Question 1

The graph shown demonstrates a tax on sellers. Who bears the greater economic tax incidence?

Accepted Answer

A)   The sellers
B)   The buyers
C)   The government
D)   The incidence is equally shared between buyers and sellers.E) A) and D)
F) All of the above

Question 2

A price ceiling is:

Accepted Answer

A)   a legal maximum price.
B)   a legal minimum price.
C)   a legal maximum quantity that can be sold at a particular price.
D)   a legal minimum quantity that can be sold at a particular price.E) All of the above
F) None of the above

Question 3

When would a subsidy to sellers benefit buyers more than sellers?

Accepted Answer

A)   If the buyers are more deserving of the subsidy.
B)   When the demand curve is relatively more elastic than the supply curve.
C)   When the demand curve is relatively less elastic than the supply curve.
D)   Buyers can never benefit more than sellers from a subsidy to sellers.E) A) and D)
F) A) and C)

Question 4

A price ceiling that is set at $8 in the market shown in the graph is:

Accepted Answer

A)   non-binding and would not affect the market.
B)   binding and would cause a shortage.
C)   binding and would cause excess supply.
D)   non-binding and would not prevent the market from reaching equilibrium.E) All of the above
F) B) and D)

Question 5

Suppose a price floor is set at $10 in the market shown in the graph. Which of the following statements is true?I. All consumers are worse off due to the higher price.II. All producers are better off, because producer surplus increases.III. The economy as a whole is worse off, because total surplus falls.

Accepted Answer

A)   II only
B)   I and III only
C)   III only
D)   I, II, and IIIE) B) and C)
F) All of the above

Question 6

Governments might choose to intervene in a market in an attempt to:

Accepted Answer

A)   encourage the consumption of certain goods.
B)   discourage the consumption of certain goods.
C)   redistribute surplus.
D)   All of these are correct.E) A) and B)
F) B) and C)

Question 7

In evaluating policy effectiveness, economists rely on:

Accepted Answer

A)   positive analysis.
B)   normative analysis.
C)   both normative and positive analysis.
D)   Economists can never fully analyze any real-world policy effectiveness.E) None of the above
F) All of the above

Question 8

Suppose a $5 tax is imposed on sellers in the market shown in the graph. Which of the following statements is true?Producers bear more of the tax burden than consumers.The tax-inclusive price (or after-tax price)  received by sellers is $8.The deadweight loss is $15,000.

Accepted Answer

A)   I only
B)   II and III only
C)   I and II only
D)   I, II, and IIIE) A) and B)
F) A) and C)

Question 9

Policymakers who wish to discourage businesses that pollute by taxing them:

Accepted Answer

A)   forget that businesses will pass the entire tax onto consumers.
B)   should place a tax on consumers instead in order to increase the burden on sellers.
C)   should place a tax on producers instead in order to increase the burden on sellers.
D)   forget that some of the tax burden will be shared by consumers.E) None of the above
F) A) and B)

Question 10

If a price ceiling is set at $8 in the market shown in the graph:

Accepted Answer

A)   a shortage of 7 units will occur.
B)   a shortage of 15 units will occur.
C)   a shortage of 23 units will occur.
D)   a shortage of 8 units will occur.E) A) and B)
F) None of the above

Question 11

According to the market in the graph shown, at which of the following prices could a binding price ceiling be set?

Accepted Answer

A)   $15
B)   $11
C)   $8
D)   A binding price ceiling could not be set at any of these prices.E) B) and C)
F) A) and C)

Question 12

What do we call situations in which the assumption of efficient, competitive markets fails to hold?

Accepted Answer

A)   Market failures
B)   Inelastic-response markets
C)   Missing markets
D)   Market interventionsE) None of the above
F) A) and B)

Question 13

If a binding price ceiling is set in the market shown in the graph:

Accepted Answer

A)   quantity demanded will exceed quantity supplied.
B)   quantity supplied will exceed quantity demanded.
C)   the demand curve will have to shift.
D)   the supply curve will have to shift.E) None of the above
F) A) and D)

Question 14

Which kind of tax is most likely demonstrated by the graph shown?

Accepted Answer

A)   A tax on sellers
B)   A tax on buyers
C)   A tax on big corporations
D)   None of these is correct.E) B) and C)
F) None of the above

Question 15

If the intended aim of the price ceiling set at $6, as shown in the graph, was a net increase in the well-being of consumers, then normative analysis would conclude that the policy was:

Accepted Answer

A)   effective because the surplus gained by consumers through lower prices is less than the surplus they lost due to fewer transactions taking place.
B)   ineffective because the surplus gained by consumers through lower prices is less than the surplus they lost due to fewer transactions taking place.
C)   effective because the surplus lost by producers through lower prices is less than the surplus gained by consumers through lower prices.
D)   There is no "right" conclusion to be reached (in a normative sense)  because different people will have different opinions concerning what constitutes a better outcome.E) C) and D)
F) A) and B)

Question 16

If sellers bear a greater tax burden than buyers in a market, which of the following must be true?

Accepted Answer

A)   The sellers are not as business savvy as the buyers.
B)   The supply curve must be more inelastic than the demand curve.
C)   The sellers face a very inelastic demand.
D)   The supply curve must be more elastic than the demand curve.E) A) and C)
F) A) and B)

Question 17

A tax on sellers causes

Accepted Answer

A)   equilibrium price to increase and equilibrium quantity to decrease.
B)   equilibrium price and quantity to increase.
C)   equilibrium price and quantity to decrease.
D)   equilibrium price to decrease and equilibrium quantity to increase.E) A) and D)
F) A) and B)

Question 18

Does a tax on sellers affect the demand curve?

Accepted Answer

A)   Yes; the demand curve shifts to the left by the amount of the tax.
B)   Yes; the demand curve shifts to the right by the amount of the tax.
C)   Yes; the demand curve shifts up by the amount of the tax.
D)   No; the demand curve does not move, as there is a change in the quantity demanded instead.E) C) and D)
F) B) and D)

Question 19

Normative analysis:

Accepted Answer

A)   involves the formulation and testing of hypotheses.
B)   is a value-free evaluation of a policy.
C)   involves a value judgement regarding the desirability of a policy.
D)   examines if a policy actually accomplished its goal.E) C) and D)
F) A) and D)

Question 20

Does a tax on buyers affect the supply curve?

Accepted Answer

A)   Yes; the supply curve shifts to the left by the amount of the tax.
B)   Yes; the supply curve shifts to the right by the amount of the tax.
C)   Yes; the supply curve shifts up by the amount of the tax.
D)   No; the supply curve does not move, as there is a change in the quantity supplied instead.E) B) and D)
F) A) and D)

Exam 6: Governmentintervention

If a price ceiling is set at $8 in the market shown in the graph:

Correct Answer
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If a binding price ceiling is set in the market shown in the graph:

Correct Answer
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Which kind of tax is most likely demonstrated by the graph shown?

Correct Answer
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Policymakers who wish to discourage businesses that pollute by taxing them:

Correct Answer
verified

According to the market in the graph shown, at which of the following prices could a binding price ceiling be set?

Correct Answer
verified

Normative analysis:

Correct Answer
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If the intended aim of the price ceiling set at $6, as shown in the graph, was a net increase in the well-being of consumers, then normative analysis would conclude that the policy was:

Correct Answer
verified

Governments might choose to intervene in a market in an attempt to:

Correct Answer
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A tax on sellers causes

Correct Answer
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When would a subsidy to sellers benefit buyers more than sellers?

Correct Answer
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If sellers bear a greater tax burden than buyers in a market, which of the following must be true?

Correct Answer
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Does a tax on buyers affect the supply curve?

Correct Answer
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What do we call situations in which the assumption of efficient, competitive markets fails to hold?

Correct Answer
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Suppose a $5 tax is imposed on sellers in the market shown in the graph. Which of the following statements is true?Producers bear more of the tax burden than consumers.The tax-inclusive price (or after-tax price) received by sellers is $8.The deadweight loss is $15,000.

Correct Answer
verified

The graph shown demonstrates a tax on sellers. Who bears the greater economic tax incidence?

Correct Answer
verified

In evaluating policy effectiveness, economists rely on:

Correct Answer
verified

Does a tax on sellers affect the demand curve?

Correct Answer
verified

A price ceiling is:

Correct Answer
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Correct Answer
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A price ceiling that is set at $8 in the market shown in the graph is:

Correct Answer
verified

Exam 6: Governmentintervention

If a price ceiling is set at $8 in the market shown in the graph:

Correct AnswerverifiedShow Answer

If a binding price ceiling is set in the market shown in the graph:

Correct AnswerverifiedShow Answer

Which kind of tax is most likely demonstrated by the graph shown?

Correct AnswerverifiedShow Answer

Policymakers who wish to discourage businesses that pollute by taxing them:

Correct AnswerverifiedShow Answer

According to the market in the graph shown, at which of the following prices could a binding price ceiling be set?

Correct AnswerverifiedShow Answer

Normative analysis:

Correct AnswerverifiedShow Answer

If the intended aim of the price ceiling set at $6, as shown in the graph, was a net increase in the well-being of consumers, then normative analysis would conclude that the policy was:

Correct AnswerverifiedShow Answer

Governments might choose to intervene in a market in an attempt to:

Correct AnswerverifiedShow Answer

A tax on sellers causes

Correct AnswerverifiedShow Answer

When would a subsidy to sellers benefit buyers more than sellers?

Correct AnswerverifiedShow Answer

If sellers bear a greater tax burden than buyers in a market, which of the following must be true?

Correct AnswerverifiedShow Answer

Does a tax on buyers affect the supply curve?

Correct AnswerverifiedShow Answer

What do we call situations in which the assumption of efficient, competitive markets fails to hold?

Correct AnswerverifiedShow Answer

Suppose a $5 tax is imposed on sellers in the market shown in the graph. Which of the following statements is true?Producers bear more of the tax burden than consumers.The tax-inclusive price (or after-tax price) received by sellers is $8.The deadweight loss is $15,000.

Correct AnswerverifiedShow Answer

The graph shown demonstrates a tax on sellers. Who bears the greater economic tax incidence?

Correct AnswerverifiedShow Answer

In evaluating policy effectiveness, economists rely on:

Correct AnswerverifiedShow Answer

Does a tax on sellers affect the demand curve?

Correct AnswerverifiedShow Answer

A price ceiling is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A price ceiling that is set at $8 in the market shown in the graph is:

Correct AnswerverifiedShow Answer

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