skilled workers. 
A) minimum wage legislation increases costs of production (and thus product prices) and creates an excess supply (unemployment) of unskilled labor. 
B) automation is the prime cause of unemployment. 
C) full employment can only be reached by increasing the minimum wage substantially. 
D) minimum wage legislation may increase the employment of low-skilled workers, but this will be offset by an equal reduction in the employment of skilled workers.

Question 17

Both price floors and price ceilings lead to

Accepted Answer

A) shortages. 
B) surpluses. 
C) reductions in quality. 
D) a reduction in the quantity traded. 
A) shortages. 
B) surpluses. 
C) reductions in quality. 
D) a reduction in the quantity traded.

Question 18

If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen?

Accepted Answer

A) The quantity of beef demanded will decrease. 
B) The quantity of beef supplied will increase. 
C) There will be a surplus of beef. 
D) There will be a shortage of beef. 
A) The quantity of beef demanded will decrease. 
B) The quantity of beef supplied will increase. 
C) There will be a surplus of beef. 
D) There will be a shortage of beef.

Question 19

A proportional tax is defined as a tax for which the

Accepted Answer

A) average tax rate rises as income increases. 
B) average tax rate falls as income increases. 
C) average tax rate remains constant at all levels of income. 
D) dollar tax liability of those with higher income is the same as the dollar tax liability of those with lower income. 
A) average tax rate rises as income increases. 
B) average tax rate falls as income increases. 
C) average tax rate remains constant at all levels of income. 
D) dollar tax liability of those with higher income is the same as the dollar tax liability of those with lower income.

Question 20

Use the figure below to answer the following question(s).
Figure 4-12
  
-Refer to Figure 4-12. The exhibit illustrates the impact of granting a subsidy on a particular good. Which of the following is true for this subsidy given the information provided in the exhibit?

Accepted Answer

A) The subsidy has been statutorily (legally) paid to buyers. 
B) The subsidy results in an increase in the selling price of the good. 
C) Sellers will receive a larger proportion of the benefit from this subsidy than buyers. 
D) All of the above are true. 
A) The subsidy has been statutorily (legally) paid to buyers. 
B) The subsidy results in an increase in the selling price of the good. 
C) Sellers will receive a larger proportion of the benefit from this subsidy than buyers. 
D) All of the above are true.

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

Which of the following statements is true?

After the ban on the production and sale of alcohol ended in 1933,

When a tax is levied on the sale of an item,

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

If Lex's income increases from $30,000 to $40,000 and his tax liability increases from $6,000 to $10,000, which of the following is true?

An excise tax levied on a product will impose a larger relative burden on consumers (and a smaller relative burden on sellers) when

If the demand for a good is highly inelastic, a tax on the good

The presence of price controls in a market usually is an indication that

Other things constant, how will a decrease in the wages of teenagers affect the market for fast food hamburgers?

The large amount of violence associated with the current drug trade is mostly caused by

Use the figure below to answer the following question(s). Figure 4-10 -Refer to Figure 4-10. The accompanying graph shows the market for a good before and after an excise tax is imposed. The total tax revenue generated is indicated by

Use the figure below to answer the following question(s). Figure 4-4 -Given the demand and supply conditions shown in Figure 4-4, what will happen as the result of imposing a price ceiling of a?

The actual incidence of a tax

Which of the following is true?

Which of the following examples illustrates a proportional income tax?

A politician was recently quoted as saying, "Our country can only reach full employment by raising the minimum wage, which would cause the demand for products to increase . . . and eventually cause production to expand." His analysis overlooks the fact that

Both price floors and price ceilings lead to

If a government imposed price ceiling legally sets the price of beef below market equilibrium, which of the following will most likely happen?

A proportional tax is defined as a tax for which the

Use the figure below to answer the following question(s). Figure 4-12 -Refer to Figure 4-12. The exhibit illustrates the impact of granting a subsidy on a particular good. Which of the following is true for this subsidy given the information provided in the exhibit?

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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