Question 1

Define consumer surplus and producer surplus.

Accepted Answer

Consumer surplus is the value

Question 2

Demonstrate graphically and explain verbally the cost to consumers of a tax of t per carton imposed on the sellers of cigarettes.Where does the lost producer surplus go?

Accepted Answer

Imposing a tax will result in an upward

Question 3

Refer to the graph shown. The market represented here is in equilibrium when the price is:

Accepted Answer

A) $5.00 per unit and 220 units are bought and sold. 
B) $8.15 per unit and 220 units are bought and sold. 
C) $5.00 per unit and 400 units are bought and sold. 
D) $3.65 per unit and 400 units are bought and sold. 
A) $5.00 per unit and 220 units are bought and sold. 
B) $8.15 per unit and 220 units are bought and sold. 
C) $5.00 per unit and 400 units are bought and sold. 
D) $3.65 per unit and 400 units are bought and sold.

Question 4

Refer to the graph shown. If the elasticity of supply is 1, the burden of the tax will be shared equally by consumers and suppliers at which point?

Accepted Answer

A) A 
B) C 
C) E 
D) It depends on who pays the tax. 
A) A 
B) C 
C) E 
D) It depends on who pays the tax.

Question 5

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

Accepted Answer

A) fall from 12 to 4. 
B) fall from 12 to 8. 
C) rise from 12 to 13. 
D) be unchanged at 12. 
A) fall from 12 to 4. 
B) fall from 12 to 8. 
C) rise from 12 to 13. 
D) be unchanged at 12.

Question 6

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.

Question 7

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 8

Refer to the graph shown. When market supply shifts from S0 to S1, the revenue loss to suppliers resulting from the lower price is shown by area:

Accepted Answer

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

Question 9

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 10

If elasticity of demand is 1 and elasticity of supply is 0, what percentage of a 10 percent tax will be borne by consumers?

Accepted Answer

A) 100 percent. 
B) 50 percent. 
C) 10 percent. 
D) 0 percent. 
A) 100 percent. 
B) 50 percent. 
C) 10 percent. 
D) 0 percent.

Question 11

Demonstrate graphically and explain verbally the concept of consumer surplus.

Accepted Answer

Consumer surplus is the value a consumer

Question 12

Refer to the following graph.   A $4 tax is levied on suppliers (represented by S0 without the tax). From the graph and tax structure you know that the:

Accepted Answer

A) elasticities of supply and demand are about the same. 
B) elasticity of supply is less than the elasticity of demand. 
C) elasticity of demand is less than the elasticity of supply. 
D) elasticities cannot be calculated. 
A) elasticities of supply and demand are about the same. 
B) elasticity of supply is less than the elasticity of demand. 
C) elasticity of demand is less than the elasticity of supply. 
D) elasticities cannot be calculated.

Question 13

Given the same price elasticity of supply, sellers would be able to pass along the largest portion of a 10 percent tax on which item?

Accepted Answer

A) Beef with a price elasticity of demand of 0.62 
B) Pork with a price elasticity of demand of 0.73 
C) Chicken with a price elasticity of demand of 0.32 
D) D.Fish with a price elasticity of demand of 0.12 
A) Beef with a price elasticity of demand of 0.62 
B) Pork with a price elasticity of demand of 0.73 
C) Chicken with a price elasticity of demand of 0.32 
D) D.Fish with a price elasticity of demand of 0.12

Question 14

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, equilibrium quantity will change to:

Accepted Answer

A) 300. 
B) 400. 
C) 500. 
D) 1,000. 
A) 300. 
B) 400. 
C) 500. 
D) 1,000.

Question 15

Graphically, deadweight loss is shown by the:

Accepted Answer

A) welfare loss rectangle. 
B) welfare loss triangle. 
C) tax revenue rectangle. 
D) consumer surplus loss triangle. 
A) welfare loss rectangle. 
B) welfare loss triangle. 
C) tax revenue rectangle. 
D) consumer surplus loss triangle.

Question 16

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 17

Refer to the graph shown. In equilibrium, total surplus is equal to:

Accepted Answer

A) 600. 
B) 1,200. 
C) 1,400. 
D) 2,000. 
A) 600. 
B) 1,200. 
C) 1,400. 
D) 2,000.

Question 18

Refer to the graph shown. Which statement best characterizes the difference between the effect of a price ceiling in the short run and the long run?

Accepted Answer

A) A price ceiling of P0 will create a shortage of (Q4 − Q0)in the short run and the long run. 
B) A price ceiling of P2 will create a shortage of (Q3 − Q0)in the short run and a smaller shortage of (Q3 − Q1)in the long run. 
C) A price ceiling of P2 will create a shortage of (Q3 − Q1)in the short run, but a greater shortage of (Q3 − Q0)in the long run. 
D) A price ceiling of P0 will create a shortage of (Q3 − Q0)in the short run and the long run. 
A) A price ceiling of P0 will create a shortage of (Q4 − Q0)in the short run and the long run. 
B) A price ceiling of P2 will create a shortage of (Q3 − Q0)in the short run and a smaller shortage of (Q3 − Q1)in the long run. 
C) A price ceiling of P2 will create a shortage of (Q3 − Q1)in the short run, but a greater shortage of (Q3 − Q0)in the long run. 
D) A price ceiling of P0 will create a shortage of (Q3 − Q0)in the short run and the long run.

Question 19

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 20

Demonstrate graphically and explain verbally how the size of a shortage created by a price ceiling is related to the elasticity of the supply and demand curves.

Accepted Answer

The more elastic the supply and demand c

Exam 7: Taxation and Government Intervention

Define consumer surplus and producer surplus.

Demonstrate graphically and explain verbally the cost to consumers of a tax of t per carton imposed on the sellers of cigarettes.Where does the lost producer surplus go?

Refer to the graph shown. The market represented here is in equilibrium when the price is:

Refer to the graph shown. If the elasticity of supply is 1, the burden of the tax will be shared equally by consumers and suppliers at which point?

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

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:

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

Refer to the graph shown. When market supply shifts from S0 to S1, the revenue loss to suppliers resulting from the lower price is shown by area:

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

If elasticity of demand is 1 and elasticity of supply is 0, what percentage of a 10 percent tax will be borne by consumers?

Demonstrate graphically and explain verbally the concept of consumer surplus.

Refer to the following graph. A $4 tax is levied on suppliers (represented by S0 without the tax). From the graph and tax structure you know that the:

Given the same price elasticity of supply, sellers would be able to pass along the largest portion of a 10 percent tax on which item?

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, equilibrium quantity will change to:

Graphically, deadweight loss is shown by the:

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. In equilibrium, total surplus is equal to:

Refer to the graph shown. Which statement best characterizes the difference between the effect of a price ceiling in the short run and the long run?

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:

Demonstrate graphically and explain verbally how the size of a shortage created by a price ceiling is related to the elasticity of the supply and demand curves.

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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters

Refer to the graph shown. When market supply shifts from S₀ to S₁, the revenue loss to suppliers resulting from the lower price is shown by area:

Refer to the following graph. A $4 tax is levied on suppliers (represented by S₀ without the tax). From the graph and tax structure you know that the:

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: