Question 1

The "incidence of a tax" is the term used to indicate

Accepted Answer

A)  the responsibility for collecting the tax. 
B)  who actually bears the tax burden. 
C)  who the tax is initially levied on. 
D)  the regressive rate structure of the tax. 
A)  the responsibility for collecting the tax. 
B)  who actually bears the tax burden. 
C)  who the tax is initially levied on. 
D)  the regressive rate structure of the tax.

Question 2

Which of the following statements regarding black markets is true?

Accepted Answer

A)  The reliability of products sold in black markets is generally higher than the reliability of products sold in legal markets. 
B)  The prices of goods in black markets are generally lower than the prices of similar products in legal markets. 
C)  The laws of supply and demand do not affect the prices of goods exchanged in black markets. 
D)  The rate of violence is higher in black markets than in legal markets. 
A)  The reliability of products sold in black markets is generally higher than the reliability of products sold in legal markets. 
B)  The prices of goods in black markets are generally lower than the prices of similar products in legal markets. 
C)  The laws of supply and demand do not affect the prices of goods exchanged in black markets. 
D)  The rate of violence is higher in black markets than in legal markets.

Question 3

Figure 4-21  
-Refer to Figure 4-21. The per-unit burden of the tax is

Accepted Answer

A)  $4 on buyers and $4 on sellers. 
B)  $5 on buyers and $5 on sellers. 
C)  $4 on buyers and $6 on sellers. 
D)  $6 on buyers and $4 on sellers. 
A)  $4 on buyers and $4 on sellers. 
B)  $5 on buyers and $5 on sellers. 
C)  $4 on buyers and $6 on sellers. 
D)  $6 on buyers and $4 on sellers.

Question 4

Other things constant, how will a decrease in the wages of teenagers affect the market for fast food hamburgers?

Accepted Answer

A)  The supply of fast food hamburgers will increase, leading to an increase in the price of hamburgers. 
B)  The supply of fast food hamburgers will increase, leading to a reduction in the price of hamburgers. 
C)  The supply of fast food hamburgers will decrease, leading to an increase in the price of hamburgers. 
D)  The supply of fast food hamburgers will decrease, leading to a reduction in the price of hamburgers. 
A)  The supply of fast food hamburgers will increase, leading to an increase in the price of hamburgers. 
B)  The supply of fast food hamburgers will increase, leading to a reduction in the price of hamburgers. 
C)  The supply of fast food hamburgers will decrease, leading to an increase in the price of hamburgers. 
D)  The supply of fast food hamburgers will decrease, leading to a reduction in the price of hamburgers.

Question 5

Economic analysis indicates minimum wage legislation has

Accepted Answer

A)  made it possible for any teenager who wants to work to earn almost 80 percent as much as an adult. 
B)  made it easier for teenagers to find jobs that offer the opportunity for training. 
C)  been an important source of increases in income since most workers earn at or near the minimum wage. 
D)  reduced the on-the-job training opportunities available to teenagers. 
A)  made it possible for any teenager who wants to work to earn almost 80 percent as much as an adult. 
B)  made it easier for teenagers to find jobs that offer the opportunity for training. 
C)  been an important source of increases in income since most workers earn at or near the minimum wage. 
D)  reduced the on-the-job training opportunities available to teenagers.

Question 6

Use the figure below to answer the following question(s).
Figure 4-8  
-Refer to Figure 4-8. The supply curve S1 and the demand curve D indicate initial conditions in the market for soft coal. A $40-per-ton tax on soft coal is levied, shifting the supply curve from S1 to S2. Imposing the tax increases the equilibrium price of soft coal from

Accepted Answer

A)  $20 to $60 per ton. 
B)  $20 to $50 per ton. 
C)  $50 to $60 per ton. 
D)  $50 to $90 per ton. 
A)  $20 to $60 per ton. 
B)  $20 to $50 per ton. 
C)  $50 to $60 per ton. 
D)  $50 to $90 per ton.

Question 7

If the government wants to generate large revenues from placing a tax on the consumption of a particular good, it should choose a good for which

Accepted Answer

A)  the demand is price elastic 
B)  the demand is unitary elastic 
C)  the demand is price inelastic 
D)  there are many good substitutes available for the good 
A)  the demand is price elastic 
B)  the demand is unitary elastic 
C)  the demand is price inelastic 
D)  there are many good substitutes available for the good

Question 8

Use the figure below illustrating the impact of an excise tax to answer the following question(s).
Figure 4-6  
-The revenue generated by the tax illustrated in Figure 4-6 is given by the area

Accepted Answer

A)  ACLH. 
B)  BEKM. 
C)  ACFG. 
D)  0AGJ. 
A)  ACLH. 
B)  BEKM. 
C)  ACFG. 
D)  0AGJ.

Question 9

The actual burden of a tax

Accepted Answer

A)  falls most heavily on the side of the market that is more elastic. 
B)  falls most heavily on the side of the market that is more inelastic. 
C)  falls most heavily on the side of the market that is closest to unitary elasticity. 
D)  is distributed independently of relative elasticities of supply and demand. 
A)  falls most heavily on the side of the market that is more elastic. 
B)  falls most heavily on the side of the market that is more inelastic. 
C)  falls most heavily on the side of the market that is closest to unitary elasticity. 
D)  is distributed independently of relative elasticities of supply and demand.

Question 10

Under rent control, tenants can expect

Accepted Answer

A)  lower rent and higher quality housing. 
B)  lower rent and lower quality housing. 
C)  higher rent and a shortage of rental housing. 
D)  higher rent and a surplus of rental housing. 
A)  lower rent and higher quality housing. 
B)  lower rent and lower quality housing. 
C)  higher rent and a shortage of rental housing. 
D)  higher rent and a surplus of rental housing.

Question 11

Figure 4-25  
-Refer to Figure 4-25. After the tax is levied, producer surplus is represented by area

Accepted Answer

A)  A. 
B)  A + B + C. 
C)  D + E + F. 
D)  F. 
A)  A. 
B)  A + B + C. 
C)  D + E + F. 
D)  F.

Question 12

A subsidy is defined as

Accepted Answer

A)  a payment that must be made to the government whenever a good or service is sold. 
B)  the number of trades that are eliminated from a market when a tax is imposed. 
C)  the difference between total revenue and total cost for a business firm. 
D)  a payment to either the buyer or seller of a good or service, usually on a per-unit basis, when a good or service is purchased. 
A)  a payment that must be made to the government whenever a good or service is sold. 
B)  the number of trades that are eliminated from a market when a tax is imposed. 
C)  the difference between total revenue and total cost for a business firm. 
D)  a payment to either the buyer or seller of a good or service, usually on a per-unit basis, when a good or service is purchased.

Question 13

Suppose the demand curve for a good is highly elastic and the supply curve is highly inelastic. If the government taxes this good,

Accepted Answer

A)  buyers and sellers will each share 50 percent of the burden, regardless of the elasticities of the demand and supply curves. 
B)  sellers will bear a larger share of the tax burden. 
C)  the distribution of the burden will depend upon whether the buyers or the sellers are required to send the tax to the government. 
D)  buyers will bear a larger share of the tax burden. 
A)  buyers and sellers will each share 50 percent of the burden, regardless of the elasticities of the demand and supply curves. 
B)  sellers will bear a larger share of the tax burden. 
C)  the distribution of the burden will depend upon whether the buyers or the sellers are required to send the tax to the government. 
D)  buyers will bear a larger share of the tax burden.

Question 14

Suppose that a tax is placed on a particular good. If the sellers end up bearing most of the tax burden, this indicates that the

Accepted Answer

A)  demand is more inelastic than supply. 
B)  supply is more inelastic than demand. 
C)  government has required that buyers remit the tax payments. 
D)  government has required that sellers remit the tax payments. 
A)  demand is more inelastic than supply. 
B)  supply is more inelastic than demand. 
C)  government has required that buyers remit the tax payments. 
D)  government has required that sellers remit the tax payments.

Question 15

Use the figure below to answer the following question(s).
Figure 4-10  
-Figure 4-10 shows the market for a good before and after an excise tax is imposed. What does the triangular area C represent?

Accepted Answer

A)  the deadweight loss accompanying the tax 
B)  the tax revenue derived from sellers 
C)  the tax revenue derived from buyers 
D)  the total tax revenue generated by the tax 
A)  the deadweight loss accompanying the tax 
B)  the tax revenue derived from sellers 
C)  the tax revenue derived from buyers 
D)  the total tax revenue generated by the tax

Question 16

The imposition of price ceilings on a market often results in

Accepted Answer

A)  an increase in investment in the industry. 
B)  a persistent surplus in the market. 
C)  an increase in expenditures in the black market. 
D)  lower prices being offered on the black market. 
A)  an increase in investment in the industry. 
B)  a persistent surplus in the market. 
C)  an increase in expenditures in the black market. 
D)  lower prices being offered on the black market.

Question 17

Use the figure below to answer the following question(s).
Figure 4-9  
-Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. How much revenue would the $.40 gasoline tax raise?

Accepted Answer

A)  $18 million 
B)  $36 million 
C)  $72 million 
D)  $100 million 
A)  $18 million 
B)  $36 million 
C)  $72 million 
D)  $100 million

Question 18

Which of the following examples illustrates a proportional income tax?

Accepted Answer

A)  I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,000 in taxes. 
B)  I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $500 in taxes. 
C)  I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $800 in taxes. 
D)  I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,200 in taxes. 
A)  I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,000 in taxes. 
B)  I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $500 in taxes. 
C)  I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $800 in taxes. 
D)  I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,200 in taxes.

Question 19

When a supply and demand model is used to analyze the market for labor,

Accepted Answer

A)  demand is generally no longer downward sloping. 
B)  the wage rate is used on the vertical axis as the market price. 
C)  employment is used on the horizontal axis as the market quantity. 
D)  both b and c. 
A)  demand is generally no longer downward sloping. 
B)  the wage rate is used on the vertical axis as the market price. 
C)  employment is used on the horizontal axis as the market quantity. 
D)  both b and c.

Question 20

A price ceiling that sets the price of a good below market equilibrium will cause

Accepted Answer

A)  an increase in quantity demanded of the good. 
B)  a decrease in quantity supplied of the good. 
C)  a shortage of the good. 
D)  all of the above. 
A)  an increase in quantity demanded of the good. 
B)  a decrease in quantity supplied of the good. 
C)  a shortage of the good. 
D)  all of the above.

The "incidence of a tax" is the term used to indicate

Which of the following statements regarding black markets is true?

Figure 4-21 -Refer to Figure 4-21. The per-unit burden of the tax is

Other things constant, how will a decrease in the wages of teenagers affect the market for fast food hamburgers?

Economic analysis indicates minimum wage legislation has

If the government wants to generate large revenues from placing a tax on the consumption of a particular good, it should choose a good for which

Use the figure below illustrating the impact of an excise tax to answer the following question(s). Figure 4-6 -The revenue generated by the tax illustrated in Figure 4-6 is given by the area

The actual burden of a tax

Under rent control, tenants can expect

Figure 4-25 -Refer to Figure 4-25. After the tax is levied, producer surplus is represented by area

A subsidy is defined as

Suppose the demand curve for a good is highly elastic and the supply curve is highly inelastic. If the government taxes this good,

Suppose that a tax is placed on a particular good. If the sellers end up bearing most of the tax burden, this indicates that the

Use the figure below to answer the following question(s). Figure 4-10 -Figure 4-10 shows the market for a good before and after an excise tax is imposed. What does the triangular area C represent?

The imposition of price ceilings on a market often results in

Use the figure below to answer the following question(s). Figure 4-9 -Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. How much revenue would the $.40 gasoline tax raise?

Which of the following examples illustrates a proportional income tax?

When a supply and demand model is used to analyze the market for labor,

A price ceiling that sets the price of a good below market equilibrium will cause

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 4: Supply and Demand: Applications and Extensions

The "incidence of a tax" is the term used to indicate

Which of the following statements regarding black markets is true?

Figure 4-21 -Refer to Figure 4-21. The per-unit burden of the tax is

Other things constant, how will a decrease in the wages of teenagers affect the market for fast food hamburgers?

Economic analysis indicates minimum wage legislation has

If the government wants to generate large revenues from placing a tax on the consumption of a particular good, it should choose a good for which

Use the figure below illustrating the impact of an excise tax to answer the following question(s). Figure 4-6 -The revenue generated by the tax illustrated in Figure 4-6 is given by the area

The actual burden of a tax

Under rent control, tenants can expect

Figure 4-25 -Refer to Figure 4-25. After the tax is levied, producer surplus is represented by area

A subsidy is defined as

Suppose the demand curve for a good is highly elastic and the supply curve is highly inelastic. If the government taxes this good,

Suppose that a tax is placed on a particular good. If the sellers end up bearing most of the tax burden, this indicates that the

Use the figure below to answer the following question(s). Figure 4-10 -Figure 4-10 shows the market for a good before and after an excise tax is imposed. What does the triangular area C represent?

The imposition of price ceilings on a market often results in

Use the figure below to answer the following question(s). Figure 4-9 -Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. How much revenue would the $.40 gasoline tax raise?

Which of the following examples illustrates a proportional income tax?

When a supply and demand model is used to analyze the market for labor,

A price ceiling that sets the price of a good below market equilibrium will cause

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters