Question 1

Refer to the graph shown. If consumers had to pay $13 per unit for this product instead of $10 per unit, consumer surplus would fall from:

Accepted Answer

A) 2,250 to 1,125. 
B) 1,125 to 810. 
C) 1,500 to 810. 
D) 1,125 to 405. 
A) 2,250 to 1,125. 
B) 1,125 to 810. 
C) 1,500 to 810. 
D) 1,125 to 405.

Question 2

The more inelastic the demand for agricultural output, the stronger the incentive for farmers to engage in rent-seeking activities.

Accepted Answer

A) True 
 B)False

Question 3

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, producer surplus is equal to:

Accepted Answer

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

Question 4

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 lost consumer surplus of this tax is equal to the area:

Accepted Answer

A) cdjh. 
B) deij. 
C) hji. 
D) cehi. 
A) cdjh. 
B) deij. 
C) hji. 
D) cehi.

Question 5

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

Accepted Answer

A) A. 
B) F. 
C) A plus area F. 
D) D plus area E plus area F. 
A) A. 
B) F. 
C) A plus area F. 
D) D plus area E plus area F.

Question 6

Refer to the graphs shown. Deadweight loss is the least with the imposition of a given per-unit tax on producers 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 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. If the government imposes a $2 per-unit tax on this product, consumer 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 8

If the supply curve is perfectly elastic, the burden of a tax on suppliers is borne:

Accepted Answer

A) entirely by the suppliers. 
B) entirely by the consumers. 
C) mostly by the suppliers and partly by the consumers if the demand curve is inelastic. 
D) partly by the suppliers and mostly by the consumers if the demand curve is elastic. 
A) entirely by the suppliers. 
B) entirely by the consumers. 
C) mostly by the suppliers and partly by the consumers if the demand curve is inelastic. 
D) partly by the suppliers and mostly by the consumers if the demand curve is elastic.

Question 9

Define consumer surplus and producer surplus.Explain why the equilibrium price and quantity maximizes the sum of producer plus consumer surplus (the total surplus).

Accepted Answer

Consumer surplus is the value the consum

Question 10

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 11

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, the deadweight loss from the tax will be:

Accepted Answer

A) 10. 
B) 60. 
C) 70. 
D) 80. 
A) 10. 
B) 60. 
C) 70. 
D) 80.

Question 12

The military draft can be seen as an implicit tax on potential recruits and a subsidy to those who demand defense services.

Accepted Answer

A) True 
 B)False

Question 13

Use the diagram below to compute the dollar value of the consumer and producer surplus.

Accepted Answer

Consumer surplus = ½

Question 14

A local government is considering a 10 percent tax on items A, B, and C. They want to tax only those goods for which the burden of the tax is lowest on suppliers. They know that the elasticity of supply of all the suppliers in question is about equal and have observed that when the price of A, B, and C rose 10 percent, total sales receipts for A and B rose 2 percent but declined 2 percent for C. From this information, they should:

Accepted Answer

A) tax A and B but not C. 
B) tax A, B, and C equally. 
C) tax C but not A and B. 
D) You need to know the volume of sales to determine the answer. 
A) tax A and B but not C. 
B) tax A, B, and C equally. 
C) tax C but not A and B. 
D) You need to know the volume of sales to determine the answer.

Question 15

Refer to the graph shown. In equilibrium, producer 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 16

Refer to the graphs shown. The burden of the tax is borne entirely by consumers 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 17

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) raise the price consumers pay from $12 to $14. 
B) lower the price consumers pay from $14 to $12. 
C) raise the price sellers keep after paying the tax from $12 to $14. 
D) lower the price sellers keep after paying the tax from $14 to $12. 
A) raise the price consumers pay from $12 to $14. 
B) lower the price consumers pay from $14 to $12. 
C) raise the price sellers keep after paying the tax from $12 to $14. 
D) lower the price sellers keep after paying the tax from $14 to $12.

Question 18

If the government's goal is to alter people's behavior through taxation, taxing goods with relatively elastic demand and supply would be most effective.

Accepted Answer

A) True 
 B)False

Question 19

If a tax is legally required to be paid by sellers, sellers typically bear the full burden of the tax.

Accepted Answer

A) True 
 B)False

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, it will collect tax revenue in the amount of:

Accepted Answer

A) $0. 
B) $1,200. 
C) $1,600. 
D) $2,000. 
A) $0. 
B) $1,200. 
C) $1,600. 
D) $2,000.

Exam 7: Taxation and Government Intervention

Refer to the graph shown. If consumers had to pay $13 per unit for this product instead of $10 per unit, consumer surplus would fall from:

The more inelastic the demand for agricultural output, the stronger the incentive for farmers to engage in rent-seeking activities.

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, producer surplus is equal 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 lost consumer surplus of this tax is equal to the area:

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

Refer to the graphs shown. Deadweight loss is the least with the imposition of a given per-unit tax on producers in graphs:

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, consumer surplus will fall from:

If the supply curve is perfectly elastic, the burden of a tax on suppliers is borne:

Define consumer surplus and producer surplus.Explain why the equilibrium price and quantity maximizes the sum of producer plus consumer surplus (the total surplus).

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 $6 and a quantity of 40 units. If the government imposes a $2 per-unit tax on this product, the deadweight loss from the tax will be:

The military draft can be seen as an implicit tax on potential recruits and a subsidy to those who demand defense services.

Use the diagram below to compute the dollar value of the consumer and producer surplus.

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

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

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:

If the government's goal is to alter people's behavior through taxation, taxing goods with relatively elastic demand and supply would be most effective.

If a tax is legally required to be paid by sellers, sellers typically bear the full burden of the tax.

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, it will collect tax revenue in the amount of:

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. 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 lost consumer surplus of this tax is equal to the 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: