Question 1

Suppose a price floor is set at $10 in the market shown in the graph. Which of the following statements is true?

Accepted Answer

A)  A shortage of five units occurs
B)  Excess supply of five units occurs
C)  Total surplus increases
D)  Deadweight loss fallsE) A) and B)
F) A) and C)

Question 2

Suppose the market in the graph shown is in equilibrium. If a price floor is set at $13, the total number of units traded:

Accepted Answer

A)  falls by 5.
B)  falls by 3.
C)  increases by 2.
D)  increases by 5.E) A) and B)
F) A) and C)

Question 3

Government attempts to lower, raise, or simply stabilize prices will usually:

Accepted Answer

A)  maintain the distribution of surplus.
B)  create unintended side effects.
C)  improve the efficiency of a market.
D)  All of these are correct.E) A) and C)
F) A) and B)

Question 4

According to the market in the graph shown, at which of the following prices could a binding price ceiling be set?

Accepted Answer

A)  $15
B)  $11
C)  $8
D)  A binding price ceiling could not be set at any of these prices.E) A) and C)
F) All of the above

Question 5

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

Accepted Answer

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

Question 6

Does a subsidy to buyers affect the demand curve?

Accepted Answer

A)  Yes; the demand curve shifts up by the amount of the subsidy.
B)  Yes; the demand curve shifts to the right by the amount of the subsidy.
C)  No; the demand curve does not move, as quantity demanded increases instead.
D)  No; the demand curve does not move, as quantity demanded decreases instead.E) C) and D)
F) A) and D)

Question 7

If a binding price floor were placed in the market shown in the graph:

Accepted Answer

A)  quantity demanded would exceed quantity supplied.
B)  quantity supplied would exceed quantity demanded.
C)  the demand curve would have to shift.
D)  the supply curve would have to shift.E) A) and D)
F) None of the above

Question 8

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

Accepted Answer

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

Question 9

A subsidy:

Accepted Answer

A)  is a requirement that the government pay an extra amount to producers or consumers of a good.
B)  is used by governments to encourage the production and consumption of a particular good or service.
C)  is used by governments as an alternative to price controls to benefit certain groups without generating a shortage or excess supply.
D)  All of these statements are true.E) None of the above
F) A) and D)

Question 10

A tax wedge:

Accepted Answer

A)  refers to the difference in the price the buyer pays and the price the seller keeps.
B)  refers to the shift in supply or demand that results from a tax.
C)  only occurs in markets when the tax is placed on buyers.
D)  only occurs in markets when taxes are placed on large corporations.E) B) and C)
F) A) and D)

Question 11

The graph shown demonstrates a tax on sellers. After the tax is in place, buyers experience:

Accepted Answer

A)  a decrease in demand.
B)  an increase in demand.
C)  a decrease in quantity demanded.
D)  an increase in quantity demanded.E) C) and D)
F) B) and D)

Question 12

A tax on sellers:

Accepted Answer

A)  causes equilibrium price and quantity to decrease.
B)  shifts the demand curve vertically downwards by the amount of the tax, but does not shift the supply curve.
C)  shifts the supply curve vertically upwards by the amount of the tax, but does not shift the demand curve.
D)  All of these are correct.E) C) and D)
F) B) and C)

Question 13

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) None of the above
F) All of the above

Question 14

A price floor is:

Accepted Answer

A)  a legal maximum price.
B)  a legal minimum price.
C)  a legal maximum quantity that can be sold at a particular price.
D)  a legal minimum quantity that can be sold at a particular price.E) A) and B)
F) A) and C)

Question 15

What do we call situations in which the assumption of efficient, competitive markets fails to hold?

Accepted Answer

A)  Market failures
B)  Inelastic-response markets
C)  Missing markets
D)  Market interventionsE) None of the above
F) All of the above

Question 16

Governments can discourage the consumption of certain goods by:

Accepted Answer

A)  giving a subsidy to consumers in those markets.
B)  taxing substitute goods.
C)  imposing a minimum price above the equilibrium price.
D)  None of these policies decrease the consumption of goods.E) B) and D)
F) A) and D)

Question 17

Suppose a tax on sellers has been imposed in the market shown in the graph. What is the total tax paid per unit of the good?

Accepted Answer

A)  $16
B)  $6
C)  $10
D)  $15E) B) and D)
F) B) and C)

Question 18

The graph shown demonstrates a tax on buyers. Before the tax was imposed, buyers purchased _______ units and paid _______ for each one.

Accepted Answer

A)  6; $22
B)  6; $34
C)  9; $18
D)  9; $30E) A) and D)
F) None of the above

Question 19

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

Accepted Answer

A)  15; $16
B)  15; $6
C)  31; $9
D)  31; $19E) None of the above
F) B) and D)

Question 20

The graph shown demonstrates a tax on buyers. The post-tax price paid by buyers is _______, and the post-tax price received by sellers is _______. The difference between them is the _________.

Accepted Answer

A)  $34; $22; amount of the tax
B)  $30; $18; tax burden
C)  $22; $34; tax wedge
D)  $30; $18; amount of the taxE) B) and D)
F) None of the above

Exam 6: Government Intervention

The graph shown demonstrates a tax on buyers. Before the tax was imposed, buyers purchased _______ units and paid _______ for each one.

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The graph shown demonstrates a tax on buyers. The post-tax price paid by buyers is _______, and the post-tax price received by sellers is _______. The difference between them is the _________.

Correct AnswerverifiedShow Answer

Government attempts to lower, raise, or simply stabilize prices will usually:

Correct AnswerverifiedShow Answer

The graph shown demonstrates a tax on sellers. After the tax is in place, buyers experience:

Correct AnswerverifiedShow Answer

Does a subsidy to buyers affect the demand curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose a price floor is set at $10 in the market shown in the graph. Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the market in the graph shown, at which of the following prices could a binding price ceiling be set?

Correct AnswerverifiedShow Answer

If a binding price floor were placed in the market shown in the graph:

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A price floor is:

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A tax wedge:

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What do we call situations in which the assumption of efficient, competitive markets fails to hold?

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A government might intervene in a market to:

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A subsidy:

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Suppose a tax on sellers has been imposed in the market shown in the graph. What is the total tax paid per unit of the good?

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Suppose the market in the graph shown is in equilibrium. If a price floor is set at $13, the total number of units traded:

Correct AnswerverifiedShow Answer

A tax on sellers:

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

Correct AnswerverifiedShow Answer

Governments can discourage the consumption of certain goods by:

Correct AnswerverifiedShow Answer

The graph shown demonstrates a tax on buyers. Before the tax was imposed, buyers purchased _ units and paid _ for each one.

Correct Answer
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The graph shown demonstrates a tax on buyers. The post-tax price paid by buyers is ___, and the post-tax price received by sellers is _. The difference between them is the _______.

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

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