Question 1

Graph 6-6  
-According to Graph 6-6, in panel b, at the actual price there will be:

Accepted Answer

A) cheaper wheat for consumers 
B) equilibrium in the market 
C) a surplus of wheat 
D) rationing of demand with long waiting lines 
A) cheaper wheat for consumers 
B) equilibrium in the market 
C) a surplus of wheat 
D) rationing of demand with long waiting lines

Question 2

A subsidy paid to suppliers of a good will grow a market.

Accepted Answer

A) True 
 B)False

Question 3

A hot summer's day can lead to dramatic increases in the demand for electricity.Suppose the government decides a binding price ceiling is necessary so pensioners can continue to afford their power bills.The effect of this policy will be such that:

Accepted Answer

A) the quantity of electricity supplied will be unchanged 
B) electricity producers will increase supply, leading to a decrease in price 
C) electricity producers will supply less than demanded, leading to a shortage 
D) demand will decrease, leading to a decrease in price 
A) the quantity of electricity supplied will be unchanged 
B) electricity producers will increase supply, leading to a decrease in price 
C) electricity producers will supply less than demanded, leading to a shortage 
D) demand will decrease, leading to a decrease in price

Question 4

Graph 6-9  
-Refer to Graph 6-9.In which market will the tax be most equally divided between the buyer and 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 5

The term tax incidence refers to the:

Accepted Answer

A) division of income tax between high-income and low-income earners 
B) level of tax levied on a buyer of a good 
C) division of the tax burden between buyers and sellers 
D) division of tax between federal and local government 
A) division of income tax between high-income and low-income earners 
B) level of tax levied on a buyer of a good 
C) division of the tax burden between buyers and sellers 
D) division of tax between federal and local government

Question 6

Payroll taxes are paid by employers therefore:

Accepted Answer

A) the burden of these taxes is borne entirely by the employer 
B) wages are not lower as a result of the tax 
C) do not discourage firms from hiring labour 
D) the burden of the tax is shared between workers and employers 
A) the burden of these taxes is borne entirely by the employer 
B) wages are not lower as a result of the tax 
C) do not discourage firms from hiring labour 
D) the burden of the tax is shared between workers and employers

Question 7

Suppose the equilibrium price of bananas is $5 and a price ceiling of $7 is implemented.This will result in:

Accepted Answer

A) a shortage, as the price ceiling is above the equilibrium price 
B) a surplus, as the price ceiling is above the equilibrium price 
C) no change in the quantity of bananas sold 
D) the demand for bananas to exceed the supply of bananas 
A) a shortage, as the price ceiling is above the equilibrium price 
B) a surplus, as the price ceiling is above the equilibrium price 
C) no change in the quantity of bananas sold 
D) the demand for bananas to exceed the supply of bananas

Question 8

When analysing the economic effects of government policies:

Accepted Answer

A) supply and demand are the most useful tools of analysis 
B) one finds that the effects are always those stated in the legislation 
C) supply and demand are not useful, since they apply only to unregulated markets 
D) one usually finds them to be the random outcome of economic shocks 
A) supply and demand are the most useful tools of analysis 
B) one finds that the effects are always those stated in the legislation 
C) supply and demand are not useful, since they apply only to unregulated markets 
D) one usually finds them to be the random outcome of economic shocks

Question 9

Unlike minimum wage laws, wage subsidies:

Accepted Answer

A) discourage firms from hiring the working poor 
B) cause unemployment 
C) help only wealthy workers 
D) raise living standards of the working poor without creating unemployment 
A) discourage firms from hiring the working poor 
B) cause unemployment 
C) help only wealthy workers 
D) raise living standards of the working poor without creating unemployment

Question 10

Suppose a price floor on alcohol is set above the equilibrium price.This will increase the supply of alcohol, leading to an increase in sales of alcohol.

Accepted Answer

A) True 
 B)False

Question 11

A price ceiling that is not binding:

Accepted Answer

A) is a detriment to society 
B) will cause a shortage 
C) will cause a surplus 
D) has no effect 
A) is a detriment to society 
B) will cause a shortage 
C) will cause a surplus 
D) has no effect

Question 12

A tax on the sellers of popcorn will:

Accepted Answer

A) reduce the equilibrium price of popcorn and increase the equilibrium quantity 
B) reduce the equilibrium price of popcorn and reduce the equilibrium quantity 
C) increase the equilibrium price of popcorn and increase the equilibrium quantity 
D) increase the equilibrium price of popcorn and reduce the equilibrium quantity 
A) reduce the equilibrium price of popcorn and increase the equilibrium quantity 
B) reduce the equilibrium price of popcorn and reduce the equilibrium quantity 
C) increase the equilibrium price of popcorn and increase the equilibrium quantity 
D) increase the equilibrium price of popcorn and reduce the equilibrium quantity

Question 13

The minimum wage is an example of:

Accepted Answer

A) a price ceiling 
B) a free-market process 
C) a price floor 
D) an efficient labour allocation mechanism 
A) a price ceiling 
B) a free-market process 
C) a price floor 
D) an efficient labour allocation mechanism

Question 14

Graph 6-10  
-In Graph 6-10, the price sellers receive after the tax is:

Accepted Answer

A) P₀ 
B) P₁ 
C) P₂ 
D) impossible to determine 
A) P₀ 
B) P₁ 
C) P₂ 
D) impossible to determine

Question 15

When analysing government policies, supply and demand are not very useful tools.

Accepted Answer

A) True 
 B)False

Question 16

Graph 6-7  
-According to Graph 6-7, the amount of the tax that sellers would pay would be:

Accepted Answer

A) $1.00 
B) $1.50 
C) $2.00 
D) $3.00 
A) $1.00 
B) $1.50 
C) $2.00 
D) $3.00

Question 17

If the government sets the minimum price which a good can be traded, this is defined as a price floor.

Accepted Answer

A) True 
 B)False

Question 18

The minimum wage has its greatest adverse impact on the market for:

Accepted Answer

A) the most experienced workers 
B) the most skilled workers 
C) engineers 
D) teenage labour 
A) the most experienced workers 
B) the most skilled workers 
C) engineers 
D) teenage labour

Question 19

Graph 6-8  
-According to Graph 6-8, the amount of the tax that sellers would pay would be:

Accepted Answer

A) $1.00 
B) $1.50 
C) $2.50 
D) $3.00 
A) $1.00 
B) $1.50 
C) $2.50 
D) $3.00

Question 20

A binding price ceiling causes:

Accepted Answer

A) excess supply 
B) a shortage 
C) a surplus 
D) equilibrium price to rise 
A) excess supply 
B) a shortage 
C) a surplus 
D) equilibrium price to rise

Exam 6: Supply, Demand and Government Policies

Graph 6-6 -According to Graph 6-6, in panel b, at the actual price there will be:

A subsidy paid to suppliers of a good will grow a market.

A hot summer's day can lead to dramatic increases in the demand for electricity.Suppose the government decides a binding price ceiling is necessary so pensioners can continue to afford their power bills.The effect of this policy will be such that:

Graph 6-9 -Refer to Graph 6-9.In which market will the tax be most equally divided between the buyer and the seller?

The term tax incidence refers to the:

Payroll taxes are paid by employers therefore:

Suppose the equilibrium price of bananas is $5 and a price ceiling of $7 is implemented.This will result in:

When analysing the economic effects of government policies:

Unlike minimum wage laws, wage subsidies:

Suppose a price floor on alcohol is set above the equilibrium price.This will increase the supply of alcohol, leading to an increase in sales of alcohol.

A price ceiling that is not binding:

A tax on the sellers of popcorn will:

The minimum wage is an example of:

Graph 6-10 -In Graph 6-10, the price sellers receive after the tax is:

When analysing government policies, supply and demand are not very useful tools.

Graph 6-7 -According to Graph 6-7, the amount of the tax that sellers would pay would be:

If the government sets the minimum price which a good can be traded, this is defined as a price floor.

The minimum wage has its greatest adverse impact on the market for:

Graph 6-8 -According to Graph 6-8, the amount of the tax that sellers would pay would be:

A binding price ceiling causes:

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

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