Question 1

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) A) and B)
F) A) and D)

Question 2

If a price floor is set at $23 in the market shown in the graph:

Accepted Answer

A)  some consumers would lose because they will pay a higher price.
B)  some producers would gain because they will sell at a higher price.
C)  the quantity traded in the market would fall.
D)  All of these are correct.E) A) and C)
F) A) and B)

Question 3

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) None of the above
F) All of the above

Question 4

When a tax is imposed on a market:

Accepted Answer

A)  the price the buyer pays is higher than the amount the seller receives.
B)  the buyers' equilibrium tax-inclusive price increases and the equilibrium quantity decreases.
C)  fewer total transactions take place in the market.
D)  All of these are correct.E) All of the above
F) B) and C)

Question 5

Does a subsidy to sellers affect the demand curve?

Accepted Answer

A)  Yes; the demand curve shifts up by the amount of the subsidy.
B)  Yes; the demand curve shifts to the right by the amount of the subsidy.
C)  No; the demand curve does not move, as quantity demanded increases instead.
D)  No; the demand curve does not move, as quantity demanded decreases instead.E) C) and D)
F) None of the above

Question 6

If a price ceiling is set at $8 in the market shown in the graph, which area(s) would represent the surplus that is transferred from producers to consumers?

Accepted Answer

A)  C + D + F + G
B)  C + D
C)  F + G
D)  CE) A) and B)
F) All of the above

Question 7

The graph shown portrays a subsidy to buyers. The subsidy causes _______ units to be sold in this market.

Accepted Answer

A)  50 more
B)  150 more
C)  100 fewer
D)  50 fewerE) A) and B)
F) C) and D)

Question 8

What does tax incidence describe?

Accepted Answer

A)  The difference between what buyers pay and what sellers receive in a market in which taxes are present
B)  Whether buyers or sellers bear more of the relative burden of a tax
C)  The revenue that is generated comes when taxes are imposed in markets
D)  The difference between the revenue generated from a tax and the value of deadweight loss caused by the imposition of a tax.E) A) and B)
F) A) and C)

Question 9

The graph shown portrays a subsidy to buyers. Why might the government enact such a policy?

Accepted Answer

A)  To encourage consumption
B)  To encourage consumers to substitute
C)  To discourage production
D)  To discourage consumptionE) A) and C)
F) All of the above

Question 10

The graph shown demonstrates a tax on buyers. After the tax is in place, buyers purchase _______ units, and the post-tax price paid for each one is _______.

Accepted Answer

A)  6; $22
B)  6; $34
C)  9; $18
D)  9; $30E) A) and C)
F) A) and B)

Question 11

In order for a price ceiling to be binding, it must be set _______ the equilibrium price, and it will likely cause _______.

Accepted Answer

A)  above; a shortage
B)  below; a shortage
C)  above; excess supply
D)  below; excess supplyE) A) and C)
F) C) and D)

Question 12

The graph shown demonstrates a tax on buyers. What is the amount of deadweight loss generated by this tax?

Accepted Answer

A)  $0
B)  $18
C)  $36
D)  $72E) B) and C)
F) None of the above

Question 13

How can a government ensure all producers benefit from the implementation of a price floor?

Accepted Answer

A)  Guarantee to buy all excess supply
B)  Ration a certain quantity per consumer
C)  Ration a certain quantity per producer
D)  All of these are correct.E) A) and B)
F) None of the above

Question 14

Suppose a $4 tax is imposed on sellers in the market shown in the graph. The tax-inclusive price (or after-tax price) paid by the buyer will be _______ and the tax-inclusive price (or after-tax price) received by the seller will be _______.

Accepted Answer

A)  $12; $8
B)  $11; $5
C)  $8; $4
D)  $10; $6E) None of the above
F) A) and B)

Question 15

If a government wants to encourage the consumption of a particular good, it should enact:

Accepted Answer

A)  a subsidy to buyers, as this will most greatly affect consumption of the good.
B)  a subsidy to sellers, as this will increase the amount of the good that is produced and offered for sale.
C)  a subsidy to buyers, as this will give the benefit to the more deserved party.
D)  a subsidy on either buyers or sellers, as both will have the same effect on the market.E) None of the above
F) A) and B)

Question 16

If a price floor is set at $23 in the market shown in the graph, the total number of units traded will:

Accepted Answer

A)  fall by 20, relative to equilibrium.
B)  fall by 27, relative to equilibrium.
C)  fall by 37, relative to equilibrium.
D)  rise by 10, relative to equilibrium.E) B) and D)
F) B) and C)

Question 17

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) None of the above
F) All of the above

Question 18

Positive analysis:

Accepted Answer

A)  involves the formulation and testing of hypotheses.
B)  involves value judgments concerning the desirability of alternative outcomes.
C)  weighs the fairness of a policy.
D)  examines if an outcome is desirable.E) C) and D)
F) B) and D)

Question 19

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) All of the above

Question 20

{MISSING IMAGE}Suppose an $8 tax is imposed on sellers in the market shown in the graph. What will be the tax-inclusive price paid by the buyers as a result of this tax?

Accepted Answer

A)  $14
B)  $26
C)  $22
D)  $10E) A) and C)
F) B) and C)

Exam 6: Government Intervention

If a price floor is set at $23 in the market shown in the graph, the total number of units traded will:

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

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

Correct Answer
verified

{MISSING IMAGE}Suppose an $8 tax is imposed on sellers in the market shown in the graph. What will be the tax-inclusive price paid by the buyers as a result of this tax?

Correct Answer
verified

What does tax incidence describe?

Correct Answer
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When a tax is imposed on a market:

Correct Answer
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The graph shown demonstrates a tax on buyers. What is the amount of deadweight loss generated by this tax?

Correct Answer
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If a government wants to encourage the consumption of a particular good, it should enact:

Correct Answer
verified

Positive analysis:

Correct Answer
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The graph shown portrays a subsidy to buyers. The subsidy causes _______ units to be sold in this market.

Correct Answer
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Correct Answer
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If a price floor is set at $23 in the market shown in the graph:

Correct Answer
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How can a government ensure all producers benefit from the implementation of a price floor?

Correct Answer
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Does a subsidy to sellers affect the demand curve?

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

Correct Answer
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In order for a price ceiling to be binding, it must be set _ the equilibrium price, and it will likely cause _.

Correct Answer
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If a price ceiling is set at $8 in the market shown in the graph, which area(s) would represent the surplus that is transferred from producers to consumers?

Correct Answer
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The graph shown portrays a subsidy to buyers. Why might the government enact such a policy?

Correct Answer
verified

The graph shown demonstrates a tax on buyers. After the tax is in place, buyers purchase _ units, and the post-tax price paid for each one is _.

Correct Answer
verified

Suppose a $4 tax is imposed on sellers in the market shown in the graph. The tax-inclusive price (or after-tax price) paid by the buyer will be _ and the tax-inclusive price (or after-tax price) received by the seller will be _.

Correct Answer
verified

Exam 6: Government Intervention

If a price floor is set at $23 in the market shown in the graph, the total number of units traded will:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

{MISSING IMAGE}Suppose an $8 tax is imposed on sellers in the market shown in the graph. What will be the tax-inclusive price paid by the buyers as a result of this tax?

Correct AnswerverifiedShow Answer

What does tax incidence describe?

Correct AnswerverifiedShow Answer

When a tax is imposed on a market:

Correct AnswerverifiedShow Answer

The graph shown demonstrates a tax on buyers. What is the amount of deadweight loss generated by this tax?

Correct AnswerverifiedShow Answer

If a government wants to encourage the consumption of a particular good, it should enact:

Correct AnswerverifiedShow Answer

Positive analysis:

Correct AnswerverifiedShow Answer

The graph shown portrays a subsidy to buyers. The subsidy causes _______ units to be sold in this market.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a price floor is set at $23 in the market shown in the graph:

Correct AnswerverifiedShow Answer

How can a government ensure all producers benefit from the implementation of a price floor?

Correct AnswerverifiedShow Answer

Does a subsidy to sellers affect the demand curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In order for a price ceiling to be binding, it must be set _______ the equilibrium price, and it will likely cause _______.

Correct AnswerverifiedShow Answer

If a price ceiling is set at $8 in the market shown in the graph, which area(s) would represent the surplus that is transferred from producers to consumers?

Correct AnswerverifiedShow Answer

The graph shown portrays a subsidy to buyers. Why might the government enact such a policy?

Correct AnswerverifiedShow Answer

The graph shown demonstrates a tax on buyers. After the tax is in place, buyers purchase _______ units, and the post-tax price paid for each one is _______.

Correct AnswerverifiedShow Answer

Suppose a $4 tax is imposed on sellers in the market shown in the graph. The tax-inclusive price (or after-tax price) paid by the buyer will be _______ and the tax-inclusive price (or after-tax price) received by the seller will be _______.

Correct AnswerverifiedShow Answer

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In order for a price ceiling to be binding, it must be set _ the equilibrium price, and it will likely cause _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The graph shown demonstrates a tax on buyers. After the tax is in place, buyers purchase _ units, and the post-tax price paid for each one is _.

Correct Answer
verified

Suppose a $4 tax is imposed on sellers in the market shown in the graph. The tax-inclusive price (or after-tax price) paid by the buyer will be _ and the tax-inclusive price (or after-tax price) received by the seller will be _.

Correct Answer
verified