Question 1

One way to allocate the scarce good created from an effective price ceiling is to:

Accepted Answer

A)   offer it on a first-come, first-served basis.
B)   ration a certain quantity per household.
C)   give them to the friends and family of the producers.
D)   All of these are examples of allocating using non-price methods.E) A) and B)
F) A) and C)

Question 2

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

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) B) and D)
F) A) and D)

Question 3

With reference to the graph above,if the intended aim of the price ceiling set at $6 was a net increase in the well-being of consumers,then normative analysis would conclude that:

Accepted Answer

A)   the policy was effective, since surplus gained by consumers through lower prices is less than the surplus they lost through deadweight loss.
B)   the policy was ineffective, since surplus gained by consumers through lower prices is less than the surplus they lost through deadweight loss.
C)   the policy was effective, since surplus lost by producers through lower prices is less than the surplus gained by consumers through lower prices.
D)   there is no "right" conclusion to be reached (in a normative sense) , since people have different opinions concerning what constitutes a better outcome.E) All of the above
F) B) and C)

Question 4

The graph shown portrays a subsidy to buyers.Once the subsidy is in place,the buyers pay _____ and the sellers receive ________; the difference is ___________.

Accepted Answer

A)   $24; $40; the amount of the subsidy
B)   $30; $46; the amount of the subsidy
C)   $40; $24; the amount of the subsidy
D)   $24; $40; the amount of government revenueE) None of the above
F) A) and D)

Question 5

After a price floor of $23 is placed on the market in the graph shown,which area represents consumer surplus?

Accepted Answer

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

Question 6

The graph shown best represents:

Accepted Answer

A)   a non-binding price ceiling.
B)   a non-binding price floor.
C)   a missing market.
D)   a market for an inferior good.E) All of the above
F) A) and B)

Question 7

Suppose the market supply is initially at S1 and a price ceiling is set at 8.If supply shifts from S1 to S2,then

Accepted Answer

A)   The price ceiling will no longer bind.
B)   The price ceiling will prevent output from changing.
C)   The size of the shortage will increase.
D)   The market will not reach equilibrium.E) A) and B)
F) All of the above

Question 8

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) A) and D)
F) All of the above

Question 9

Suppose a tax on buyers has been imposed in the graph shown.The amount of deadweight loss generated by this tax is:

Accepted Answer

A)   $0.
B)   $18.
C)   $36.
D)   $72.E) A) and D)
F) All of the above

Question 10

The graph shown best represents:

Accepted Answer

A)   a binding price ceiling.
B)   a binding price floor.
C)   a missing market.
D)   a market for an inferior good.E) B) and C)
F) C) and D)

Question 11

Which of the following changes to the market in the graph shown could cause the price ceiling to become non-binding?

Accepted Answer

A)   Demand could increase, and shift to the right.
B)   Supply could increase, and shift to the left.
C)   Supply could increase, and shift to the right.
D)   Supply could decrease, and shift to the left.E) A) and D)
F) None of the above

Question 12

Suppose a tax has been imposed in the graph shown.Which kind of tax is most likely demonstrated by this graph?

Accepted Answer

A)   A tax on sellers
B)   A tax on buyers
C)   A tax on big corporations
D)   A price ceilingE) None of the above
F) B) and C)

Question 13

If a price ceiling of $8 were placed on the market in the graph shown,which area represents the surplus that is transferred from producers to consumers?

Accepted Answer

A)   C + D + F + G
B)   C + D
C)   F + G
D)   CE) A) and C)
F) C) and D)

Question 14

After a price floor of $23 is placed on the market in the graph shown,which area represents total surplus?

Accepted Answer

A)   A
B)   B + C + E + F
C)   A + B + E
D)   A + B + C + E + FE) B) and C)
F) All of the above

Question 15

Positive analysis:

Accepted Answer

A)   involves the formulation and testing of hypotheses.
B)   involves value judgments concerning the desirability of alternative outcomes.
C)   weighs the fairness of a policy.
D)   examines if the outcome is desirable.E) B) and D)
F) A) and D)

Question 16

Policymakers who wish to discourage businesses that pollute by taxing them:

Accepted Answer

A)   forget that businesses will pass the entire tax onto consumers of their products.
B)   should place a tax on consumers instead of the producers in order to increase the burden on sellers.
C)   should place a tax on producers instead of the consumers in order to increase the burden on sellers.
D)   forget that some of the tax burden will be shared by consumers.E) All of the above
F) B) and C)

Question 17

A price ceiling 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) All of the above
F) A) and D)

Question 18

In order for a price ceiling to "bind," it:

Accepted Answer

A)   must be set above the equilibrium price, and will likely cause a shortage.
B)   must be set below the equilibrium price, and will likely cause a shortage.
C)   must be set above the equilibrium price, and will likely cause a surplus.
D)   must be set below the equilibrium price, and will likely cause a surplus.E) B) and C)
F) None of the above

Question 19

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

Accepted Answer

A)   15; $16
B)   31; $9
C)   31; $19
D)   15; $6E) A) and B)
F) B) and D)

Question 20

A binding price floor:

Accepted Answer

A)   will cause quantity demanded to exceed quantity supplied.
B)   will cause quantity supplied to exceed quantity demanded.
C)   will increase total well-being.
D)   will set a legal maximum price in a market.E) A) and D)
F) A) and C)

Exam 6: Government Intervention Microeconomics

Which of the following changes to the market in the graph shown could cause the price ceiling to become non-binding?

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If a price ceiling of $8 were placed on the market in the graph shown,which area represents the surplus that is transferred from producers to consumers?

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Policymakers who wish to discourage businesses that pollute by taxing them:

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The graph shown portrays a subsidy to buyers.Once the subsidy is in place,the buyers pay _____ and the sellers receive ________; the difference is ___________.

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The graph shown best represents:

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After a price floor of $23 is placed on the market in the graph shown,which area represents consumer surplus?

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In order for a price ceiling to "bind," it:

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After a price floor of $23 is placed on the market in the graph shown,which area represents total surplus?

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Suppose a tax has been imposed in the graph shown.Which kind of tax is most likely demonstrated by this graph?

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With reference to the graph above,if the intended aim of the price ceiling set at $6 was a net increase in the well-being of consumers,then normative analysis would conclude that:

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A binding price floor:

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Suppose the market supply is initially at S1 and a price ceiling is set at 8.If supply shifts from S1 to S2,then

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Suppose a tax on buyers has been imposed in the graph shown.The amount of deadweight loss generated by this tax is:

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

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Positive analysis:

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

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A price ceiling is non-binding when:

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The graph shown best represents:

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One way to allocate the scarce good created from an effective price ceiling is to:

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A price ceiling is:

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The graph shown portrays a subsidy to buyers.Once the subsidy is in place,the buyers pay _ and the sellers receive ; the difference is _______.

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

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