Question 1

Graph 6-10  
-In Graph 6-10, the per-unit burden of the tax on the sellers is:

Accepted Answer

A) P₂ minus P₀ 
B) P₂ minus P₁ 
C) P₁ minus P₀ 
D) Q₁ minus q₀ 
A) P₂ minus P₀ 
B) P₂ minus P₁ 
C) P₁ minus P₀ 
D) Q₁ minus q₀

Question 2

Most labour economists believe that the supply of labour is less elastic than demand.This means:

Accepted Answer

A) most of the payroll tax burden is borne by workers 
B) most of the payroll tax burden is borne by employers 
C) the payroll tax burden is shared equally between employers and workers 
D) the payroll tax burden falls onto employers as lawmakers intended 
A) most of the payroll tax burden is borne by workers 
B) most of the payroll tax burden is borne by employers 
C) the payroll tax burden is shared equally between employers and workers 
D) the payroll tax burden falls onto employers as lawmakers intended

Question 3

If the government lowered the minimum wage but this had no effect on unemployment, one possible explanation could be:

Accepted Answer

A) those who are already unemployed refuse to work for such a low wage 
B) the equilibrium wage was already above the minimum wage 
C) most of the unemployed are teenagers who don't require high wages 
D) the equilibrium wage was below the minimum wage 
A) those who are already unemployed refuse to work for such a low wage 
B) the equilibrium wage was already above the minimum wage 
C) most of the unemployed are teenagers who don't require high wages 
D) the equilibrium wage was below the minimum wage

Question 4

Rent controls lead to:

Accepted Answer

A) a shortage of housing in the short run and a surplus of housing in the long run 
B) a surplus of housing in the short run and a surplus of housing in the long run 
C) a small shortage of housing in the short run and a large shortage of housing in the long run 
D) a large shortage of housing in the short run and a small shortage of housing in the long run 
A) a shortage of housing in the short run and a surplus of housing in the long run 
B) a surplus of housing in the short run and a surplus of housing in the long run 
C) a small shortage of housing in the short run and a large shortage of housing in the long run 
D) a large shortage of housing in the short run and a small shortage of housing in the long run

Question 5

Suppose that the government places a tax of $5 per tyre on the buyers of automobile tyres.Use a supply-demand diagram to show the effect of the tax on the tyre market and the incidence of taxation on buyers and sellers.Now suppose that the government switches to a tax of $5 per tyre on the sellers of automobile tyres.Use a second supply-demand diagram to show the effects of this tax on the tyre market and the incidence of taxation on buyers and sellers.Can you say anything about the relative effects of the two alternative taxes on the tyre market and on the incidence of taxation?

Accepted Answer

The student should be able to use the tw

Question 6

A tax on the sellers of coffee:

Accepted Answer

A) leads sellers to supply a smaller quantity at every price 
B) leads buyers to demand a smaller quantity at every price 
C) leads sellers to supply a larger quantity at every price 
D) causes the supply curve to shift to the right 
A) leads sellers to supply a smaller quantity at every price 
B) leads buyers to demand a smaller quantity at every price 
C) leads sellers to supply a larger quantity at every price 
D) causes the supply curve to shift to the right

Question 7

Who pays the majority of a tax levied on a product depends on whether the tax is placed on the buyer or the seller.

Accepted Answer

A) True 
 B)False

Question 8

Rent control reduces the incentive for landlords to properly maintain their properties.

Accepted Answer

A) True 
 B)False

Question 9

Graph 6-9  
-Refer to Graph 6-9.In which market will the majority of a tax be paid by the seller?

Accepted Answer

A) market a 
B) market b 
C) market c 
D) all of the above 
A) market a 
B) market b 
C) market c 
D) all of the above

Question 10

Which is the most correct statement about the benefits of a subsidy on toothbrushes?

Accepted Answer

A) buyers will receive most of the benefit of the subsidy 
B) sellers will receive most of the benefit of the subsidy 
C) buyers and sellers will share the benefits of the subsidy 
D) the government enjoys the entire benefit of the subsidy 
A) buyers will receive most of the benefit of the subsidy 
B) sellers will receive most of the benefit of the subsidy 
C) buyers and sellers will share the benefits of the subsidy 
D) the government enjoys the entire benefit of the subsidy

Question 11

The effect of a tax on a product is always to reduce the total size of its market.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the government imposes a binding price ceiling on interest rates in the mortgage lending market.What would benefit from such actions and who would bear the costs?

Accepted Answer

People who are able to obtain a loan at

Question 13

If a price ceiling is binding:

Accepted Answer

A) the equilibrium price is above the ceiling and there will be a shortage 
B) the equilibrium price is above the ceiling and there will be a surplus 
C) the equilibrium price is below the ceiling and there will be a shortage 
D) the equilibrium price is below the ceiling and there will be a surplus 
A) the equilibrium price is above the ceiling and there will be a shortage 
B) the equilibrium price is above the ceiling and there will be a surplus 
C) the equilibrium price is below the ceiling and there will be a shortage 
D) the equilibrium price is below the ceiling and there will be a surplus

Question 14

In the end, tax incidence:

Accepted Answer

A) is determined by the policymakers 
B) falls entirely on the buyers 
C) depends on the relative elasticities of supply and demand 
D) falls entirely on the sellers 
A) is determined by the policymakers 
B) falls entirely on the buyers 
C) depends on the relative elasticities of supply and demand 
D) falls entirely on the sellers

Question 15

If buyers of bananas are required to pay a $1.00 tax on each bunch of bananas purchased, then the demand curve for bananas will shift:

Accepted Answer

A) right by $1.00 per bunch 
B) left by $1.00 per bunch 
C) up by $1.00 per bunch 
D) down by $1.00 per bunch 
A) right by $1.00 per bunch 
B) left by $1.00 per bunch 
C) up by $1.00 per bunch 
D) down by $1.00 per bunch

Question 16

A binding price floor in a competitive market will result in persistent shortages of a product.

Accepted Answer

A) True 
 B)False

Question 17

The incidence of a tax is determined by whether the tax is imposed on the seller or the buyer.

Accepted Answer

A) True 
 B)False

Question 18

Graph 6-8  
-According to Graph 6-8, the equilibrium price in the market before the tax is imposed is:

Accepted Answer

A) $1.00 
B) $3.50 
C) $5.00 
D) $6.00 
A) $1.00 
B) $3.50 
C) $5.00 
D) $6.00

Question 19

Does a tax encourage increased market activity? How does a tax affect the amount paid by buyers and the amount received by sellers as a result of a tax on a good?

Accepted Answer

A tax reduces market activity.When a goo

Question 20

Graph 6-4  
-According to Graph 6-4, when the supply curve shifts from S1 to S2:

Accepted Answer

A) the new market quantity will be Q₃ 
B) the new market quantity will be less than Q₃ 
C) the new market quantity will be greater than Q₃ 
D) there will be a surplus at the new market price of P₂ 
A) the new market quantity will be Q₃ 
B) the new market quantity will be less than Q₃ 
C) the new market quantity will be greater than Q₃ 
D) there will be a surplus at the new market price of P₂

Exam 6: Supply, Demand and Government Policies

Graph 6-10 -In Graph 6-10, the per-unit burden of the tax on the sellers is:

Most labour economists believe that the supply of labour is less elastic than demand.This means:

If the government lowered the minimum wage but this had no effect on unemployment, one possible explanation could be:

Rent controls lead to:

A tax on the sellers of coffee:

Who pays the majority of a tax levied on a product depends on whether the tax is placed on the buyer or the seller.

Rent control reduces the incentive for landlords to properly maintain their properties.

Graph 6-9 -Refer to Graph 6-9.In which market will the majority of a tax be paid by the seller?

Which is the most correct statement about the benefits of a subsidy on toothbrushes?

The effect of a tax on a product is always to reduce the total size of its market.

Suppose the government imposes a binding price ceiling on interest rates in the mortgage lending market.What would benefit from such actions and who would bear the costs?

If a price ceiling is binding:

In the end, tax incidence:

If buyers of bananas are required to pay a $1.00 tax on each bunch of bananas purchased, then the demand curve for bananas will shift:

A binding price floor in a competitive market will result in persistent shortages of a product.

The incidence of a tax is determined by whether the tax is imposed on the seller or the buyer.

Graph 6-8 -According to Graph 6-8, the equilibrium price in the market before the tax is imposed is:

Does a tax encourage increased market activity? How does a tax affect the amount paid by buyers and the amount received by sellers as a result of a tax on a good?

Graph 6-4 -According to Graph 6-4, when the supply curve shifts from S1 to S2:

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Consumers, Producers and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

Filters

Graph 6-4 -According to Graph 6-4, when the supply curve shifts from S1 to S₂: