Question 1

-In the above figure, the tax incidence is

Accepted Answer

A)  that most of it is paid by the buyers. 
B)  that most of it is paid by the sellers. 
C)  split equally so that the buyers and sellers pay the same amount. 
D)  that neither the buyers nor the sellers pay it. 
A)  that most of it is paid by the buyers. 
B)  that most of it is paid by the sellers. 
C)  split equally so that the buyers and sellers pay the same amount. 
D)  that neither the buyers nor the sellers pay it.

Question 2

-You are in the business of producing and selling hamburgers, french fries, pizza, and ice cream. The mayor plans to impose a tax on one of these products. Based on the elasticities in the above table, on which of these goods would your customers most prefer to be taxed?

Accepted Answer

A)  hamburgers 
B)  pizza 
C)  French fries 
D)  ice cream 
A)  hamburgers 
B)  pizza 
C)  French fries 
D)  ice cream

Question 3

-In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

Accepted Answer

A)  a shortage and an increase in search costs. 
B)  a shortage and a decrease in search costs. 
C)  a surplus and an increase in search costs. 
D)  a surplus and a decrease in search costs. 
A)  a shortage and an increase in search costs. 
B)  a shortage and a decrease in search costs. 
C)  a surplus and an increase in search costs. 
D)  a surplus and a decrease in search costs.

Question 4

-To help pay for the cost of sport related injuries, the government imposes a tax on sellers of all sports equipment. Using the above figure, how much producer surplus is lost from this tax on sports equipment?

Accepted Answer

A)  abd 
B)  acd 
C)  P0P1ba 
D)  P0P1da 
A)  abd 
B)  acd 
C)  P0P1ba 
D)  P0P1da

Question 5

"The tax on insulin in the Philippines is anywhere between 10 and 20 percent. If you are rich and living in the Philippines, this is not a problem, but if you are poor, then insulin becomes something that you cannot afford." If the government places the tax on sellers, what is the effect on the supply and demand curves?

Accepted Answer

A)  The demand curve stays the same and the supply curve shifts leftward. 
B)  The demand curve shifts rightward and the supply curve stays the same. 
C)  Both the demand and supply curves shift leftward. 
D)  The demand curve shifts leftward and the supply curve stays the same. 
A)  The demand curve stays the same and the supply curve shifts leftward. 
B)  The demand curve shifts rightward and the supply curve stays the same. 
C)  Both the demand and supply curves shift leftward. 
D)  The demand curve shifts leftward and the supply curve stays the same.

Question 6

When a government imposes penalties on both sellers and buyers of an illegal good, the price of the good ________ and the quantity ________.

Accepted Answer

A)  falls; decreases 
B)  falls; might increase, decrease, or not change 
C)  rises; might increase, decrease, or not change 
D)  might rise, fall, or not change; decreases 
A)  falls; decreases 
B)  falls; might increase, decrease, or not change 
C)  rises; might increase, decrease, or not change 
D)  might rise, fall, or not change; decreases

Question 7

-In the above figure, the equilibrium price of a paperback book is $6 per book and the equilibrium quantity is 3 million books. The National Literature Board convinces the government to impose a price ceiling of $6 per book. At this price, the quantity of books supplied to the market will be

Accepted Answer

A)  3 million a month and will equal the quantity demanded. 
B)  less than 3 million a month and will exceed the quantity demanded. 
C)  less than 3 million a month and will be less than the quantity demanded. 
D)  more than 3 million a month and will exceed the quantity demanded. 
A)  3 million a month and will equal the quantity demanded. 
B)  less than 3 million a month and will exceed the quantity demanded. 
C)  less than 3 million a month and will be less than the quantity demanded. 
D)  more than 3 million a month and will exceed the quantity demanded.

Question 8

-The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. The sales tax on anti-freeze decreases the quantity of anti-freeze that automobile owners purchase by

Accepted Answer

A)  0 gallons. 
B)  1000 gallons. 
C)  2000 gallons. 
D)  3000 gallons. 
A)  0 gallons. 
B)  1000 gallons. 
C)  2000 gallons. 
D)  3000 gallons.

Question 9

Sherry wants to rent an apartment. Although rents are below what she is willing to pay, she cannot find an apartment. Then after a month of searching, she finds an apartment but she has to pay an additional $1,000 to have the locks changed. Sherry has just experienced the effects of ________.

Accepted Answer

A)  a rent floor with a black market 
B)  inelastic demand 
C)  a market working efficiently 
D)  a rent ceiling 
A)  a rent floor with a black market 
B)  inelastic demand 
C)  a market working efficiently 
D)  a rent ceiling

Question 10

-In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month, which causes a shortage. Suppose that apartments are an inferior good and incomes rise. The increase in income

Accepted Answer

A)  decreases the shortage. 
B)  has no effect on the shortage. 
C)  increases the shortage. 
D)  raises the rent. 
A)  decreases the shortage. 
B)  has no effect on the shortage. 
C)  increases the shortage. 
D)  raises the rent.

Question 11

Suppose penalties are imposed on both buyers and sellers of marijuana, but the cost of breaking the law to sellers is greater than that to buyers. This measure will ________ the equilibrium price of marijuana and ________ the equilibrium quantity of marijuana sold.

Accepted Answer

A)  lower; increase 
B)  raise; increase 
C)  raise; decrease 
D)  not change; will decrease 
A)  lower; increase 
B)  raise; increase 
C)  raise; decrease 
D)  not change; will decrease

Question 12

A price ceiling set below the equilibrium price ________ search activity and ________ the use of black markets.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 13

-The figure above shows the market for low-skilled labor in Midland city. The government sets a minimum wage at $6 per hour. The minimum wage ________ the employers' surplus by ________ million per year.

Accepted Answer

A)  decreases; $60 
B)  decreases; $120 
C)  increases; $40 
D)  increases; $100 
A)  decreases; $60 
B)  decreases; $120 
C)  increases; $40 
D)  increases; $100

Question 14

If a tax is imposed on buyers in a market in which supply is perfectly inelastic, the

Accepted Answer

A)  buyers pay the entire tax. 
B)  sellers pay the entire tax. 
C)  buyers and the sellers both pay a portion of the tax. 
D)  neither the buyers nor the sellers pay the tax. 
A)  buyers pay the entire tax. 
B)  sellers pay the entire tax. 
C)  buyers and the sellers both pay a portion of the tax. 
D)  neither the buyers nor the sellers pay the tax.

Question 15

Suppose the demand for saline solution is perfectly inelastic for contact lens wearers. If the government imposes a tax on saline solution, what occurs? Be sure to tell what happens to the price paid by the buyers and discuss the incidence of the tax.

Accepted Answer

If demand is perfectly inelastic, then n

Question 16

The government of Healthyland imposes a tax on sellers of salt. The tax is $0.10 per pound. With no tax, the price of salt is $0.40 per pound. The demand for salt is perfectly inelastic and the elasticity of supply is 1.5. With the tax, the price of salt paid by buyers in Healthyland is

Accepted Answer

A)  $0.40 per pound. 
B)  $0.45 per pound. 
C)  $0.35 per pound. 
D)  $0.50 per pound. 
A)  $0.40 per pound. 
B)  $0.45 per pound. 
C)  $0.35 per pound. 
D)  $0.50 per pound.

Question 17

"A price floor that is less than the equilibrium price leads to a shortage of the good." Is this assertion true or false? Explain your answer.

Accepted Answer

The assertion is False. A price floor is

Question 18

A good has a perfectly inelastic supply and a downward sloping demand curve. Imposing a sales tax of $1 per unit on the sellers of the good

Accepted Answer

A)  raises the price paid by demanders by more than $1.00. 
B)  raises the price paid by demanders by $1.00. 
C)  raises the price paid by demanders by less than $1.00. 
D)  does not change the price paid by demanders. 
A)  raises the price paid by demanders by more than $1.00. 
B)  raises the price paid by demanders by $1.00. 
C)  raises the price paid by demanders by less than $1.00. 
D)  does not change the price paid by demanders.

Question 19

Suppose a $1 tax is placed on a good. The more elastic the supply of the good, the

Accepted Answer

A)  larger the increase in the after-tax price. 
B)  smaller the decrease in the quantity sold. 
C)  less of the tax will be paid by the buyers. 
D)  more of the tax will be paid by the sellers. 
A)  larger the increase in the after-tax price. 
B)  smaller the decrease in the quantity sold. 
C)  less of the tax will be paid by the buyers. 
D)  more of the tax will be paid by the sellers.

Question 20

More than 80 percent of the home heating oil used in the United States goes to the Northeast. In Vermont, the vast majority of people there use oil to stay warm when it's cold outside. Richard Izor heats his home with oil and inquires, "I'd like to see them come in and put a ceiling on the oil price now before it gets any higher. Why they haven't done this is more than I can understand." Which of the following is NOT likely to occur if such a price ceiling was imposed?

Accepted Answer

A)  There would be a surplus of heating oil. 
B)  A heating oil shortage may occur. 
C)  A black market for heating oil may be created. 
D)  There would be an increase in inefficiency in the heating oil market. 
A)  There would be a surplus of heating oil. 
B)  A heating oil shortage may occur. 
C)  A black market for heating oil may be created. 
D)  There would be an increase in inefficiency in the heating oil market.

-In the above figure, the tax incidence is

-You are in the business of producing and selling hamburgers, french fries, pizza, and ice cream. The mayor plans to impose a tax on one of these products. Based on the elasticities in the above table, on which of these goods would your customers most prefer to be taxed?

-In the figure above, the demand curve shifts rightward from D₀ to D₁ so that D₁ is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

-To help pay for the cost of sport related injuries, the government imposes a tax on sellers of all sports equipment. Using the above figure, how much producer surplus is lost from this tax on sports equipment?

When a government imposes penalties on both sellers and buyers of an illegal good, the price of the good and the quantity .

-In the above figure, the equilibrium price of a paperback book is $6 per book and the equilibrium quantity is 3 million books. The National Literature Board convinces the government to impose a price ceiling of $6 per book. At this price, the quantity of books supplied to the market will be

-The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. The sales tax on anti-freeze decreases the quantity of anti-freeze that automobile owners purchase by

Sherry wants to rent an apartment. Although rents are below what she is willing to pay, she cannot find an apartment. Then after a month of searching, she finds an apartment but she has to pay an additional $1,000 to have the locks changed. Sherry has just experienced the effects of ________.

Suppose penalties are imposed on both buyers and sellers of marijuana, but the cost of breaking the law to sellers is greater than that to buyers. This measure will the equilibrium price of marijuana and the equilibrium quantity of marijuana sold.

A price ceiling set below the equilibrium price search activity and the use of black markets.

-The figure above shows the market for low-skilled labor in Midland city. The government sets a minimum wage at $6 per hour. The minimum wage the employers' surplus by million per year.

If a tax is imposed on buyers in a market in which supply is perfectly inelastic, the

Suppose the demand for saline solution is perfectly inelastic for contact lens wearers. If the government imposes a tax on saline solution, what occurs? Be sure to tell what happens to the price paid by the buyers and discuss the incidence of the tax.

The government of Healthyland imposes a tax on sellers of salt. The tax is $0.10 per pound. With no tax, the price of salt is $0.40 per pound. The demand for salt is perfectly inelastic and the elasticity of supply is 1.5. With the tax, the price of salt paid by buyers in Healthyland is

"A price floor that is less than the equilibrium price leads to a shortage of the good." Is this assertion true or false? Explain your answer.

A good has a perfectly inelastic supply and a downward sloping demand curve. Imposing a sales tax of $1 per unit on the sellers of the good

Suppose a $1 tax is placed on a good. The more elastic the supply of the good, the

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 6: Government Actions in Markets

-In the above figure, the tax incidence is

-You are in the business of producing and selling hamburgers, french fries, pizza, and ice cream. The mayor plans to impose a tax on one of these products. Based on the elasticities in the above table, on which of these goods would your customers most prefer to be taxed?

-In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

-To help pay for the cost of sport related injuries, the government imposes a tax on sellers of all sports equipment. Using the above figure, how much producer surplus is lost from this tax on sports equipment?

When a government imposes penalties on both sellers and buyers of an illegal good, the price of the good ________ and the quantity ________.

-In the above figure, the equilibrium price of a paperback book is $6 per book and the equilibrium quantity is 3 million books. The National Literature Board convinces the government to impose a price ceiling of $6 per book. At this price, the quantity of books supplied to the market will be

-The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. The sales tax on anti-freeze decreases the quantity of anti-freeze that automobile owners purchase by

Sherry wants to rent an apartment. Although rents are below what she is willing to pay, she cannot find an apartment. Then after a month of searching, she finds an apartment but she has to pay an additional $1,000 to have the locks changed. Sherry has just experienced the effects of ________.

Suppose penalties are imposed on both buyers and sellers of marijuana, but the cost of breaking the law to sellers is greater than that to buyers. This measure will ________ the equilibrium price of marijuana and ________ the equilibrium quantity of marijuana sold.

A price ceiling set below the equilibrium price ________ search activity and ________ the use of black markets.

-The figure above shows the market for low-skilled labor in Midland city. The government sets a minimum wage at $6 per hour. The minimum wage ________ the employers' surplus by ________ million per year.

If a tax is imposed on buyers in a market in which supply is perfectly inelastic, the

Suppose the demand for saline solution is perfectly inelastic for contact lens wearers. If the government imposes a tax on saline solution, what occurs? Be sure to tell what happens to the price paid by the buyers and discuss the incidence of the tax.

The government of Healthyland imposes a tax on sellers of salt. The tax is $0.10 per pound. With no tax, the price of salt is $0.40 per pound. The demand for salt is perfectly inelastic and the elasticity of supply is 1.5. With the tax, the price of salt paid by buyers in Healthyland is

"A price floor that is less than the equilibrium price leads to a shortage of the good." Is this assertion true or false? Explain your answer.

A good has a perfectly inelastic supply and a downward sloping demand curve. Imposing a sales tax of $1 per unit on the sellers of the good

Suppose a $1 tax is placed on a good. The more elastic the supply of the good, the

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

-In the figure above, the demand curve shifts rightward from D₀ to D₁ so that D₁ is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

When a government imposes penalties on both sellers and buyers of an illegal good, the price of the good and the quantity .

Suppose penalties are imposed on both buyers and sellers of marijuana, but the cost of breaking the law to sellers is greater than that to buyers. This measure will the equilibrium price of marijuana and the equilibrium quantity of marijuana sold.

A price ceiling set below the equilibrium price search activity and the use of black markets.

-The figure above shows the market for low-skilled labor in Midland city. The government sets a minimum wage at $6 per hour. The minimum wage the employers' surplus by million per year.