Question 1

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 2

Demonstrate graphically and explain verbally how a price floor may be viewed as essentially a tax and subsidy scheme.

Accepted Answer

The key to the story is that a price flo

Question 3

What are the three costs of taxation? What is the deadweight loss of taxation? What causes deadweight loss?

Accepted Answer

The costs of taxation to society include

Question 4

The distance between the supply curve and the price the producer receives for a product for a given quantity supplied 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 5

Refer to the graph shown. When market supply shifts from S0 to S1, total producer revenue:

Accepted Answer

A) increases from $2,520 to $3,000. 
B) increases from $1,260 to $1,500. 
C) decreases from $3,000 to $2,520. 
D) decreases from $1,500 to $1,260. 
A) increases from $2,520 to $3,000. 
B) increases from $1,260 to $1,500. 
C) decreases from $3,000 to $2,520. 
D) decreases from $1,500 to $1,260.

Question 6

Unlike excise taxes, price ceilings create no deadweight loss.

Accepted Answer

A) True 
 B)False

Question 7

Suppose the price elasticity of demand is 1.5 and the price elasticity of supply is 0.5,what is the percentage of a tax borne by the consumer,and what is the percentage of the same tax borne by the producer?

Accepted Answer

The percentage of the tax borne by the c

Question 8

If elasticity of demand is 0.7, elasticity of supply is 0.7, and a 5 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

When elasticities of supply and demand are both equal to 1, the burden of a tax will be:

Accepted Answer

A) entirely on buyers. 
B) entirely on sellers. 
C) half on buyers and half on sellers. 
D) mostly on buyers. 
A) entirely on buyers. 
B) entirely on sellers. 
C) half on buyers and half on sellers. 
D) mostly on buyers.

Question 10

Refer to the graph shown. Total surplus is maximized when:

Accepted Answer

A) the market is in equilibrium at price P1 and quantity Q1. 
B) producers are able to charge a price above P1. 
C) consumers are able to pay a price below P1. 
D) excess demand is maximized. 
A) the market is in equilibrium at price P1 and quantity Q1. 
B) producers are able to charge a price above P1. 
C) consumers are able to pay a price below P1. 
D) excess demand is maximized.

Question 11

The United States currently imposes a tariff on imported sugar.How does the burden imposed on suppliers and consumers by this tariff relate to the relative elasticities for sugar? Explain.NOTE: Be sure to include supply and demand diagrams as part of your explanation and vary the elasticity of demand,keeping elasticity of supply constant.

Accepted Answer

The imposition of a tariff will shift th

Question 12

Suppose the current equilibrium price of a good is $10,the elasticity of demand is 0,and the elasticity of supply is 2.If the government levies a $1 tax on the supplier,calculate the new equilibrium price and the percentage of the tax borne by both the demander and the supplier of the good.

Accepted Answer

Note that demand is perfectly inelastic

Question 13

Demonstrate graphically and explain verbally why the equilibrium values of price and quantity in a supply and demand model lead to the maximum combination of consumer and producer surplus.

Accepted Answer

To demonstrate that the maximum combinat

Question 14

A price ceiling is, in essence, an implicit tax on producers and an implicit subsidy to consumers.

Accepted Answer

A) True 
 B)False

Question 15

Suppose elasticity of demand is 1, elasticity of supply is 2, and a 5 percent excise tax is levied on consumers. Which of the following changes will reduce the burden of the tax on consumers?

Accepted Answer

A) Elasticity of demand falls to 0. 
B) Elasticity of demand rises to 2. 
C) Taxing authorities levy the tax on suppliers. 
D) Nothing will change the burden of the tax. 
A) Elasticity of demand falls to 0. 
B) Elasticity of demand rises to 2. 
C) Taxing authorities levy the tax on suppliers. 
D) Nothing will change the burden of the tax.

Question 16

A per-unit tax on coffee paid by the seller causes the:

Accepted Answer

A) supply of coffee curve to shift upward by the amount of the per-unit tax. 
B) supply of coffee curve to shift downward by the amount of the per-unit tax. 
C) demand for coffee curve to shift upward by the amount of the per-unit tax. 
D) demand for coffee curve to shift downward by the amount of the per-unit tax. 
A) supply of coffee curve to shift upward by the amount of the per-unit tax. 
B) supply of coffee curve to shift downward by the amount of the per-unit tax. 
C) demand for coffee curve to shift upward by the amount of the per-unit tax. 
D) demand for coffee curve to shift downward by the amount of the per-unit tax.

Question 17

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

Accepted Answer

The more elastic the supply and demand c

Question 18

When government imposes a per-unit tax on a product, the net price producers actually receive for the product (after taxation)typically:

Accepted Answer

A) increases by the amount of the per-unit tax. 
B) increases by less than the amount of the per-unit tax. 
C) decreases by the amount of the per-unit tax. 
D) decreases by less than the amount of the per-unit tax. 
A) increases by the amount of the per-unit tax. 
B) increases by less than the amount of the per-unit tax. 
C) decreases by the amount of the per-unit tax. 
D) decreases by less than the amount of the per-unit tax.

Question 19

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 20

If the demand for Insulin is highly inelastic, the burden of a tax on Insulin will be borne almost entirely by sellers.

Accepted Answer

A) True 
 B)False

Exam 7: Taxation and Government Intervention

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

Demonstrate graphically and explain verbally how a price floor may be viewed as essentially a tax and subsidy scheme.

What are the three costs of taxation? What is the deadweight loss of taxation? What causes deadweight loss?

The distance between the supply curve and the price the producer receives for a product for a given quantity supplied is referred to as:

Refer to the graph shown. When market supply shifts from S0 to S1, total producer revenue:

Unlike excise taxes, price ceilings create no deadweight loss.

Suppose the price elasticity of demand is 1.5 and the price elasticity of supply is 0.5,what is the percentage of a tax borne by the consumer,and what is the percentage of the same tax borne by the producer?

If elasticity of demand is 0.7, elasticity of supply is 0.7, and a 5 percent excise tax is levied on the good:

When elasticities of supply and demand are both equal to 1, the burden of a tax will be:

Refer to the graph shown. Total surplus is maximized when:

Suppose the current equilibrium price of a good is $10,the elasticity of demand is 0,and the elasticity of supply is 2.If the government levies a $1 tax on the supplier,calculate the new equilibrium price and the percentage of the tax borne by both the demander and the supplier of the good.

Demonstrate graphically and explain verbally why the equilibrium values of price and quantity in a supply and demand model lead to the maximum combination of consumer and producer surplus.

A price ceiling is, in essence, an implicit tax on producers and an implicit subsidy to consumers.

Suppose elasticity of demand is 1, elasticity of supply is 2, and a 5 percent excise tax is levied on consumers. Which of the following changes will reduce the burden of the tax on consumers?

A per-unit tax on coffee paid by the seller causes the:

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

When government imposes a per-unit tax on a product, the net price producers actually receive for the product (after taxation)typically:

There is no deadweight loss if:

If the demand for Insulin is highly inelastic, the burden of a tax on Insulin will be borne almost entirely by sellers.

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, total producer revenue: