Question 1

An efficient tax is

Accepted Answer

A)  a tax that imposes an equal tax burden on buyers and sellers. 
B)  a tax that raises a maximum amount of revenue. 
C)  a tax that imposes a small excess burden relative to the tax revenue that it raises. 
D)  a tax that is used to fund research and development of new technology. 
A)  a tax that imposes an equal tax burden on buyers and sellers. 
B)  a tax that raises a maximum amount of revenue. 
C)  a tax that imposes a small excess burden relative to the tax revenue that it raises. 
D)  a tax that is used to fund research and development of new technology.

Question 2

A tax is efficient if it imposes a large excess burden relative to the tax revenue it raises.

Accepted Answer

A) True 
 B)False

Question 3

Figure 4-11   Figure 4-11 shows the demand and supply curves for the coffee market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Which of the follow is a result of imposing a rent ceiling?

Accepted Answer

A)  Some consumer surplus is converted to producer surplus. 
B)  There is an increase in the quantity of apartments supplied. 
C)  There is an increase in the quantity of apartments demanded. 
D)  The marginal benefit of the last apartment rented is less than the marginal cost of supplying it. 
A)  Some consumer surplus is converted to producer surplus. 
B)  There is an increase in the quantity of apartments supplied. 
C)  There is an increase in the quantity of apartments demanded. 
D)  The marginal benefit of the last apartment rented is less than the marginal cost of supplying it.

Question 4

Figure 4-18   Figure 4-18 shows the market for cigarettes. The government plans to impose a unit tax in this market.
-Refer to Figure 4-18. How much of the tax is paid by producers?

Accepted Answer

A)  $45 
B)  $8 
C)  $3 
D)  $2 
A)  $45 
B)  $8 
C)  $3 
D)  $2

Question 5

Figure 4-13  
-Refer to Figure 4-13, which shows the market for vitamins. Suppose the government imposes a price ceiling of Pv. How will the price ceiling affect the quantity supplied, quantity demanded and quantity exchanged?

Accepted Answer

The price ceiling will have no effect on

Question 6

Figure 4-1   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1. Arnold's marginal benefit from consuming the fourth burrito is

Accepted Answer

A)  $0. 
B)  $1.00. 
C)  $2.50. 
D)  $3.00. 
A)  $0. 
B)  $1.00. 
C)  $2.50. 
D)  $3.00.

Question 7

Table 4-7
   Table 4-7 shows the demand and supply schedules for labor market in the city of Pixley.
-Refer to Table 4-7. If a minimum wage of $12.50 an hour is mandated, what is the quantity of labor demanded?

Accepted Answer

A)  80,000 
B)  550,000 
C)  630,000 
D)  1,180,000 
A)  80,000 
B)  550,000 
C)  630,000 
D)  1,180,000

Question 8

The excess burden of a tax is also a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 9

Price ceilings result in shortages.

Accepted Answer

A) True 
 B)False

Question 10

Table 4-2
  
-Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a theater ticket. If the price of one of the tickets is $18,

Accepted Answer

A)  Anya and Basil will each buy two tickets. 
B)  Basil will receive $2 of consumer surplus from buying one ticket. 
C)  Anya and Basil receive a total of $26 of consumer surplus from buying one ticket each. No one else will buy a ticket. 
D)  Celeste, Dralon, and Esther will receive a total of $34 of consumer surplus since they will buy no tickets. 
A)  Anya and Basil will each buy two tickets. 
B)  Basil will receive $2 of consumer surplus from buying one ticket. 
C)  Anya and Basil receive a total of $26 of consumer surplus from buying one ticket each. No one else will buy a ticket. 
D)  Celeste, Dralon, and Esther will receive a total of $34 of consumer surplus since they will buy no tickets.

Question 11

Table 4-7
   Table 4-7 shows the demand and supply schedules for labor market in the city of Pixley.
-Refer to Table 4-7. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?

Accepted Answer

A)  W* = $10.50; Q* = 590,000 
B)  W* = $11.50; Q* = 570,000 
C)  W* = $9.50; Q* = 570,000 
D)  W* = $10.50; Q* = 1,200,000 
A)  W* = $10.50; Q* = 590,000 
B)  W* = $11.50; Q* = 570,000 
C)  W* = $9.50; Q* = 570,000 
D)  W* = $10.50; Q* = 1,200,000

Question 12

Table 4-6
  
-Consumer surplus in a market for a product would be equal to the area under the demand curve if

Accepted Answer

A)  producer surplus was equal to zero. 
B)  marginal cost was equal to the market price. 
C)  the product was produced in a perfectly competitive market. 
D)  the market price was zero. 
A)  producer surplus was equal to zero. 
B)  marginal cost was equal to the market price. 
C)  the product was produced in a perfectly competitive market. 
D)  the market price was zero.

Question 13

Figure 4-1   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1. If the market price is $1.50, what is Arnold's consumer surplus?

Accepted Answer

A)  $1.50 
B)  $2.25 
C)  $3.00 
D)  $4.75 
A)  $1.50 
B)  $2.25 
C)  $3.00 
D)  $4.75

Question 14

Table 4-7
   Table 4-7 shows the demand and supply schedules for labor market in the city of Pixley.
-Refer to Table 4-7. If a minimum wage of $12.50 is mandated there will be a

Accepted Answer

A)  shortage of 40,000 units of labor. 
B)  surplus of 40,000 units of labor. 
C)  shortage of 80,000 units of labor. 
D)  surplus of 80,000 units of labor. 
A)  shortage of 40,000 units of labor. 
B)  surplus of 40,000 units of labor. 
C)  shortage of 80,000 units of labor. 
D)  surplus of 80,000 units of labor.

Question 15

Figure 4-1   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1. If the market price is $1.00, what is Arnold's consumer surplus?

Accepted Answer

A)  $1.00 
B)  $2.00 
C)  $6.00 
D)  $7.00 
A)  $1.00 
B)  $2.00 
C)  $6.00 
D)  $7.00

Question 16

Is there a difference between the "true burden" of a tax and who is legally required to pay a tax? Briefly explain.

Accepted Answer

There is a difference. The True burden o

Question 17

The cities of Francistown and Nalady are five miles apart. Francistown enacts a rent control
law that puts a ceiling on rents well below their equilibrium market value. Predict the impact of this law on the competitive equilibrium rent in Nalady, which does not have a rent control law.
a. Illustrate your answer with one demand and supply graph for the apartment market in Francistown and another demand and supply graph for the apartment marketing Nalady.
b. Make sure that your graphs clearly show (1) the initial equilibrium before the rent control in both markets and (2) what happens after the imposition of rent control.
c. Clearly show any shifts in the demand or supply curves, and the movement along the curves for each market.
d. Label your graphs fully and provide written explanation for your graphs.

Accepted Answer

See the figure below. The rent ceiling i

Question 18

Which of the following describes the difference between "scarcity" and "shortage"?

Accepted Answer

A)  There is no difference; either word can be used to describe the situation that exists when there is less of a good or service available than people want. 
B)  In the economic sense, almost everything is scarce. A shortage of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price. 
C)  There is a shortage of almost everything. Scarcity occurs only if the quantity demanded of a good or service is greater than the quantity supplied at the current market price. 
D)  In the economic sense, almost everything is scarce. A shortage of a good or service occurs when the quantity demanded is greater than the quantity supplied at the equilibrium price. 
A)  There is no difference; either word can be used to describe the situation that exists when there is less of a good or service available than people want. 
B)  In the economic sense, almost everything is scarce. A shortage of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price. 
C)  There is a shortage of almost everything. Scarcity occurs only if the quantity demanded of a good or service is greater than the quantity supplied at the current market price. 
D)  In the economic sense, almost everything is scarce. A shortage of a good or service occurs when the quantity demanded is greater than the quantity supplied at the equilibrium price.

Question 19

Figure 4-8   Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-8. What is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling?

Accepted Answer

A)  $40,000 
B)  $100,000 
C)  $125,000 
D)  $140,000 
A)  $40,000 
B)  $100,000 
C)  $125,000 
D)  $140,000

Question 20

The following equations represent the demand and supply for silver pendants. QD = 50 - 2P
QS = -10 + 2P
What is the equilibrium price (P) and quantity (Q - in thousands) of pendants?

Accepted Answer

A)  P = $15; Q = 20 thousand 
B)  P = $50; Q = 10 thousand 
C)  P = $20; Q = 15 thousand 
D)  P = $10; Q = 30 thousand 
A)  P = $15; Q = 20 thousand 
B)  P = $50; Q = 10 thousand 
C)  P = $20; Q = 15 thousand 
D)  P = $10; Q = 30 thousand

Exam 4: Economic Efficiency, Government Price Setting, and Taxes

An efficient tax is

A tax is efficient if it imposes a large excess burden relative to the tax revenue it raises.

Figure 4-11 Figure 4-11 shows the demand and supply curves for the coffee market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00. -Which of the follow is a result of imposing a rent ceiling?

Figure 4-18 Figure 4-18 shows the market for cigarettes. The government plans to impose a unit tax in this market. -Refer to Figure 4-18. How much of the tax is paid by producers?

Figure 4-13 -Refer to Figure 4-13, which shows the market for vitamins. Suppose the government imposes a price ceiling of Pv. How will the price ceiling affect the quantity supplied, quantity demanded and quantity exchanged?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1. Arnold's marginal benefit from consuming the fourth burrito is

Table 4-7 Table 4-7 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-7. If a minimum wage of $12.50 an hour is mandated, what is the quantity of labor demanded?

The excess burden of a tax is also a deadweight loss.

Price ceilings result in shortages.

Table 4-2 -Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a theater ticket. If the price of one of the tickets is $18,

Table 4-7 Table 4-7 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-7. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?

Table 4-6 -Consumer surplus in a market for a product would be equal to the area under the demand curve if

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1. If the market price is $1.50, what is Arnold's consumer surplus?

Table 4-7 Table 4-7 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-7. If a minimum wage of $12.50 is mandated there will be a

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1. If the market price is $1.00, what is Arnold's consumer surplus?

Is there a difference between the "true burden" of a tax and who is legally required to pay a tax? Briefly explain.

Which of the following describes the difference between "scarcity" and "shortage"?

Figure 4-8 Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-8. What is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling?

The following equations represent the demand and supply for silver pendants. QD = 50 - 2P QS = -10 + 2P What is the equilibrium price (P) and quantity (Q - in thousands) of pendants?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Table 4-7 Table 4-7 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-7. What is the equilibrium hourly wage (W) and the equilibrium quantity of labor (Q)?