Question 1

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. A

Question 2

Price controls will tend to cause misallocation of resources because

Accepted Answer

A)  production (or opportunity) cost no longer corresponds to market price. 
B)  people are unable to determine their preferences at the high or low price. 
C)  producers no longer have incentive to be profitable. 
D)  consumers no longer have incentive to spend their income efficiently. 
A)  production (or opportunity) cost no longer corresponds to market price. 
B)  people are unable to determine their preferences at the high or low price. 
C)  producers no longer have incentive to be profitable. 
D)  consumers no longer have incentive to spend their income efficiently. A

Question 3

If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and if as a result, the price to consumers of a pack of cigarettes went up by 40 cents, the

Accepted Answer

A)  actual burden of this tax falls mostly on consumers. 
B)  actual burden of this tax falls mostly on manufacturers. 
C)  actual burden of the tax would be shared equally by producers and consumers. 
D)  tax would clearly be a progressive tax. 
A)  actual burden of this tax falls mostly on consumers. 
B)  actual burden of this tax falls mostly on manufacturers. 
C)  actual burden of the tax would be shared equally by producers and consumers. 
D)  tax would clearly be a progressive tax. A

Question 4

When a tax is imposed on a good,

Accepted Answer

A)  the supply curve for the good always shifts. 
B)  the demand curve for the good always shifts. 
C)  the amount of the good that buyers are willing to buy at each price always remains unchanged. 
D)  the equilibrium quantity of the good always decreases. 
A)  the supply curve for the good always shifts. 
B)  the demand curve for the good always shifts. 
C)  the amount of the good that buyers are willing to buy at each price always remains unchanged. 
D)  the equilibrium quantity of the good always decreases.

Question 5

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 6

If a $5,000 property tax is placed legally (statutorily) on the buyers of new automobiles and as a result the price of automobiles at dealerships rises by $2,000, the actual burden of the tax

Accepted Answer

A)  falls completely on automobile buyers. 
B)  falls completely on automobile sellers. 
C)  is $2,000 on automobile buyers and $3,000 on sellers. 
D)  is $3,000 on automobile buyers and $2,000 on sellers. 
A)  falls completely on automobile buyers. 
B)  falls completely on automobile sellers. 
C)  is $2,000 on automobile buyers and $3,000 on sellers. 
D)  is $3,000 on automobile buyers and $2,000 on sellers.

Question 7

Use the table below to choose the correct answer.  
For the income range illustrated, the tax shown here is

Accepted Answer

A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  regressive up to $20,000 but progressive beyond that. 
A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  regressive up to $20,000 but progressive beyond that.

Question 8

Use the table below to choose the correct answer.  
The marginal tax rate on income in the $20,000 to $25,000 range is

Accepted Answer

A)  10 percent. 
B)  12 percent. 
C)  20 percent. 
D)  30 percent. 
A)  10 percent. 
B)  12 percent. 
C)  20 percent. 
D)  30 percent.

Question 9

A progressive tax

Accepted Answer

A)  is one that taxes those with higher incomes at a higher rate than those with lower incomes. 
B)  takes a similar percentage in the form of taxes from those with higher incomes as it does from those with lower incomes. 
C)  takes a higher percentage of income in the form of taxes from those with lower incomes than from those with higher incomes. 
D)  is any tax in which the dollar amount of taxes paid increases with income. 
A)  is one that taxes those with higher incomes at a higher rate than those with lower incomes. 
B)  takes a similar percentage in the form of taxes from those with higher incomes as it does from those with lower incomes. 
C)  takes a higher percentage of income in the form of taxes from those with lower incomes than from those with higher incomes. 
D)  is any tax in which the dollar amount of taxes paid increases with income.

Question 10

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 11

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 12

Which of the following is true?

Accepted Answer

A)  Most minimum wage workers are employed more than 40 hours per week. 
B)  Economic analysis indicates an increase in the minimum wage would increase the training opportunities available to inexperienced workers. 
C)  Most minimum wage workers are heads of families with incomes below the poverty level. 
D)  Most minimum wage workers are employed part-time, and they are often members of a household with an income well above the poverty level. 
A)  Most minimum wage workers are employed more than 40 hours per week. 
B)  Economic analysis indicates an increase in the minimum wage would increase the training opportunities available to inexperienced workers. 
C)  Most minimum wage workers are heads of families with incomes below the poverty level. 
D)  Most minimum wage workers are employed part-time, and they are often members of a household with an income well above the poverty level.

Question 13

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

Accepted Answer

A)  burden of a tax on the product will fall on sellers. 
B)  burden of a tax on the product will fall on buyers. 
C)  burden of a tax on the product will fall equally on both buyers and sellers. 
D)  deadweight loss of the tax will be smaller. 
A)  burden of a tax on the product will fall on sellers. 
B)  burden of a tax on the product will fall on buyers. 
C)  burden of a tax on the product will fall equally on both buyers and sellers. 
D)  deadweight loss of the tax will be smaller.

Question 14

When a supply and demand model is used to analyze the market for labor,

Accepted Answer

A)  demand is generally no longer downward sloping. 
B)  the wage rate is used on the vertical axis as the market price. 
C)  employment is used on the horizontal axis as the market quantity. 
D)  both b and c. 
A)  demand is generally no longer downward sloping. 
B)  the wage rate is used on the vertical axis as the market price. 
C)  employment is used on the horizontal axis as the market quantity. 
D)  both b and c.

Question 15

A $10 per unit government subsidy paid directly to sellers of heaters will result in

Accepted Answer

A)  a downward shift in the demand curve for heaters by $10. 
B)  an upward shift in the demand curve for heaters by $10. 
C)  a downward shift in the supply curve for heaters by $10. 
D)  an upward shift in the supply curve for heaters by $10. 
A)  a downward shift in the demand curve for heaters by $10. 
B)  an upward shift in the demand curve for heaters by $10. 
C)  a downward shift in the supply curve for heaters by $10. 
D)  an upward shift in the supply curve for heaters by $10.

Question 16

Suppose a property tax of $300 per month is legally (statutorily) imposed on the owners of rental housing. Which of the following is likely to occur?

Accepted Answer

A)  The monthly rental rate paid by tenants would increase. 
B)  The quantity of rental housing available would decline. 
C)  There would be a deadweight loss (or excess burden) created in the rental housing market. 
D)  All of the above are likely to happen. 
A)  The monthly rental rate paid by tenants would increase. 
B)  The quantity of rental housing available would decline. 
C)  There would be a deadweight loss (or excess burden) created in the rental housing market. 
D)  All of the above are likely to happen.

Question 17

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 18

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 19

Which of the following is the most likely result of an increase in the minimum wage?

Accepted Answer

A)  an increase in the employment of unskilled workers 
B)  a decrease in the number of workers seeking minimum wage jobs 
C)  an increase in the demand for unskilled workers 
D)  a decrease in the employment of unskilled workers 
A)  an increase in the employment of unskilled workers 
B)  a decrease in the number of workers seeking minimum wage jobs 
C)  an increase in the demand for unskilled workers 
D)  a decrease in the employment of unskilled workers

Question 20

If a government price control succeeds in affecting price, it can be expected to lead to a corresponding

Accepted Answer

A)  decrease in the quantity of sales only if the price is forced down. 
B)  decrease in the quantity of sales if the price is forced down and an increase in the volume of sales if the price is forced up. 
C)  decrease in the quantity of sales whether the price is forced up or down. 
D)  increase in the quantity of sales whether the price is forced up or down. 
A)  decrease in the quantity of sales only if the price is forced down. 
B)  decrease in the quantity of sales if the price is forced down and an increase in the volume of sales if the price is forced up. 
C)  decrease in the quantity of sales whether the price is forced up or down. 
D)  increase in the quantity of sales whether the price is forced up or down.

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

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

Price controls will tend to cause misallocation of resources because

If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and if as a result, the price to consumers of a pack of cigarettes went up by 40 cents, the

When a tax is imposed on a good,

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

If a $5,000 property tax is placed legally (statutorily) on the buyers of new automobiles and as a result the price of automobiles at dealerships rises by $2,000, the actual burden of the tax

Use the table below to choose the correct answer. For the income range illustrated, the tax shown here is

Use the table below to choose the correct answer. The marginal tax rate on income in the $20,000 to $25,000 range is

A progressive tax

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?

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

Which of the following is true?

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

When a supply and demand model is used to analyze the market for labor,

A $10 per unit government subsidy paid directly to sellers of heaters will result in

Suppose a property tax of $300 per month is legally (statutorily) imposed on the owners of rental housing. Which of the following is likely to occur?

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

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

Which of the following is the most likely result of an increase in the minimum wage?

If a government price control succeeds in affecting price, it can be expected to lead to a corresponding

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

A : Taking the Nations Economic Pulse

B : Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

A : an Introduction to Basic Macroeconomic Markets

B : an Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, Incentives, and Secondary Effects

A : Money and the Banking System

B : Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

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

Special Topic 1 : Government Spending and Taxation

Special Topic 2 : The Economics of Social Security

Special Topic 3 : The Stock Market: Its Function, Performance, and Potential as an Investment Opportunity

Special Topic 4 : Great Debates in Economics: Keynes Versus Hayek

Special Topic 5 : The Crisis of 2008: Causes and Lessons for the Future

Special Topic 6 : Lessons from the Great Depression

Special Topic 7 : Lessons from Japan and Canada

Special Topic 8 : The Federal Budget and the National Debt

Special Topic 9 : The Economics of Healthcare

Special Topic 10 : Education: Problems and Performance

Special Topic 11 : Earnings Differences Between Men and Women

Special Topic 12 : Do Labor Unions Increase the Wages of Workers?

Special Topic 13 : The Question of Resource Exhaustion

Special Topic 14 : Difficult Environmental Cases and the Role of Government

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