Question 1

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

Question 2

The graph shown demonstrates a tax on sellers.Who bears the greater tax incidence?

Accepted Answer

A)   The sellers
B)   The buyers
C)   The government
D)   The incidence is equally shared between buyer and seller.E) None of the above
F) All of the above

Question 3

If a price ceiling of $8 were placed in the market in the graph shown:

Accepted Answer

A)   some surplus is transferred from consumer to producer.
B)   some surplus is transferred from producer to consumer.
C)   all consumers are made better off.
D)   all producers are made better off.E) B) and D)
F) B) and C)

Question 4

Does a tax on sellers affect the demand curve?

Accepted Answer

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

Question 5

The graph shown portrays a subsidy to buyers.The deadweight loss arising from the subsidy is:

Accepted Answer

A)   $400.
B)   $3,600.
C)   $750.
D)   $800.E) B) and C)
F) A) and D)

Question 6

Who actually benefits from a subsidy to sellers?

Accepted Answer

A)   Only consumers benefit from any kind of subsidy.
B)   Only sellers benefit, since it is their subsidy.
C)   The benefit is shared depending on elasticity of the supply and demand curves.
D)   None of these statements is true.E) A) and D)
F) C) and D)

Question 7

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

Accepted Answer

A)   6
B)   9
C)   3
D)   12E) B) and C)
F) B) and D)

Question 8

The graph shown demonstrates a tax on sellers.What is the amount of tax revenue being generated from the tax?

Accepted Answer

A)   $150
B)   $80
C)   $310
D)   $135E) B) and D)
F) B) and C)

Question 9

If a binding price ceiling 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) A) and D)
F) C) and D)

Question 10

A tax on sellers:

Accepted Answer

A)   causes equilibrium price to increase and equilibrium quantity to decrease.
B)   cause equilibrium price and quantity to increase.
C)   cause equilibrium price and quantity to decrease.
D)   cause equilibrium price to decrease and equilibrium quantity to increase.E) None of the above
F) C) and D)

Question 11

The graph shown portrays a subsidy to buyers.The amount of money spent on this subsidy by the government is:

Accepted Answer

A)   $3,600.
B)   $2,400.
C)   $6,000.
D)   $800.E) None of the above
F) B) and D)

Question 12

Suppose a tax on buyers has been imposed in the graph shown.Once the tax is in place,the sellers experience:

Accepted Answer

A)   a decrease in supply.
B)   an increase in supply.
C)   a decrease in quantity supplied.
D)   an increase in quantity supplied.E) All of the above
F) B) and C)

Question 13

Does a subsidy to buyers affect the demand curve?

Accepted Answer

A)   Yes, it shifts demand up by the amount of the subsidy.
B)   Yes, it shifts demand to the right by the amount of the subsidy.
C)   No, the quantity demanded will increase, but the demand curve does not move.
D)   No, the quantity demanded will decrease, but the demand curve does not move.E) A) and D)
F) C) and D)

Question 14

The graph shown demonstrates a tax on buyers.Which of the following can be said about the effect of this tax?

Accepted Answer

A)   The tax creates a shortage, and rationing must occur.
B)   The tax creates a surplus, and the government must buy the excess.
C)   The tax creates a shortage, and the government must regulate the market.
D)   None of these is true.E) A) and B)
F) None of the above

Question 15

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) All of the above
F) None of the above

Question 16

The graph shown demonstrates a tax on sellers.Which of the following can be said about the effect of this tax?

Accepted Answer

A)   The price paid by buyers is greater than that received by sellers, and the difference is the tax wedge.
B)   The price paid by buyers is less than that received by sellers, and the difference is the total tax revenue.
C)   The price paid by buyers is greater than that received by sellers, and the difference is the total tax revenue.
D)   The price paid by buyers and received by sellers is higher than it was before the tax was imposed.E) A) and B)
F) A) and D)

Question 17

Tax incidence is:

Accepted Answer

A)   the difference between what the buyers pay and what the sellers receive in a market where taxes are present.
B)   the relative tax burden borne by buyers and sellers.
C)   the generated revenue that comes from taxes in markets.
D)   the difference between the tax revenue generated and the value of deadweight loss caused by the imposition of the tax.E) B) and C)
F) C) and D)

Question 18

An argument against price floors is:

Accepted Answer

A)   non-price rationing must occur, and can lead to consumers waiting in line.
B)   the cost to taxpayers if the government buys all surplus.
C)   producers will reduce the quality of the goods they sell.
D)   they transfer surplus from producers to consumers.E) A) and D)
F) B) and D)

Question 19

If the intended aim of the price floor set in the graph shown was a net increase in the well-being of producers,then normative analysis would conclude that:

Accepted Answer

A)   the policy was effective, since surplus gained by producers through higher prices is greater than the surplus they lost through deadweight loss.
B)   the policy was ineffective, since surplus gained by producers through higher prices is greater than the surplus they lost through deadweight loss.
C)   the policy was effective, since surplus gained by producers through higher prices is greater than the surplus lost by consumers through higher 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) A) and C)
F) All of the above

Question 20

The graph shown best represents which of the following?

Accepted Answer

A)   A tax on sellers
B)   A subsidy to sellers
C)   A price floor.
D)   A subsidy to buyersE) A) and D)
F) A) and B)

Exam 6: Government Intervention Microeconomics

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

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The graph shown portrays a subsidy to buyers.The deadweight loss arising from the subsidy is:

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The graph shown demonstrates a tax on sellers.What is the amount of tax revenue being generated from the tax?

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The graph shown demonstrates a tax on sellers.Which of the following can be said about the effect of this tax?

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If the intended aim of the price floor set in the graph shown was a net increase in the well-being of producers,then normative analysis would conclude that:

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A tax on sellers:

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The graph shown best represents:

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The graph shown demonstrates a tax on sellers.Who bears the greater tax incidence?

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Tax incidence is:

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The graph shown best represents which of the following?

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

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Does a tax on sellers affect the demand curve?

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An argument against price floors is:

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Who actually benefits from a subsidy to sellers?

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Suppose a tax on buyers has been imposed in the graph shown.Once the tax is in place,the sellers experience:

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If a price ceiling of $8 were placed in the market in the graph shown:

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The graph shown portrays a subsidy to buyers.The amount of money spent on this subsidy by the government is:

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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?

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Does a subsidy to buyers affect the demand curve?

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The graph shown demonstrates a tax on buyers.Which of the following can be said about the effect of this tax?

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