Question 1

Total consumer surplus is measured as the area:

Accepted Answer

A) between the demand curve and the supply curve. 
B) above the demand curve. 
C) beneath the demand curve and above the market price. 
D) beneath the market price and above the supply curve. 
A) between the demand curve and the supply curve. 
B) above the demand curve. 
C) beneath the demand curve and above the market price. 
D) beneath the market price and above the supply curve.

Question 2

Refer to the graph shown. Initially, the market is in equilibrium where the demand curve intersects S0. In the initial equilibrium, consumer surplus is equal to:

Accepted Answer

A) 750. 
B) 1,500. 
C) 2,250. 
D) 3,000. 
A) 750. 
B) 1,500. 
C) 2,250. 
D) 3,000.

Question 3

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, the equilibrium price will change to:

Accepted Answer

A) $4. 
B) $8. 
C) $12. 
D) $14. 
A) $4. 
B) $8. 
C) $12. 
D) $14.

Question 4

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) consumers pay 5 percent of the tax. 
B) sellers pay 5 percent of the tax. 
C) consumers pay 50 percent of the tax. 
D) sellers pay 100 percent of the tax. 
A) consumers pay 5 percent of the tax. 
B) sellers pay 5 percent of the tax. 
C) consumers pay 50 percent of the tax. 
D) sellers pay 100 percent of the tax.

Question 5

Refer to the graph shown. Initially, the market is in equilibrium with price equal to $25 and quantity equal to 100. 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 $400. 
C) reduce producer surplus by $375. 
D) reduce producer surplus by $400. 
A) give government tax revenues of $100. 
B) give government tax revenues of $400. 
C) reduce producer surplus by $375. 
D) reduce producer surplus by $400.

Question 6

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

Accepted Answer

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

Question 7

The total cost of taxation to consumers and producers generally exceeds the amount of tax revenue collected by government.

Accepted Answer

A) True 
 B)False

Question 8

Refer to the graph shown. In the long run supply will become:

Accepted Answer

A) more elastic, rotating from S0 to S1, creating a larger shortage with a price ceiling of P2. 
B) less elastic, rotating from S0 to S1, creating a larger shortage with a price ceiling of P2. 
C) more elastic, rotating from S0 to S1, creating a smaller shortage with a price ceiling of P2. 
D) less elastic, rotating from S0 to S1, creating a smaller shortage with a price ceiling of P2. 
A) more elastic, rotating from S0 to S1, creating a larger shortage with a price ceiling of P2. 
B) less elastic, rotating from S0 to S1, creating a larger shortage with a price ceiling of P2. 
C) more elastic, rotating from S0 to S1, creating a smaller shortage with a price ceiling of P2. 
D) less elastic, rotating from S0 to S1, creating a smaller shortage with a price ceiling of P2.

Question 9

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, producer surplus will fall from:

Accepted Answer

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

Question 10

Given the same supply elasticity, the burden of a 10 percent tax on suppliers would be greatest on consumers within what price range? $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity } \
\hline \$ 2.00 & 26 \
\hline 4.00 & 22 \
\hline 6.00 & 18 \
\hline \mathbf { 8 . 0 0 } & 14 \
\hline 10.00 & 10 \
\hline
\end{array}$$

Accepted Answer

A) $2 and $4. 
B) $4 and $6 
C) $6 and $8 
D) $8 and $10 
A) $2 and $4. 
B) $4 and $6 
C) $6 and $8 
D) $8 and $10

Question 11

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 12

An excise tax is imposed on smartphones. If the elasticity of demand is 2 and the elasticity of supply is 1, we can predict that:

Accepted Answer

A) consumers will bear the full tax burden. 
B) sellers will bear the full tax burden. 
C) consumers will bear 2/3 of the tax burden. 
D) sellers will bear 2/3 of the tax burden. 
A) consumers will bear the full tax burden. 
B) sellers will bear the full tax burden. 
C) consumers will bear 2/3 of the tax burden. 
D) sellers will bear 2/3 of the tax burden.

Question 13

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, producer 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 14

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

Accepted Answer

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

Question 15

When the United States imposed a tariff on imported shrimp, a Vietnamese official said: "If the tariffs are imposed, that will mean fewer shrimp for the U.S. market and higher prices for consumers. So the U.S. government position hurts its own people. That's irrational." The imposition of tariffs by the United States in this case illustrates:

Accepted Answer

A) that the U.S. government, like all governments, is sometimes irrational. 
B) what the text calls the general rule of political economy, which states that often small interest groups lobby better than large groups. 
C) that U.S. consumers are either irrational or altruistic because they are willing to pay higher prices to help the U.S. shrimp industry. 
D) the good/bad paradox that what is good economics is always bad politics and vice versa. 
A) that the U.S. government, like all governments, is sometimes irrational. 
B) what the text calls the general rule of political economy, which states that often small interest groups lobby better than large groups. 
C) that U.S. consumers are either irrational or altruistic because they are willing to pay higher prices to help the U.S. shrimp industry. 
D) the good/bad paradox that what is good economics is always bad politics and vice versa.

Question 16

Refer to the graph shown. Assume the market is initially in equilibrium at point b in the graph but the imposition of a per-unit tax on this product shifts the supply curve up from S0 to S1. The amount of revenue government will collect from this tax is equal to the:

Accepted Answer

A) amount of the per-unit tax multiplied by Q1. 
B) amount of the per-unit tax multiplied by Q2. 
C) area of the triangle abc. 
D) area of the triangle bcd. 
A) amount of the per-unit tax multiplied by Q1. 
B) amount of the per-unit tax multiplied by Q2. 
C) area of the triangle abc. 
D) area of the triangle bcd.

Question 17

There are far more consumers of agricultural commodities than there are producers;but agricultural producers have consistently been able to get Congress to vote them subsidies at taxpayer expense and supply restrictions at the consumer's expense.How can the success of the agricultural lobby be explained by "the general rule of political economy"?

Accepted Answer

The groups that are hurt by agricultural

Question 18

Refer to the graph shown. Initially, the market is in equilibrium with price equal to $3 and quantity equal to 100. Government imposes a tax on suppliers of $1 per unit. The effect of the tax is to:

Accepted Answer

A) raise the price consumers pay from $3 to $4. 
B) lower the price consumers pay from $3 to $2. 
C) raise the price sellers keep after paying the tax. 
D) lower the price sellers keep after paying the tax. 
A) raise the price consumers pay from $3 to $4. 
B) lower the price consumers pay from $3 to $2. 
C) raise the price sellers keep after paying the tax. 
D) lower the price sellers keep after paying the tax.

Question 19

Refer to the graph shown. After an increase in supply, the market is in equilibrium where the demand curve intersects S1. In this new equilibrium, producer surplus is equal to:

Accepted Answer

A) 900. 
B) 1,260. 
C) 2,520. 
D) 2,940. 
A) 900. 
B) 1,260. 
C) 2,520. 
D) 2,940.

Question 20

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.

Exam 7: Taxation and Government Intervention

Total consumer surplus is measured as the area:

Refer to the graph shown. Initially, the market is in equilibrium where the demand curve intersects S0. In the initial equilibrium, consumer surplus is equal 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, the equilibrium price will change to:

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

Refer to the graph shown. Initially, the market is in equilibrium with price equal to $25 and quantity equal to 100. 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. When the market is in equilibrium, total surplus is area:

The total cost of taxation to consumers and producers generally exceeds the amount of tax revenue collected by government.

Refer to the graph shown. In the long run supply will become:

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, producer surplus will fall from:

Given the same supply elasticity, the burden of a 10 percent tax on suppliers would be greatest on consumers within what price range? Price Quantity \ 2.00 26 4.00 22 6.00 18 14 10.00 10

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

An excise tax is imposed on smartphones. If the elasticity of demand is 2 and the elasticity of supply is 1, we can predict that:

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, producer surplus is equal to:

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

Refer to the graph shown. Assume the market is initially in equilibrium at point b in the graph but the imposition of a per-unit tax on this product shifts the supply curve up from S0 to S1. The amount of revenue government will collect from this tax is equal to the:

Refer to the graph shown. Initially, the market is in equilibrium with price equal to $3 and quantity equal to 100. Government imposes a tax on suppliers of $1 per unit. The effect of the tax is to:

Refer to the graph shown. After an increase in supply, the market is in equilibrium where the demand curve intersects S1. In this new equilibrium, producer surplus is equal to:

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

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. Initially, the market is in equilibrium where the demand curve intersects S₀. In the initial equilibrium, consumer surplus is equal to:

Refer to the graph shown. Initially, the market is in equilibrium with price equal to $25 and quantity equal to 100. 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. Assume the market is initially in equilibrium at point b in the graph but the imposition of a per-unit tax on this product shifts the supply curve up from S₀ to S₁. The amount of revenue government will collect from this tax is equal to the:

Refer to the graph shown. After an increase in supply, the market is in equilibrium where the demand curve intersects S₁. In this new equilibrium, producer surplus is equal to: