Question 1

If a price ceiling of $12 is set in the market shown in the graph, what will consumer surplus be?

Accepted Answer

A)   $260
B)   $130
C)   $88
D)   $60E) A) and B)
F) A) and C)

Question 2

Who benefits from a subsidy to buyers?

Accepted Answer

A)   Only sellers benefit.
B)   Only buyers benefit.
C)   The benefit is shared by sellers and buyers depending on the elasticity of the supply and demand curves.
D)   None of these statements are true.E) A) and B)
F) C) and D)

Question 3

A price ceiling is non-binding when:

Accepted Answer

A)   it is set above the equilibrium price.
B)   it is set below the equilibrium price.
C)   it reduces the output in a market.
D)   it increases the output in a market.E) All of the above
F) B) and C)

Question 4

The graph shown portrays a subsidy to buyers. With the subsidy, buyers will purchase _______ units, and the post-subsidy price paid for each one is _______.

Accepted Answer

A)   100; $46
B)   100; $30
C)   150; $40
D)   150; $24E) B) and D)
F) B) and C)

Question 5

If a price ceiling is set at $8 in the market shown in the graph, which area(s)  would represent consumer surplus?

Accepted Answer

A)   A + C
B)   A + B
C)   A + B + C
D)   A + B + C + D + F + GE) A) and C)
F) B) and D)

Question 6

When a tax is placed on buyers:

Accepted Answer

A)   the resulting price paid by consumers is the same as if the tax were placed on sellers.
B)   the resulting price received by sellers is the same as if the tax were placed on sellers.
C)   the equilibrium quantity will unequivocally decrease.
D)   All of these are correct.E) B) and D)
F) B) and C)

Question 7

The graph shown portrays a subsidy to buyers. What is the amount of the subsidy per unit of this good?

Accepted Answer

A)   $22
B)   $16
C)   $10
D)   $6E) B) and C)
F) A) and D)

Question 8

The relative tax burden borne by buyers and sellers is called the:

Accepted Answer

A)   tax wedge.
B)   tax incidence.
C)   tax revenue.
D)   real tax.E) A) and C)
F) A) and D)

Question 9

If a price floor is set at $23 in the market shown in the graph:

Accepted Answer

A)   some surplus will be transferred from consumers to producers.
B)   some surplus will be transferred from producers to consumers.
C)   all producers will be better off.
D)   all consumers will be better off.E) All of the above
F) C) and D)

Question 10

The graph shown demonstrates a tax on sellers. How many fewer units are being sold due to the imposition of a tax on this market?

Accepted Answer

A)   15
B)   16
C)   31
D)   37E) B) and C)
F) All of the above

Question 11

If the demand curve is more elastic than the supply curve in a market that is taxed, then:

Accepted Answer

A)   buyers will bear a greater tax burden than sellers.
B)   sellers will bear a greater tax burden than buyers.
C)   the tax burden will be shared equally by buyers and sellers.
D)   None of these are correct.E) C) and D)
F) A) and D)

Question 12

A price floor that is set at $23 in the market shown in the graph is:

Accepted Answer

A)   binding and would cause a shortage.
B)   non-binding and would not affect the market.
C)   binding and would cause excess supply.
D)   non-binding and would not prevent the market from reaching equilibrium.E) All of the above
F) A) and C)

Question 13

If a good has only one producer, with no threat of competition, it is likely that government intervention in the market will:

Accepted Answer

A)   have no impact.
B)   raise prices for consumers.
C)   increase total surplus.
D)   make buyers and sellers better off.E) A) and B)
F) A) and C)

Question 14

If a good has only one producer, with no threat of competition, the market for this good likely:

Accepted Answer

A)   has greater consumer surplus than in a competitive equilibrium.
B)   has the price set inefficiently high.
C)   has the price set below the competitive equilibrium price.
D)   is efficient.E) C) and D)
F) A) and C)

Question 15

Does a tax on buyers affect the demand curve?

Accepted Answer

A)   Yes; the demand curve shifts down by the amount of the tax.
B)   Yes; the demand curve shifts to the left by the amount of the tax.
C)   Yes; the demand curve shifts up by the amount of the tax.
D)   No; the demand curve does not move, as there is a change in the quantity demanded instead.E) A) and B)
F) A) and C)

Question 16

The graph shown demonstrates a tax on buyers. Before the tax was imposed, sellers produced _______ units and received _______ for each one sold.

Accepted Answer

A)   6; $22
B)   6; $34
C)   9; $18
D)   9; $30E) A) and B)
F) A) and C)

Question 17

If a government wants to encourage the consumption of a particular good, it should enact:

Accepted Answer

A)   a subsidy to buyers, as this will most greatly affect consumption of the good.
B)   a subsidy to sellers, as this will increase the amount of the good that is produced and offered for sale.
C)   a subsidy to buyers, as this will give the benefit to the more deserved party.
D)   a subsidy on either buyers or sellers, as both will have the same effect on the market.E) C) and D)
F) A) and D)

Question 18

In order for a price floor to be binding, it must be set _______ the equilibrium price, and it will likely cause _______.

Accepted Answer

A)   above; a shortage
B)   below; a shortage
C)   above; excess supply
D)   below; excess supplyE) A) and C)
F) A) and D)

Question 19

A government might intervene in a market to:

Accepted Answer

A)   increase the efficiency of the market.
B)   reduce the consumption of a "bad" product.
C)   correct a market failure.
D)   All of these are reasons why a government might intervene in a market.E) A) and B)
F) A) and C)

Question 20

A price ceiling in the market shown in the graph would be non-binding if it were set at:

Accepted Answer

A)   $5.
B)   $8.
C)   $10.
D)   $13.E) B) and C)
F) A) and D)

Exam 6: Governmentintervention

If a government wants to encourage the consumption of a particular good, it should enact:

Correct AnswerverifiedShow Answer

If a price ceiling of $12 is set in the market shown in the graph, what will consumer surplus be?

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The graph shown demonstrates a tax on sellers. How many fewer units are being sold due to the imposition of a tax on this market?

Correct AnswerverifiedShow Answer

Does a tax on buyers affect the demand curve?

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The graph shown demonstrates a tax on buyers. Before the tax was imposed, sellers produced _______ units and received _______ for each one sold.

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When a tax is placed on buyers:

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If the demand curve is more elastic than the supply curve in a market that is taxed, then:

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The relative tax burden borne by buyers and sellers is called the:

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A government might intervene in a market to:

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A price ceiling is non-binding when:

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In order for a price floor to be binding, it must be set _______ the equilibrium price, and it will likely cause _______.

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If a price ceiling is set at $8 in the market shown in the graph, which area(s) would represent consumer surplus?

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If a good has only one producer, with no threat of competition, it is likely that government intervention in the market will:

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Who benefits from a subsidy to buyers?

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A price floor that is set at $23 in the market shown in the graph is:

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If a good has only one producer, with no threat of competition, the market for this good likely:

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The graph shown portrays a subsidy to buyers. What is the amount of the subsidy per unit of this good?

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If a price floor is set at $23 in the market shown in the graph:

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A price ceiling in the market shown in the graph would be non-binding if it were set at:

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The graph shown portrays a subsidy to buyers. With the subsidy, buyers will purchase _______ units, and the post-subsidy price paid for each one is _______.

Correct AnswerverifiedShow Answer

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The graph shown demonstrates a tax on buyers. Before the tax was imposed, sellers produced _ units and received _ for each one sold.

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In order for a price floor to be binding, it must be set _ the equilibrium price, and it will likely cause _.

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The graph shown portrays a subsidy to buyers. With the subsidy, buyers will purchase _ units, and the post-subsidy price paid for each one is _.

Correct Answer
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