Question 1

-When a sales tax is imposed on sellers, the supply curve shifts so that the vertical distance between the old and the new supply curve equals the

Accepted Answer

A)  sales tax multiplied by the price elasticity of demand. 
B)  sales tax multiplied by the price elasticity of supply. 
C)  amount of the sales tax. 
D)  sales tax divided by the price elasticity of demand. 
A)  sales tax multiplied by the price elasticity of demand. 
B)  sales tax multiplied by the price elasticity of supply. 
C)  amount of the sales tax. 
D)  sales tax divided by the price elasticity of demand.

Question 2

Sherry wants to rent an apartment. Although rents are below what she is willing to pay, she cannot find an apartment. Then after a month of searching, she finds an apartment but she has to pay an additional $1,000 to have the locks changed. Sherry has just experienced the effects of ________.

Accepted Answer

A)  a rent floor with a black market 
B)  inelastic demand 
C)  a market working efficiently 
D)  a rent ceiling 
A)  a rent floor with a black market 
B)  inelastic demand 
C)  a market working efficiently 
D)  a rent ceiling

Question 3

-In the table above, what is the level of unemployment (in millions of workers) if the minimum wage is set at $8 per hour?

Accepted Answer

A)  0 
B)  1 
C)  3 
D)  4 
A)  0 
B)  1 
C)  3 
D)  4

Question 4

-You are in the business of producing and selling hamburgers, french fries, pizza, and ice cream. The mayor plans to impose a tax on one of these products. Based on the elasticities in the above table, as a profit-minded business person who seeks to avoid taxes whenever possible, which good would you most prefer to have taxed?

Accepted Answer

A)  hamburgers 
B)  pizza 
C)  French fries 
D)  ice cream 
A)  hamburgers 
B)  pizza 
C)  French fries 
D)  ice cream

Question 5

-The figure above illustrates the current market for workers in Lima, Peru.
a) Without any government intervention, what is the equilibrium wage rate and amount of employment?
b) If the city government imposes a minimum wage of $3 an hour, what is the amount of employment? Does the minimum wage create any unemployment? Why or why not?
c) If the city government imposes a minimum wage of $6 an hour, what is the amount of employment? Does the minimum wage create any unemployment? Why or why not?

Accepted Answer

a) The equilibrium wage rate is $4 an ho

Question 6

-The above figure shows the apartment market in Big City. What is the equilibrium rent in Big City?

Accepted Answer

A)  $1500 
B)  $1350 
C)  $1250 
D)  $1125 
A)  $1500 
B)  $1350 
C)  $1250 
D)  $1125

Question 7

A student wrote: "A subsidy raises marginal social benefit above marginal social cost and eliminates the deadweight loss from underproduction." If you were the instructor, how would you correct this statement?

Accepted Answer

The student errs in several important re

Question 8

The elasticity of demand for chocolate chip cookies is 0.6 and the elasticity of supply for these cookies is 1.9. If a tax is imposed on purchases of chocolate chip cookies, then the

Accepted Answer

A)  consumers would pay more of the tax. 
B)  producers would pay more of the tax. 
C)  tax would be equally shared by the consumers and the producers. 
D)  consumers would pay the entire tax because their demand is less elastic than the producers' supply. 
A)  consumers would pay more of the tax. 
B)  producers would pay more of the tax. 
C)  tax would be equally shared by the consumers and the producers. 
D)  consumers would pay the entire tax because their demand is less elastic than the producers' supply.

Question 9

A rent ceiling results in a shortage of apartments. As a result, there is

Accepted Answer

A)  only a loss of consumer surplus for tenants. 
B)  only a loss of producer surplus for landlords. 
C)  a loss of both consumer and producer surplus. 
D)  a gain of both consumer and producer surplus. 
A)  only a loss of consumer surplus for tenants. 
B)  only a loss of producer surplus for landlords. 
C)  a loss of both consumer and producer surplus. 
D)  a gain of both consumer and producer surplus.

Question 10

-The table gives the demand and supply schedules for fireworks on the Island of Big Bang. In the past, because many deaths have resulted from accidents involving fireworks, the government has banned fireworks and is enforcing the ban. A $6 a firework penalty on buyers of fireworks and no penalty on sellers will reduce the number of fireworks bought to ________ a week and decrease the price kept by suppliers to ________ a firework.

Accepted Answer

A)  80; $5 
B)  40; $8 
C)  0; an unknown amount 
D)  140; $3 
A)  80; $5 
B)  40; $8 
C)  0; an unknown amount 
D)  140; $3

Question 11

-The figure above shows the market for milk in Cowland. A subsidy paid to producers of $1 per gallon of milk is introduced. If there are no external costs and no external benefits, the marginal benefit of the last gallon of milk consumed is

Accepted Answer

A)  $3.50 a gallon. 
B)  $4.00 a gallon. 
C)  $4.50 a gallon. 
D)  $5.00 a gallon. 
A)  $3.50 a gallon. 
B)  $4.00 a gallon. 
C)  $4.50 a gallon. 
D)  $5.00 a gallon.

Question 12

-The figure above shows the market for milk in Cowland. A subsidy paid to producers of $1 per gallon of milk is introduced. If there are no external costs and no external benefits, the marginal cost of the last gallon of milk produced is

Accepted Answer

A)  $3.00 a gallon. 
B)  $3.50 a gallon. 
C)  $4.00 a gallon. 
D)  $4.50 a gallon. 
A)  $3.00 a gallon. 
B)  $3.50 a gallon. 
C)  $4.00 a gallon. 
D)  $4.50 a gallon.

Question 13

One common effect of rent ceilings in big cities is

Accepted Answer

A)  that landlords build more apartments. 
B)  that landlords charge "key money," high payments charged to new tenants for new locks and keys. 
C)  to equalize the quantity of apartments demanded and the quantity supplied in neighborhoods. 
D)  to reduce the search activity by those seeking shelter. 
A)  that landlords build more apartments. 
B)  that landlords charge "key money," high payments charged to new tenants for new locks and keys. 
C)  to equalize the quantity of apartments demanded and the quantity supplied in neighborhoods. 
D)  to reduce the search activity by those seeking shelter.

Question 14

-The above figure shows the market for blouses. The government decides to impose the sales tax on sellers, as shown in the figure. Using the figure, how much tax revenue does the government raise?

Accepted Answer

A)  $20,000 
B)  $40,000 
C)  $60,000 
D)  $80,000 
A)  $20,000 
B)  $40,000 
C)  $60,000 
D)  $80,000

Question 15

-A tax is imposed on the sale of a product. As long as neither the supply nor the demand is perfectly elastic or inelastic,

Accepted Answer

A)  there is no change in the price paid by the consumers. 
B)  the price paid by the consumers increases by the full amount of the tax. 
C)  the price paid by the consumers increases by less than the amount of the tax. 
D)  the price paid by the consumers increases by more than the amount of the tax. 
A)  there is no change in the price paid by the consumers. 
B)  the price paid by the consumers increases by the full amount of the tax. 
C)  the price paid by the consumers increases by less than the amount of the tax. 
D)  the price paid by the consumers increases by more than the amount of the tax.

Question 16

-In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

Accepted Answer

A)  a deadweight loss created. 
B)  a reduction in renters' search activities. 
C)  an elimination of a black market. 
D)  an increased number apartments rented. 
A)  a deadweight loss created. 
B)  a reduction in renters' search activities. 
C)  an elimination of a black market. 
D)  an increased number apartments rented.

Question 17

-As long as the supply curve for a good is upward sloping and the demand curve is downward sloping, a sales tax imposed on sellers shifts the supply curve

Accepted Answer

A)  leftward and definitely raises the equilibrium price. 
B)  leftward and possibly raises the equilibrium price. 
C)  rightward and possibly increases the equilibrium quantity. 
D)  rightward and definitely decreases the equilibrium quantity. 
A)  leftward and definitely raises the equilibrium price. 
B)  leftward and possibly raises the equilibrium price. 
C)  rightward and possibly increases the equilibrium quantity. 
D)  rightward and definitely decreases the equilibrium quantity.

Question 18

Suppose that apartments rent for $1,300 a month in San Francisco, California and $850 a month in Los Angeles, California. If the state of California passes a state-wide rent ceiling for apartments of $1,100 a month, what occurs in the two cities?

Accepted Answer

The rent ceiling is below the equilibriu

Question 19

When a government fines and/or imprisons persons convicted of using illegal drugs, the government is attempting to decrease the illegal drug trade by shifting the ________ curve for illegal drugs ________.

Accepted Answer

A)  demand; rightward 
B)  demand; leftward 
C)  supply; rightward 
D)  supply; leftward 
A)  demand; rightward 
B)  demand; leftward 
C)  supply; rightward 
D)  supply; leftward

Question 20

If supply is perfectly inelastic, a sales tax imposed on sellers is paid by

Accepted Answer

A)  only the buyers. 
B)  only the sellers. 
C)  both the buyers and sellers. 
D)  None of the above answers is correct. 
A)  only the buyers. 
B)  only the sellers. 
C)  both the buyers and sellers. 
D)  None of the above answers is correct.

Exam 6: Government Actions in Markets

-When a sales tax is imposed on sellers, the supply curve shifts so that the vertical distance between the old and the new supply curve equals the

Sherry wants to rent an apartment. Although rents are below what she is willing to pay, she cannot find an apartment. Then after a month of searching, she finds an apartment but she has to pay an additional $1,000 to have the locks changed. Sherry has just experienced the effects of ________.

-In the table above, what is the level of unemployment (in millions of workers) if the minimum wage is set at $8 per hour?

-The above figure shows the apartment market in Big City. What is the equilibrium rent in Big City?

A student wrote: "A subsidy raises marginal social benefit above marginal social cost and eliminates the deadweight loss from underproduction." If you were the instructor, how would you correct this statement?

The elasticity of demand for chocolate chip cookies is 0.6 and the elasticity of supply for these cookies is 1.9. If a tax is imposed on purchases of chocolate chip cookies, then the

A rent ceiling results in a shortage of apartments. As a result, there is

-The figure above shows the market for milk in Cowland. A subsidy paid to producers of $1 per gallon of milk is introduced. If there are no external costs and no external benefits, the marginal benefit of the last gallon of milk consumed is

-The figure above shows the market for milk in Cowland. A subsidy paid to producers of $1 per gallon of milk is introduced. If there are no external costs and no external benefits, the marginal cost of the last gallon of milk produced is

One common effect of rent ceilings in big cities is

-The above figure shows the market for blouses. The government decides to impose the sales tax on sellers, as shown in the figure. Using the figure, how much tax revenue does the government raise?

-A tax is imposed on the sale of a product. As long as neither the supply nor the demand is perfectly elastic or inelastic,

-In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

-As long as the supply curve for a good is upward sloping and the demand curve is downward sloping, a sales tax imposed on sellers shifts the supply curve

Suppose that apartments rent for $1,300 a month in San Francisco, California and $850 a month in Los Angeles, California. If the state of California passes a state-wide rent ceiling for apartments of $1,100 a month, what occurs in the two cities?

When a government fines and/or imprisons persons convicted of using illegal drugs, the government is attempting to decrease the illegal drug trade by shifting the ________ curve for illegal drugs ________.

If supply is perfectly inelastic, a sales tax imposed on sellers is paid by

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

-In the figure above, the demand curve shifts rightward from D₀ to D₁ so that D₁ is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

When a government fines and/or imprisons persons convicted of using illegal drugs, the government is attempting to decrease the illegal drug trade by shifting the curve for illegal drugs .