Question 1

Other things constant, a decrease in the demand for computers will

Accepted Answer

A)  increase the price of computers. 
B)  increase the quantity supplied of computers. 
C)  increase the demand for computer manufacturing workers. 
D)  decrease the demand for computer manufacturing workers. 
A)  increase the price of computers. 
B)  increase the quantity supplied of computers. 
C)  increase the demand for computer manufacturing workers. 
D)  decrease the demand for computer manufacturing workers.

Question 2

Economists have argued that rent control is "the best way to destroy a city, other than bombing." Why would economists say this?

Accepted Answer

A)  They anticipate that low rents will cause low-income people to move into the city, reducing the quality of life for other people. 
B)  They anticipate that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. 
C)  They anticipate that rent controls will cause a construction boom, which will make the city crowded and more polluted. 
D)  They anticipate that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city. 
A)  They anticipate that low rents will cause low-income people to move into the city, reducing the quality of life for other people. 
B)  They anticipate that rent control will benefit landlords at the expense of tenants, increasing inequality in the city. 
C)  They anticipate that rent controls will cause a construction boom, which will make the city crowded and more polluted. 
D)  They anticipate that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.

Question 3

Which of the following is the most likely outcome of minimum wage laws?

Accepted Answer

A)  an increase in both the quantity of labor supplied by workers and the quantity of labor demanded by firms 
B)  an increase in the quantity of labor supplied by workers and a decrease in the quantity of labor demanded by firms 
C)  a decrease in the quantity of labor supplied by workers and an increase in the quantity of labor demanded by firms 
D)  a decrease in both the quantity of labor supplied by workers and the quantity of labor demanded by firms 
A)  an increase in both the quantity of labor supplied by workers and the quantity of labor demanded by firms 
B)  an increase in the quantity of labor supplied by workers and a decrease in the quantity of labor demanded by firms 
C)  a decrease in the quantity of labor supplied by workers and an increase in the quantity of labor demanded by firms 
D)  a decrease in both the quantity of labor supplied by workers and the quantity of labor demanded by firms

Question 4

Use the figure below to answer the following question(s).
Figure 4-8
  
-Refer to Figure 4-8. The supply curve S₁ and the demand curve D indicate initial conditions in the market for soft coal. A $40-per-ton tax on soft coal is levied, shifting the supply curve from S₁ to S₂. Imposing the tax increases the equilibrium price of soft coal from

Accepted Answer

A)  $20 to $60 per ton. 
B)  $20 to $50 per ton. 
C)  $50 to $60 per ton. 
D)  $50 to $90 per ton. 
A)  $20 to $60 per ton. 
B)  $20 to $50 per ton. 
C)  $50 to $60 per ton. 
D)  $50 to $90 per ton.

Question 5

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?

Accepted Answer

A)  an increase in the demand for accountants 
B)  an increase in the employment of accountants 
C)  a decrease in the wage rate of accountants 
D)  an increase in the number of students choosing to major in accounting 
A)  an increase in the demand for accountants 
B)  an increase in the employment of accountants 
C)  a decrease in the wage rate of accountants 
D)  an increase in the number of students choosing to major in accounting

Question 6

A tax imposed on the sellers of a good will

Accepted Answer

A)  raise the price paid by buyers and lower the equilibrium quantity. 
B)  raise the price paid by buyers and raise the equilibrium quantity. 
C)  raise the net price received by sellers and raise the equilibrium quantity. 
D)  raise the net price received by sellers and lower the equilibrium quantity. 
A)  raise the price paid by buyers and lower the equilibrium quantity. 
B)  raise the price paid by buyers and raise the equilibrium quantity. 
C)  raise the net price received by sellers and raise the equilibrium quantity. 
D)  raise the net price received by sellers and lower the equilibrium quantity.

Question 7

Suppose that the federal government levies a 50 cent excise tax on gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the burden of the tax

Accepted Answer

A)  will fall primarily on producers. 
B)  will fall primarily on consumers. 
C)  will be split equally between consumers and producers. 
D)  cannot be determined because the burden of a tax is not influenced by the elasticities of supply and demand. 
A)  will fall primarily on producers. 
B)  will fall primarily on consumers. 
C)  will be split equally between consumers and producers. 
D)  cannot be determined because the burden of a tax is not influenced by the elasticities of supply and demand.

Question 8

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 9

Use the figure below to answer the following question(s).
Figure 4-8
  
-Refer to Figure 4-8. The supply curve S₁ and the demand curve D indicate initial conditions in the market for soft coal. A $40-per-ton tax on soft coal is levied, shifting the supply curve from S₁ to S₂. Which of the following states the actual burden of the tax?

Accepted Answer

A)  $10 for buyers and $30 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)  $10 for buyers and $30 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 10

Compared to legal markets, black markets have

Accepted Answer

A)  products of higher quality. 
B)  higher prices. 
C)  lower profit rates. 
D)  less violence. 
A)  products of higher quality. 
B)  higher prices. 
C)  lower profit rates. 
D)  less violence.

Question 11

If the government wants to raise tax revenue and shift most of the tax burden to the consumers, 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) demand 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) demand curve. 
D)  flat (elastic) demand curve and a flat (elastic) supply curve.

Question 12

If Sally were to get a $3,000 bonus from her employer, which of the following tax rates would most accurately reflect the percent of this additional income that she would owe in taxes?

Accepted Answer

A)  her marginal tax rate 
B)  her average tax rate 
C)  her progressive tax coefficient 
D)  the rate of excess burden 
A)  her marginal tax rate 
B)  her average tax rate 
C)  her progressive tax coefficient 
D)  the rate of excess burden

Question 13

The tax rate that maximizes the revenue generated by a tax

Accepted Answer

A)  is highly efficient, and therefore, the government should always seek to impose this rate. 
B)  is an ideal tax rate from the standpoint of a government that wants to minimize the deadweight loss (or excess burden) accompanying taxation. 
C)  is, from an efficiency standpoint, superior to any lower rate of taxation. 
D)  will impose a large deadweight loss (excess burden) relative to the marginal revenues collected, and therefore, a government interested in the welfare of its citizens should select a lower tax rate. 
A)  is highly efficient, and therefore, the government should always seek to impose this rate. 
B)  is an ideal tax rate from the standpoint of a government that wants to minimize the deadweight loss (or excess burden) accompanying taxation. 
C)  is, from an efficiency standpoint, superior to any lower rate of taxation. 
D)  will impose a large deadweight loss (excess burden) relative to the marginal revenues collected, and therefore, a government interested in the welfare of its citizens should select a lower tax rate.

Question 14

Use the figure below to answer the following question(s).
Figure 4-7
  
-Refer to Figure 4-7. Which of the following is true for the tax illustrated?

Accepted Answer

A)  The tax increases the price of gasoline by $.60. 
B)  Since the demand for gasoline is more inelastic than the supply, consumers bear most of the burden of the tax. 
C)  Since the demand for gasoline is more elastic than the supply, consumers bear most of the burden of the tax. 
D)  Since the supply of gasoline is highly inelastic, the primary burden of the tax is imposed on the suppliers of gasoline. 
A)  The tax increases the price of gasoline by $.60. 
B)  Since the demand for gasoline is more inelastic than the supply, consumers bear most of the burden of the tax. 
C)  Since the demand for gasoline is more elastic than the supply, consumers bear most of the burden of the tax. 
D)  Since the supply of gasoline is highly inelastic, the primary burden of the tax is imposed on the suppliers of gasoline.

Question 15

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 16

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 17

An increase in the number of students graduating with a major in engineering would result in

Accepted Answer

A)  a decrease in the supply of engineers that would increase the wage of engineers and decrease the number employed. 
B)  an increase in the supply of engineers that would decrease the wage of engineers and increase the number employed. 
C)  a decrease in the demand for engineers that would decrease the wage of engineers and decrease the number employed. 
D)  an increase in the demand for engineers that would increase the wage of engineers and increase the number employed. 
A)  a decrease in the supply of engineers that would increase the wage of engineers and decrease the number employed. 
B)  an increase in the supply of engineers that would decrease the wage of engineers and increase the number employed. 
C)  a decrease in the demand for engineers that would decrease the wage of engineers and decrease the number employed. 
D)  an increase in the demand for engineers that would increase the wage of engineers and increase the number employed.

Question 18

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 19

Many economists believe a general sales tax (particularly on items such as food) takes a larger proportion of income from low-income households than from high-income households. If this is true, a general sales tax is 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 20

A legal system that provides secure private property rights and unbiased enforcement of contracts

Accepted Answer

A)  is unnecessary for the smooth operation of markets. 
B)  reduces the efficiency of markets. 
C)  enhances the efficiency of markets. 
D)  makes it easier for sellers to cheat or defraud consumers. 
A)  is unnecessary for the smooth operation of markets. 
B)  reduces the efficiency of markets. 
C)  enhances the efficiency of markets. 
D)  makes it easier for sellers to cheat or defraud consumers.

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

Other things constant, a decrease in the demand for computers will

Economists have argued that rent control is "the best way to destroy a city, other than bombing." Why would economists say this?

Which of the following is the most likely outcome of minimum wage laws?

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?

A tax imposed on the sellers of a good will

Suppose that the federal government levies a 50 cent excise tax on gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the burden of the tax

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

Compared to legal markets, black markets have

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

If Sally were to get a $3,000 bonus from her employer, which of the following tax rates would most accurately reflect the percent of this additional income that she would owe in taxes?

The tax rate that maximizes the revenue generated by a tax

Use the figure below to answer the following question(s). Figure 4-7 -Refer to Figure 4-7. Which of the following is true for the tax illustrated?

Which of the following is correct?

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

An increase in the number of students graduating with a major in engineering would result in

The actual incidence of a tax

Many economists believe a general sales tax (particularly on items such as food) takes a larger proportion of income from low-income households than from high-income households. If this is true, a general sales tax is a

A legal system that provides secure private property rights and unbiased enforcement of contracts

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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