Question 1

Refer to the graph shown. The difference between total surplus in equilibrium and total surplus when price is $8.15 and quantity is 220 is:

Accepted Answer

A)  405. 
B)  423.5. 
C)  600. 
D)  810. 
A)  405. 
B)  423.5. 
C)  600. 
D)  810.

Question 2

Suppose people freely choose to spend 40 percent of their income on healthcare, but then the government decides to tax 40 of a person's income to provide the same level of coverage as before. What can be said about deadweight loss in each case?

Accepted Answer

A)  Taxing income results in deadweight loss, and purchasing healthcare on one's own doesn't result in deadweight loss. 
B)  Taxing income results in less deadweight loss because government knows better what healthcare coverage is good for society. 
C)  There is no difference because the goods are purchased in the market in either case. 
D)  There is no difference because the total spending remains the same and the healthcare purchased remains the same. 
A)  Taxing income results in deadweight loss, and purchasing healthcare on one's own doesn't result in deadweight loss. 
B)  Taxing income results in less deadweight loss because government knows better what healthcare coverage is good for society. 
C)  There is no difference because the goods are purchased in the market in either case. 
D)  There is no difference because the total spending remains the same and the healthcare purchased remains the same.

Question 3

Refer to the graph shown. With an effective price floor at Pf, the effect is an implicit tax on:

Accepted Answer

A)  suppliers shown by area C and a subsidy to consumers of that area. 
B)  suppliers shown by area B and a subsidy to consumers of that area. 
C)  consumers shown by area C and a subsidy to suppliers of that area. 
D)  consumers shown by area B and a subsidy to suppliers of that area. 
A)  suppliers shown by area C and a subsidy to consumers of that area. 
B)  suppliers shown by area B and a subsidy to consumers of that area. 
C)  consumers shown by area C and a subsidy to suppliers of that area. 
D)  consumers shown by area B and a subsidy to suppliers of that area.

Question 4

Refer to the graph shown. An effective price ceiling at $3 causes producer surplus to:

Accepted Answer

A)  increase from 30 to 120. 
B)  increase from 80 to 110. 
C)  fall from 120 to 30. 
D)  fall from 80 to 30. 
A)  increase from 30 to 120. 
B)  increase from 80 to 110. 
C)  fall from 120 to 30. 
D)  fall from 80 to 30.

Question 5

If price is increased by law from a market equilibrium value of $5 to a higher value of $6:

Accepted Answer

A)  both producer surplus and consumer surplus will increase. 
B)  consumer surplus will decrease and there will be some lost surplus. 
C)  producer surplus will decrease and there will be some lost surplus. 
D)  there will be lost surplus, as both producer surplus and consumer surplus decrease. 
A)  both producer surplus and consumer surplus will increase. 
B)  consumer surplus will decrease and there will be some lost surplus. 
C)  producer surplus will decrease and there will be some lost surplus. 
D)  there will be lost surplus, as both producer surplus and consumer surplus decrease.

Question 6

If elasticity of demand is 0.2, elasticity of supply is 0.6, and a 10 percent excise tax is levied on the good:

Accepted Answer

A)  consumers pay 25 percent of the tax. 
B)  sellers pay 25 percent of the tax. 
C)  consumers pay 20 percent of the tax. 
D)  sellers pay 60 percent of the tax. 
A)  consumers pay 25 percent of the tax. 
B)  sellers pay 25 percent of the tax. 
C)  consumers pay 20 percent of the tax. 
D)  sellers pay 60 percent of the tax.

Question 7

Refer to the graph shown. When the market is in equilibrium, consumer surplus is equal to:

Accepted Answer

A)  1,125. 
B)  1,500. 
C)  2,250. 
D)  2,500. 
A)  1,125. 
B)  1,500. 
C)  2,250. 
D)  2,500.

Question 8

Which of the following statements is true?

Accepted Answer

A)  Supply and demand tend to be much more elastic in the long run than in the short run. 
B)  Supply and demand tend to be much more inelastic in the long run than in the short run. 
C)  Supply is elastic in the short run, whereas demand is elastic only in the long run. 
D)  Supply is inelastic in the short run, whereas demand is inelastic only in the long run. 
A)  Supply and demand tend to be much more elastic in the long run than in the short run. 
B)  Supply and demand tend to be much more inelastic in the long run than in the short run. 
C)  Supply is elastic in the short run, whereas demand is elastic only in the long run. 
D)  Supply is inelastic in the short run, whereas demand is inelastic only in the long run.

Question 9

Refer to the graph shown. When the market is in equilibrium, producer surplus is equal to:

Accepted Answer

A)  500. 
B)  1,000. 
C)  1,500. 
D)  2,000. 
A)  500. 
B)  1,000. 
C)  1,500. 
D)  2,000.

Question 10

Refer to the graph shown. Initially, the market is in equilibrium with price equal to $3 and quantity equal to 100. Government imposes a tax on suppliers of $1 per unit. The effect of the tax is to:

Accepted Answer

A)  give government tax revenues of $100. 
B)  give government tax revenues of $400. 
C)  reduce producer surplus by $100. 
D)  reduce producer surplus by $400. 
A)  give government tax revenues of $100. 
B)  give government tax revenues of $400. 
C)  reduce producer surplus by $100. 
D)  reduce producer surplus by $400.

Question 11

Refer to the graphs shown. In which graph is there no consumer surplus either with or without a per-unit tax?

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 12

Refer to the graph shown. If the government imposed a price ceiling of $4, producers' revenue would:

Accepted Answer

A)  rise. 
B)  decline. 
C)  remain unchanged. 
D)  It cannot be determined. 
A)  rise. 
B)  decline. 
C)  remain unchanged. 
D)  It cannot be determined.

Question 13

Refer to the graph shown. Given the same supply elasticity, the burden of a 10 percent tax would be borne the most by the consumer in segment:

Accepted Answer

A)  AB. 
B)  BC. 
C)  CD. 
D)  DE. 
A)  AB. 
B)  BC. 
C)  CD. 
D)  DE.

Question 14

If elasticity of demand is 0.2, elasticity of supply is 0.5, and a 10 percent excise tax is levied on the good:

Accepted Answer

A)  the tax burden on suppliers will be greater. 
B)  the tax burden on consumers will be greater. 
C)  the tax burden will be the same for both. 
D)  one cannot say who will bear the greater burden without knowing the tax. 
A)  the tax burden on suppliers will be greater. 
B)  the tax burden on consumers will be greater. 
C)  the tax burden will be the same for both. 
D)  one cannot say who will bear the greater burden without knowing the tax.

Question 15

Refer to the graph shown. Assume the market is initially in equilibrium at point j in the graph but the imposition of a per-unit tax on this product shifts the supply curve up from S0 to S1. The welfare loss triangle from this tax is represented by area:

Accepted Answer

A)  ahf. 
B)  eig. 
C)  hji. 
D)  ajg. 
A)  ahf. 
B)  eig. 
C)  hji. 
D)  ajg.

Question 16

A per-unit tax will result in a deadweight loss unless the tax causes no change in:

Accepted Answer

A)  the price consumers pay. 
B)  the price producers receive after paying it. 
C)  equilibrium quantity sold. 
D)  either equilibrium price or equilibrium quantity. 
A)  the price consumers pay. 
B)  the price producers receive after paying it. 
C)  equilibrium quantity sold. 
D)  either equilibrium price or equilibrium quantity.

Question 17

Those with more inelastic demands will bear a larger burden of a tax because they:

Accepted Answer

A)  have more buying power. 
B)  have more income. 
C)  will switch to other products with a tax. 
D)  have fewer substitutes for that good. 
A)  have more buying power. 
B)  have more income. 
C)  will switch to other products with a tax. 
D)  have fewer substitutes for that good.

Question 18

Unlike excise taxes, price ceilings create no deadweight loss.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the graph shown. Initially, the market is in equilibrium with price equal to $12 and quantity equal to 140. As a result of a per-unit tax imposed by the government, the supply curve shifts from S0 to S1. The effect of the tax is to:

Accepted Answer

A)  give government tax revenues of $100. 
B)  give government tax revenues of $280. 
C)  reduce consumer surplus by $240. 
D)  reduce consumer surplus by $200. 
A)  give government tax revenues of $100. 
B)  give government tax revenues of $280. 
C)  reduce consumer surplus by $240. 
D)  reduce consumer surplus by $200.

Question 20

Refer to the graph shown. If consumers had to pay $7.50 per unit for this product instead of $5.00 per unit (because of a price floor or a shift in supply), consumer surplus would fall from:

Accepted Answer

A)  2,000 to 500. 
B)  1,000 to 500. 
C)  1,000 to 250. 
D)  500 to 250. 
A)  2,000 to 500. 
B)  1,000 to 500. 
C)  1,000 to 250. 
D)  500 to 250.

Exam 7: Taxation and Government Intervention

Refer to the graph shown. The difference between total surplus in equilibrium and total surplus when price is $8.15 and quantity is 220 is:

Suppose people freely choose to spend 40 percent of their income on healthcare, but then the government decides to tax 40 of a person's income to provide the same level of coverage as before. What can be said about deadweight loss in each case?

Refer to the graph shown. With an effective price floor at Pf, the effect is an implicit tax on:

Refer to the graph shown. An effective price ceiling at $3 causes producer surplus to:

If price is increased by law from a market equilibrium value of $5 to a higher value of $6:

If elasticity of demand is 0.2, elasticity of supply is 0.6, and a 10 percent excise tax is levied on the good:

Refer to the graph shown. When the market is in equilibrium, consumer surplus is equal to:

Which of the following statements is true?

Refer to the graph shown. When the market is in equilibrium, producer surplus is equal to:

Refer to the graph shown. Initially, the market is in equilibrium with price equal to $3 and quantity equal to 100. Government imposes a tax on suppliers of $1 per unit. The effect of the tax is to:

Refer to the graphs shown. In which graph is there no consumer surplus either with or without a per-unit tax?

Refer to the graph shown. If the government imposed a price ceiling of $4, producers' revenue would:

Refer to the graph shown. Given the same supply elasticity, the burden of a 10 percent tax would be borne the most by the consumer in segment:

If elasticity of demand is 0.2, elasticity of supply is 0.5, and a 10 percent excise tax is levied on the good:

Refer to the graph shown. Assume the market is initially in equilibrium at point j in the graph but the imposition of a per-unit tax on this product shifts the supply curve up from S0 to S1. The welfare loss triangle from this tax is represented by area:

A per-unit tax will result in a deadweight loss unless the tax causes no change in:

Those with more inelastic demands will bear a larger burden of a tax because they:

Unlike excise taxes, price ceilings create no deadweight loss.

Refer to the graph shown. Initially, the market is in equilibrium with price equal to $12 and quantity equal to 140. As a result of a per-unit tax imposed by the government, the supply curve shifts from S0 to S1. The effect of the tax is to:

Refer to the graph shown. If consumers had to pay $7.50 per unit for this product instead of $5.00 per unit (because of a price floor or a shift in supply), consumer surplus would fall from:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters

Refer to the graph shown. With an effective price floor at P_f, the effect is an implicit tax on:

Refer to the graph shown. Assume the market is initially in equilibrium at point j in the graph but the imposition of a per-unit tax on this product shifts the supply curve up from S₀ to S₁. The welfare loss triangle from this tax is represented by area:

Refer to the graph shown. Initially, the market is in equilibrium with price equal to $12 and quantity equal to 140. As a result of a per-unit tax imposed by the government, the supply curve shifts from S₀ to S₁. The effect of the tax is to: