Question 1

Given the same price elasticity of supply, sellers would be able to pass along the smallest 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) 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) Fish with a price elasticity of demand of 0.12

Question 2

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 3

A price floor will create the largest surplus when:

Accepted Answer

A) both supply and demand are inelastic. 
B) both supply and demand are elastic. 
C) supply is elastic and demand is inelastic. 
D) supply is inelastic and demand is elastic. 
A) both supply and demand are inelastic. 
B) both supply and demand are elastic. 
C) supply is elastic and demand is inelastic. 
D) supply is inelastic and demand is elastic.

Question 4

Suppose that 75 percent of a cigarette tax is borne by consumers. If the supply elasticity is 1, the demand elasticity is equal to:

Accepted Answer

A) 1. 
B) 1/2. 
C) 1/3. 
D) 1/4. 
A) 1. 
B) 1/2. 
C) 1/3. 
D) 1/4.

Question 5

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 6

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 7

Refer to the graph shown. An effective price ceiling at Pc causes consumer surplus to:

Accepted Answer

A) change from areas C + D + F to areas B + C + D. 
B) change from areas A + B + E to areas A + B + C. 
C) fall from areas C + D + F to area D. 
D) fall from areas A + B + E to area A. 
A) change from areas C + D + F to areas B + C + D. 
B) change from areas A + B + E to areas A + B + C. 
C) fall from areas C + D + F to area D. 
D) fall from areas A + B + E to area A.

Question 8

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

Accepted Answer

A) change from areas C + D + F to areas B + C + D. 
B) change from areas A + B + E to areas A + B + C. 
C) fall from areas C + D + F to area D. 
D) fall from areas A + B + E to area A. 
A) change from areas C + D + F to areas B + C + D. 
B) change from areas A + B + E to areas A + B + C. 
C) fall from areas C + D + F to area D. 
D) fall from areas A + B + E to area A.

Question 9

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 10

Demonstrate graphically and explain verbally the concept of producer surplus.

Accepted Answer

Producer surplus is the price a producer

Question 11

Define rent-seeking activities and give an example.Use agricultural price supports to demonstrate that the value of rent seeking is linked to elasticity.

Accepted Answer

Rent-seeking activities are activities d

Question 12

Consumers have the greatest incentive to lobby for price controls in the short run when supply is:

Accepted Answer

A) inelastic and demand increases 
B) inelastic and demand decreases. 
C) elastic and demand increases. 
D) elastic and demand decreases. 
A) inelastic and demand increases 
B) inelastic and demand decreases. 
C) elastic and demand increases. 
D) elastic and demand decreases.

Question 13

When the market is in equilibrium, total surplus is maximized.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $10 and a quantity of 500 units. In equilibrium, consumer surplus is equal to:

Accepted Answer

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

Question 16

Demonstrate graphically and explain verbally the cost to producers 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 17

An excise tax on alcohol causes the supply of alcohol to decrease and the price of alcohol to decrease.

Accepted Answer

A) True 
 B)False

Question 18

Assuming a binding price floor, the more inelastic the supply and the demand curves are, the:

Accepted Answer

A) smaller the shortage a price floor will create. 
B) greater the shortage a price floor will create. 
C) smaller the surplus a price floor will create. 
D) greater the surplus a price floor will create. 
A) smaller the shortage a price floor will create. 
B) greater the shortage a price floor will create. 
C) smaller the surplus a price floor will create. 
D) greater the surplus a price floor will create.

Question 19

Refer to the following graph.   Given a tax of t on suppliers, revenue collected is:

Accepted Answer

A) A, B, C. Suppliers pay A and B. Consumers pay C. 
B) A, B, C. Suppliers pay B and C. Consumers pay A. 
C) A and B. Suppliers pay A. Consumers pay B. 
D) A and B. Suppliers pay B. Consumers pay A. 
A) A, B, C. Suppliers pay A and B. Consumers pay C. 
B) A, B, C. Suppliers pay B and C. Consumers pay A. 
C) A and B. Suppliers pay A. Consumers pay B. 
D) A and B. Suppliers pay B. Consumers pay A.

Question 20

Price ceilings create shortages, but taxes do not.

Accepted Answer

A) True 
 B)False

Exam 7: Taxation and Government Intervention

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

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

A price floor will create the largest surplus when:

Suppose that 75 percent of a cigarette tax is borne by consumers. If the supply elasticity is 1, the demand elasticity is equal to:

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

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

Refer to the graph shown. An effective price ceiling at Pc causes consumer surplus to:

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

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

Demonstrate graphically and explain verbally the concept of producer surplus.

Define rent-seeking activities and give an example.Use agricultural price supports to demonstrate that the value of rent seeking is linked to elasticity.

Consumers have the greatest incentive to lobby for price controls in the short run when supply is:

When the market is in equilibrium, total surplus is maximized.

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. Assume that the market is initially in equilibrium at a price of $10 and a quantity of 500 units. In equilibrium, consumer surplus is equal to:

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

An excise tax on alcohol causes the supply of alcohol to decrease and the price of alcohol to decrease.

Assuming a binding price floor, the more inelastic the supply and the demand curves are, the:

Refer to the following graph. Given a tax of t on suppliers, revenue collected is:

Price ceilings create shortages, but taxes do not.

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

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

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: