Question 1

The graph shown portrays a subsidy to buyers.The subsidy causes:

Accepted Answer

A)   50 more units to be sold in this market.
B)   150 more units to be sold in this market.
C)   100 fewer units to be sold in this market.
D)   50 fewer units to be sold in this market.E) A) and C)
F) A) and B)

Question 2

A subsidy to buyers has been placed on the market in the graph shown.What is the amount of the subsidy per unit of this good?

Accepted Answer

A)   $22
B)   $16
C)   $10
D)   $6E) C) and D)
F) All of the above

Question 3

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

Accepted Answer

A)   a subsidy to buyers, since they want to affect consumption of the good.
B)   a subsidy to sellers, since they want more to be produced and offered for sale.
C)   a subsidy to buyers, since they deserve the benefit more than the producers.
D)   a subsidy on either buyers or sellers, since they will both have the same effect on the market.E) None of the above
F) All of the above

Question 4

For a price ceiling to have an impact on a market it:

Accepted Answer

A)   must be set above the equilibrium price.
B)   must be set below the equilibrium price.
C)   must be set at the equilibrium price.
D)   can lead more goods to be produced in a market.E) B) and D)
F) None of the above B

Question 5

After a price ceiling of $8 is placed on the market in the graph shown,which area represents producer surplus?

Accepted Answer

A)   C + D + E
B)   C + D + F + G
C)   E
D)   A + C + EE) B) and D)
F) A) and B)

Question 6

Suppose a tax on sellers has been imposed in the graph shown.The amount of deadweight loss generated by this tax is:

Accepted Answer

A)   $0.
B)   $80.
C)   $160.
D)   $129.50.E) None of the above
F) C) and D)

Question 7

The difference in the price the buyer pays and the price the sellers keep in the presence of a tax is called:

Accepted Answer

A)   a tax differential.
B)   a tax wedge.
C)   the tax incidence.
D)   the tax burden.E) A) and D)
F) A) and C) B

Question 8

A tax on sellers:

Accepted Answer

A)   causes equilibrium price and quantity to decrease.
B)   shifts the demand curve vertically downwards by the amount of the tax, but does not affect the supply curve
C)   shifts the supply curve vertically upwards by the amount of the tax, but does not affect the demand curve.
D)   causes a shortage in the market.E) B) and C)
F) A) and C)

Question 9

Situations in which the assumption of efficient,competitive markets fails to hold are called:

Accepted Answer

A)   market failures.
B)   inelastic-response markets.
C)   missing markets.
D)   market interventions.E) B) and C)
F) B) and D)

Question 10

Does a subsidy to buyers affect the supply curve?

Accepted Answer

A)   Yes, it shifts supply up by the amount of the subsidy.
B)   Yes, it shifts supply to the right by the amount of the subsidy.
C)   No, the quantity supplied will increase, but the supply curve does not move.
D)   No, the quantity supplied will decrease, but the supply curve does not move.E) All of the above
F) A) and B)

Question 11

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

Accepted Answer

A)   The seller
B)   The buyer
C)   The government
D)   The incidence is equally shared between buyer and sellerE) A) and B)
F) C) and D)

Question 12

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 13

Suppose a tax on sellers has been imposed in the graph shown.Once the tax is in place,the buyers purchase ____ units and pay ____ for each one.

Accepted Answer

A)   15; $16
B)   15; $6
C)   31; $9
D)   31; $19E) None of the above
F) A) and D)

Question 14

The graph shown demonstrates a tax on sellers.Which of the following can be said about the effect of this tax?

Accepted Answer

A)   The tax creates a shortage, and rationing must occur.
B)   The tax creates a surplus, and the government must buy the excess.
C)   The tax creates a shortage, and the government must regulate the market.
D)   None of these is true.E) None of the above
F) B) and C)

Question 15

Suppose a tax on buyers has been imposed in the graph shown.Once the tax is in place,the buyers purchase ____ units and pay ____ for each one.

Accepted Answer

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

Question 16

The graph shown shows a subsidy to buyers.Before the subsidy is put in place,the buyers bought _____ units and paid _____ for each of them.

Accepted Answer

A)   100; $46
B)   100; $30
C)   150; $40
D)   150; $24E) B) and C)
F) A) and D)

Question 17

A price floor that is binding:

Accepted Answer

A)   must be set above the equilibrium price, and will likely cause a shortage.
B)   must be set below the equilibrium price, and will likely cause a shortage.
C)   must be set above the equilibrium price, and will likely cause a surplus.
D)   must be set below the equilibrium price, and will likely cause a surplus.E) A) and B)
F) A) and C)

Question 18

A subsidy to buyers has been placed in the market in the graph shown.The result is:

Accepted Answer

A)   a higher quantity bought and sold at a higher price.
B)   customers are worse off than before the subsidy.
C)   producers are worse off than before the subsidy.
D)   None of these is true.E) A) and B)
F) A) and C)

Question 19

Does a subsidy to sellers affect the supply curve?

Accepted Answer

A)   Yes, it shifts supply vertically downward by the amount of the subsidy.
B)   Yes, it shifts supply to the right by the amount of the subsidy.
C)   No, the quantity supplied will increase, but the supply curve does not move.
D)   No, the quantity supplied will decrease, but the supply curve does not move.E) All of the above
F) C) and D)

Question 20

Positive analysis:

Accepted Answer

A)   is the best way to analyze a policy.
B)   leads to the best solutions.
C)   is the only way to analyze a policy.
D)   examines if the policy actually accomplished its goals.E) None of the above
F) B) and D) D

Exam 6: Government Intervention Microeconomics

The graph shown portrays a subsidy to buyers.The subsidy causes:

Correct AnswerverifiedShow Answer

A subsidy to buyers has been placed on the market in the graph shown.What is the amount of the subsidy per unit of this good?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For a price ceiling to have an impact on a market it:

Correct AnswerverifiedB

After a price ceiling of $8 is placed on the market in the graph shown,which area represents producer surplus?

Correct AnswerverifiedShow Answer

Suppose a tax on sellers has been imposed in the graph shown.The amount of deadweight loss generated by this tax is:

Correct AnswerverifiedShow Answer

The difference in the price the buyer pays and the price the sellers keep in the presence of a tax is called:

Correct AnswerverifiedB

A tax on sellers:

Correct AnswerverifiedShow Answer

Situations in which the assumption of efficient,competitive markets fails to hold are called:

Correct AnswerverifiedShow Answer

Does a subsidy to buyers affect the supply curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In evaluating policy effectiveness,economists rely on:

Correct AnswerverifiedShow Answer

Suppose a tax on sellers has been imposed in the graph shown.Once the tax is in place,the buyers purchase ____ units and pay ____ for each one.

Correct AnswerverifiedShow Answer

The graph shown demonstrates a tax on sellers.Which of the following can be said about the effect of this tax?

Correct AnswerverifiedShow Answer

Suppose a tax on buyers has been imposed in the graph shown.Once the tax is in place,the buyers purchase ____ units and pay ____ for each one.

Correct AnswerverifiedShow Answer

The graph shown shows a subsidy to buyers.Before the subsidy is put in place,the buyers bought _____ units and paid _____ for each of them.

Correct AnswerverifiedShow Answer

A price floor that is binding:

Correct AnswerverifiedShow Answer

A subsidy to buyers has been placed in the market in the graph shown.The result is:

Correct AnswerverifiedShow Answer

Does a subsidy to sellers affect the supply curve?

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Positive analysis:

Correct AnswerverifiedD

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B

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B

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Suppose a tax on sellers has been imposed in the graph shown.Once the tax is in place,the buyers purchase units and pay for each one.

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Suppose a tax on buyers has been imposed in the graph shown.Once the tax is in place,the buyers purchase units and pay for each one.

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The graph shown shows a subsidy to buyers.Before the subsidy is put in place,the buyers bought _ units and paid _ for each of them.

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D