Question 1

Because a price floor causes:

Accepted Answer

A)   a shortage, some form of rationing must occur.
B)   excess supply, some producers may ultimately lose because they won't have enough customers.
C)   a shortage, rent-seeking will occur.
D)   excess supply, everyone will be better off.E) B) and D)
F) None of the above

Question 2

Why do governments tend to set price ceilings?

Accepted Answer

A)   To ensure everyone can afford certain goods.
B)   To encourage producers to make enough for everyone.
C)   To help producers make enough profit to stay in the industry.
D)   To prevent consumers from choosing the wrong goods.E) All of the above
F) B) and D)

Question 3

The graph shown demonstrates a tax on 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) C) and D)
F) None of the above

Question 4

The difference in the price the buyer pays and the price the sellers keep in the presence of a tax is called:

Accepted Answer

A)   a tax differential.
B)   a tax wedge.
C)   the tax incidence.
D)   the tax burden.E) A) and B)
F) A) and C)

Question 5

{MISSING IMAGE}Suppose an $8 tax is imposed on sellers in the market shown in the graph. What will be the tax-inclusive price paid by the buyers as a result of this tax?

Accepted Answer

A)   $14
B)   $26
C)   $22
D)   $10E) All of the above
F) A) and B)

Question 6

Does a subsidy to buyers affect the supply curve?

Accepted Answer

A)   Yes; the supply curve shifts up by the amount of the subsidy.
B)   Yes; the supply curve shifts to the right by the amount of the subsidy.
C)   No; the supply curve does not move, as quantity supplied increases instead.
D)   No; the supply curve does not move, as quantity supplied decreases instead.E) None of the above
F) A) and D)

Question 7

A market failure is most likely to occur when:

Accepted Answer

A)   a sole producer of a good faces no threat of competition.
B)   several producers of a good compete for customers by having price wars.
C)   several producers of a good search for the lowest-cost method of production.
D)   many producers produce identical products, and only the consumers are affected by the transactions.E) A) and B)
F) B) and C)

Question 8

If a price ceiling is set at $8 in the market shown in the graph:

Accepted Answer

A)   excess supply of 7 units will occur.
B)   excess supply of 15 units will occur.
C)   excess supply of 23 units will occur.
D)   no excess supply will occur.E) A) and D)
F) A) and C)

Question 9

Suppose a tax is imposed on buyers in the market shown in the graph. What area(s)  will represent deadweight loss?

Accepted Answer

A)   E
B)   D + H
C)   K
D)   I + ME) A) and B)
F) A) and C)

Question 10

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

Accepted Answer

A)   a shortage of 37 will occur.
B)   a shortage of 10 will occur.
C)   a shortage of 27 will occur.
D)   no shortage will occur.E) C) and D)
F) B) and D)

Question 11

The graph shown best represents:

Accepted Answer

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

Question 12

If a price floor is set at $23 in the market shown in the graph, which areas would represent producer surplus?

Accepted Answer

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

Question 13

The graph shown portrays a subsidy to buyers. After the subsidy is in place, the post-subsidy price paid by buyers is _______ and the post-subsidy price received by sellers is _______; the difference between these two figures is the amount of _______.

Accepted Answer

A)   $24; $40; the subsidy
B)   $30; $46; the subsidy
C)   $40; $24; the subsidy
D)   $24; $40; government revenueE) A) and B)
F) All of the above

Question 14

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) B) and C)
F) C) and D)

Question 15

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) All of the above

Question 16

The graph shown portrays a subsidy to buyers. Why might the government enact such a policy?

Accepted Answer

A)   To encourage consumption
B)   To encourage consumers to substitute
C)   To discourage production
D)   To discourage consumptionE) B) and C)
F) C) and D)

Question 17

If a price floor is set at $23 in the market shown in the graph, which area(s)  would represent deadweight loss?

Accepted Answer

A)   C + F
B)   C + D + F
C)   G
D)   B + C + E + FE) A) and D)
F) None of the above

Question 18

Which of the following statements about taxes is true?

Accepted Answer

A)   They benefit many of the consumers in the market.
B)   They are sometimes used to correct market failures.
C)   They are sometimes used to transfer surplus from producers to consumers.
D)   They are sometimes used to transfer surplus from consumers to producers.E) None of the above
F) A) and C)

Question 19

The graph shown demonstrates a tax on sellers. After the tax is in place, buyers purchase _______ units, and the post-tax price paid for each one is _______.

Accepted Answer

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

Question 20

The graph shown portrays a subsidy to buyers. What will result from this subsidy?

Accepted Answer

A)   A higher quantity will be bought a nd sold at a higher price.
B)   Customers will be worse off than before the subsidy was placed.
C)   Producers will be worse off than before the subsidy was placed.
D)   None of these are true.E) A) and B)
F) A) and C)

Exam 6: Governmentintervention

If a price ceiling is set at $8 in the market shown in the graph:

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If a price floor is set at $23 in the market shown in the graph, which areas would represent producer surplus?

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Does a subsidy to buyers affect the supply curve?

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Which of the following statements about taxes is true?

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If a price floor is set at $23 in the market shown in the graph, which area(s) would represent deadweight loss?

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The graph shown best represents:

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The graph shown portrays a subsidy to buyers. After the subsidy is in place, the post-subsidy price paid by buyers is _______ and the post-subsidy price received by sellers is _______; the difference between these two figures is the amount of _______.

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Why do governments tend to set price ceilings?

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

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The graph shown portrays a subsidy to buyers. Why might the government enact such a policy?

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{MISSING IMAGE}Suppose an $8 tax is imposed on sellers in the market shown in the graph. What will be the tax-inclusive price paid by the buyers as a result of this tax?

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The difference in the price the buyer pays and the price the sellers keep in the presence of a tax is called:

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The graph shown demonstrates a tax on sellers. After the tax is in place, buyers purchase _______ units, and the post-tax price paid for each one is _______.

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A market failure is most likely to occur when:

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Suppose a tax is imposed on buyers in the market shown in the graph. What area(s) will represent deadweight loss?

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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 sellers produced ________ units and received __________ for each one sold.

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The graph shown portrays a subsidy to buyers. What will result from this subsidy?

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

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Because a price floor causes:

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The graph shown portrays a subsidy to buyers. After the subsidy is in place, the post-subsidy price paid by buyers is ___ and the post-subsidy price received by sellers is _; the difference between these two figures is the amount of _____.

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The graph shown demonstrates a tax on sellers. After the tax is in place, buyers purchase _ units, and the post-tax price paid for each one is _.

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

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