Question 1

When demand is highly inelastic and supply shifts to the right, price:

Accepted Answer

A)  falls, quantity sold increases, and total revenue increases. 
B)  falls, quantity sold increases, and total revenue decreases. 
C)  increases, quantity sold decreases, and total revenue increases. 
D)  increases, quantity sold decreases, and total revenue decreases. 
A)  falls, quantity sold increases, and total revenue increases. 
B)  falls, quantity sold increases, and total revenue decreases. 
C)  increases, quantity sold decreases, and total revenue increases. 
D)  increases, quantity sold decreases, and total revenue decreases.

Question 2

Refer to the graph shown. If price is increased from $3 to $4, total surplus will fall by:

Accepted Answer

A)  50. 
B)  100. 
C)  150. 
D)  200. 
A)  50. 
B)  100. 
C)  150. 
D)  200.

Question 3

Refer to the graph shown. The burden of the tax is borne entirely by sellers in graphs:

Accepted Answer

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

Question 4

Refer to the graph shown. An effective price floor at $8 causes producer surplus to:

Accepted Answer

A)  increase from 10 to 80. 
B)  fall from 62.5 to 10. 
C)  increase from 62.5 to 70. 
D)  fall from 70 to 62.5. 
A)  increase from 10 to 80. 
B)  fall from 62.5 to 10. 
C)  increase from 62.5 to 70. 
D)  fall from 70 to 62.5.

Question 5

Refer to the graphs shown. In which graph is there no producer 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 6

Suppose the equilibrium price of textbooks is $40 a textbook. At that price, the quantity of textbooks demanded and supplied is 20,000. If a $5 tax per textbook paid by consumers increases the price paid by consumers to $42 a textbook and reduces the equilibrium quantity sold to 18,000, elasticity of:

Accepted Answer

A)  demand is 1.3 and elasticity of supply is 2.0. Consumers pay a larger portion of the tax. 
B)  demand is 0.7 and elasticity of supply is 0.5. Consumers pay a smaller portion of the tax. 
C)  supply is 1.3 and elasticity of demand is 2.0. Suppliers pay a larger portion of the tax. 
D)  supply is 0.7 and elasticity of demand is 0.5. Suppliers pay a smaller portion of the tax. 
A)  demand is 1.3 and elasticity of supply is 2.0. Consumers pay a larger portion of the tax. 
B)  demand is 0.7 and elasticity of supply is 0.5. Consumers pay a smaller portion of the tax. 
C)  supply is 1.3 and elasticity of demand is 2.0. Suppliers pay a larger portion of the tax. 
D)  supply is 0.7 and elasticity of demand is 0.5. Suppliers pay a smaller portion of the tax.

Question 7

Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $6 and a quantity of 40 units. In equilibrium, consumer surplus is equal to:

Accepted Answer

A)  40. 
B)  80. 
C)  120. 
D)  160. 
A)  40. 
B)  80. 
C)  120. 
D)  160.

Question 8

If elasticity of demand is 1.8, elasticity of supply is 0.7, and a 20 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 9

The distance between the demand curve and the price the consumer has to pay for a product (given quantity demanded) is referred to as:

Accepted Answer

A)  market surplus. 
B)  market shortage. 
C)  consumer surplus. 
D)  producer surplus. 
A)  market surplus. 
B)  market shortage. 
C)  consumer surplus. 
D)  producer surplus.

Question 10

Refer to the graph shown. If the price were at the market equilibrium price, the total surplus would be equal to:

Accepted Answer

A)  80. 
B)  120. 
C)  200. 
D)  400. 
A)  80. 
B)  120. 
C)  200. 
D)  400.

Question 11

There is no deadweight loss if:

Accepted Answer

A)  demand is perfectly inelastic. 
B)  demand is perfectly elastic. 
C)  taxes collected are used for societal good. 
D)  demand shifts the amount of the tax. 
A)  demand is perfectly inelastic. 
B)  demand is perfectly elastic. 
C)  taxes collected are used for societal good. 
D)  demand shifts the amount of the tax.

Question 12

Refer to the graph shown. If the government imposed a price ceiling of $4, producer surplus would:

Accepted Answer

A)  increase from 2 to 4. 
B)  increase from 4 to 8. 
C)  fall from 8 to 2. 
D)  fall from 16 to 4. 
A)  increase from 2 to 4. 
B)  increase from 4 to 8. 
C)  fall from 8 to 2. 
D)  fall from 16 to 4.

Question 13

Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $6 and a quantity of 40 units. If the government imposes a $2 per-unit tax on this product, producer surplus will fall from:

Accepted Answer

A)  80 to 45. 
B)  160 to 90. 
C)  90 to 45. 
D)  160 to 80. 
A)  80 to 45. 
B)  160 to 90. 
C)  90 to 45. 
D)  160 to 80.

Question 14

If elasticity of demand is 1.8, elasticity of supply is 0.2, and a 20 percent excise tax is levied on the good:

Accepted Answer

A)  consumers pay 20 percent of the tax. 
B)  sellers pay 20 percent of the tax. 
C)  consumers pay 10 percent of the tax. 
D)  sellers pay 10 percent of the tax. 
A)  consumers pay 20 percent of the tax. 
B)  sellers pay 20 percent of the tax. 
C)  consumers pay 10 percent of the tax. 
D)  sellers pay 10 percent of the tax.

Question 15

As a result of advances in productivity, farmers can produce more at a lower cost. The effect of these changes has been to:

Accepted Answer

A)  increase the demand for farm output. 
B)  reduce total revenue for farmers as a group. 
C)  increase total revenue for farmers as a group. 
D)  increase profits for farmers as a group. 
A)  increase the demand for farm output. 
B)  reduce total revenue for farmers as a group. 
C)  increase total revenue for farmers as a group. 
D)  increase profits for farmers as a group.

Question 16

Suppose elasticity of demand is 0.2, elasticity of supply is 0.7, and a 10 percent excise tax is levied on producers. Which of the following changes will reduce the share of the tax paid by consumers?

Accepted Answer

A)  Elasticity of supply falls to 0.3. 
B)  Elasticity of demand falls to 0.1. 
C)  The tax is increased to 20 percent. 
D)  Nothing will change the burden of the tax. 
A)  Elasticity of supply falls to 0.3. 
B)  Elasticity of demand falls to 0.1. 
C)  The tax is increased to 20 percent. 
D)  Nothing will change the burden of the tax.

Question 17

Refer to the graph shown. When market supply shifts from S0 to S1, the revenue gain to suppliers resulting from increased quantity demanded is shown by area:

Accepted Answer

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

Question 18

Refer to the graph shown. With an effective price ceiling at $3, total surplus is reduced by:

Accepted Answer

A)  20. 
B)  30. 
C)  50. 
D)  100. 
A)  20. 
B)  30. 
C)  50. 
D)  100.

Question 19

Refer to the graph shown. An effective price floor at $8 causes consumer surplus to:

Accepted Answer

A)  increase from 10 to 62.50. 
B)  fall from 62.50 to 10. 
C)  increase from 120 to 130. 
D)  fall from 320 to 80. 
A)  increase from 10 to 62.50. 
B)  fall from 62.50 to 10. 
C)  increase from 120 to 130. 
D)  fall from 320 to 80.

Question 20

Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $10 and a quantity of 500 units. If the government imposes a $4 per-unit tax on this product, consumer surplus will fall from:

Accepted Answer

A)  2,500 to 1,600. 
B)  5,000 to 3,200. 
C)  2,500 to 1,200. 
D)  5,000 to 2,500. 
A)  2,500 to 1,600. 
B)  5,000 to 3,200. 
C)  2,500 to 1,200. 
D)  5,000 to 2,500.

Exam 7: Taxation and Government Intervention

When demand is highly inelastic and supply shifts to the right, price:

Refer to the graph shown. If price is increased from $3 to $4, total surplus will fall by:

Refer to the graph shown. The burden of the tax is borne entirely by sellers in graphs:

Refer to the graph shown. An effective price floor at $8 causes producer surplus to:

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

Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $6 and a quantity of 40 units. In equilibrium, consumer surplus is equal to:

If elasticity of demand is 1.8, elasticity of supply is 0.7, and a 20 percent excise tax is levied on the good:

The distance between the demand curve and the price the consumer has to pay for a product (given quantity demanded) is referred to as:

Refer to the graph shown. If the price were at the market equilibrium price, the total surplus would be equal to:

There is no deadweight loss if:

Refer to the graph shown. If the government imposed a price ceiling of $4, producer surplus would:

Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $6 and a quantity of 40 units. If the government imposes a $2 per-unit tax on this product, producer surplus will fall from:

If elasticity of demand is 1.8, elasticity of supply is 0.2, and a 20 percent excise tax is levied on the good:

As a result of advances in productivity, farmers can produce more at a lower cost. The effect of these changes has been to:

Suppose elasticity of demand is 0.2, elasticity of supply is 0.7, and a 10 percent excise tax is levied on producers. Which of the following changes will reduce the share of the tax paid by consumers?

Refer to the graph shown. When market supply shifts from S0 to S1, the revenue gain to suppliers resulting from increased quantity demanded is shown by area:

Refer to the graph shown. With an effective price ceiling at $3, total surplus is reduced by:

Refer to the graph shown. An effective price floor at $8 causes consumer surplus to:

Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $10 and a quantity of 500 units. If the government imposes a $4 per-unit tax on this product, consumer surplus will 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. When market supply shifts from S₀ to S₁, the revenue gain to suppliers resulting from increased quantity demanded is shown by area: