Question 1

When a tax is placed on sellers:

Accepted Answer

A)  sellers always bear a higher tax incidence than buyers.
B)  buyers always bear a higher tax incidence than sellers.
C)  its effect on the price buyers pay and sellers receive equals that of a tax on buyers.
D)  None of these are correct.E) None of the above
F) C) and D)

Question 2

The graph shown portrays a subsidy to buyers. What is the amount of money the government has spent on this subsidy?

Accepted Answer

A)  $3,600
B)  $2,400
C)  $6,000
D)  $800E) All of the above
F) C) and D)

Question 3

If the intended aim of the price ceiling set at $6, as shown in the graph, was a net increase in the well-being of consumers, what would positive analysis consider?

Accepted Answer

A)  Whether the surplus transferred from consumers to producers is greater than the consumer surplus lost.
B)  Whether the producer surplus lost to deadweight loss is greater than the producer surplus gained from a higher price.
C)  Whether the surplus transferred from producers to consumers is greater than the consumer surplus lost.
D)  Whether the producer surplus lost due to lower prices is greater than the producer surplus lost due to fewer transactions taking place.E) All of the above
F) A) and C)

Question 4

Normative analysis:

Accepted Answer

A)  involves the formulation and testing of hypotheses.
B)  is a value-free evaluation of a policy.
C)  involves a value judgement regarding the desirability of a policy.
D)  examines if a policy actually accomplished its goal.E) A) and B)
F) None of the above

Question 5

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

Accepted Answer

A)  $10
B)  $6
C)  $8
D)  A binding price floor could not be set at any of these prices.E) C) and D)
F) None of the above

Question 6

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

Accepted Answer

A)  $72
B)  $36
C)  $48
D)  $96E) A) and B)
F) All of the above

Question 7

Consider the graph shown. What would most likely be the cause of a shift from D1 to D2?

Accepted Answer

A)  A tax on sellers
B)  A tax on buyers
C)  A subsidy for sellers
D)  A subsidy for buyersE) C) and D)
F) All of the above

Question 8

If a price ceiling of $14 is set in the market shown in the graph: QS appears to be incomplete.I. Total surplus will be $90.II. Deadweight loss will be $8.III. Producer surplus will be $25.

Accepted Answer

A)  I only
B)  III only
C)  II and III only
D)  I, II, and IIIE) B) and C)
F) A) and D)

Question 9

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 B)
F) A) and C)

Question 10

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) C) and D)
F) None of the above

Question 11

If the intended aim of the price floor set at $23, as shown in the graph, was a net increase in the well-being of producers, then positive analysis would have us consider whether:

Accepted Answer

A)  the surplus transferred from producers to consumers is greater than the consumer surplus lost due to fewer transactions taking place.
B)  the surplus transferred from consumers to producers is greater than the consumer surplus lost due to fewer transactions taking place.
C)  the producer surplus lost due to fewer transactions taking place is greater than the producer surplus gained from a higher price.
D)  the producer surplus lost due to lower prices is greater than the producer surplus lost due to fewer transactions taking place.E) A) and B)
F) A) and C) C

Question 12

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) A) and B)
F) A) and C)

Question 13

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

Question 14

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) A) and B)
F) A) and C)

Question 15

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 excess supply and the government must buy the excess.
C)  The tax creates a shortage, and the government must regulate the market.
D)  None of these are correct.E) B) and C)
F) A) and D)

Question 16

The graph shown portrays a subsidy to buyers. Before the subsidy is put in place, buyers bought _______ units and paid _______ for each one.

Accepted Answer

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

Question 17

Which of the following exemplifies a market failure?

Accepted Answer

A)  One person's consumption of a good imposes costs on others.
B)  A firm selling a product faces competition from many other sellers.
C)  A good is priced too high for poor families to afford.
D)  The distribution of surplus in a market is unfair.E) A) and D)
F) None of the above

Question 18

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

Question 19

Is it possible for sellers to benefit more than buyers from a subsidy to buyers?

Accepted Answer

A)  Yes, if the sellers need it more.
B)  Yes, if the supply curve is relatively less elastic than the demand curve.
C)  Yes, if the supply curve is relatively more elastic than the demand curve.
D)  No; sellers can never benefit more than buyers from a subsidy to buyers.E) A) and B)
F) A) and C)

Question 20

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

Exam 6: Government Intervention

When a tax is placed on sellers:

Correct AnswerverifiedShow Answer

The graph shown portrays a subsidy to buyers. What is the amount of money the government has spent on this subsidy?

Correct AnswerverifiedShow Answer

If the intended aim of the price ceiling set at $6, as shown in the graph, was a net increase in the well-being of consumers, what would positive analysis consider?

Correct AnswerverifiedShow Answer

Normative analysis:

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Consider the graph shown. What would most likely be the cause of a shift from D1 to D2?

Correct AnswerverifiedShow Answer

If a price ceiling of $14 is set in the market shown in the graph: QS appears to be incomplete.I. Total surplus will be $90.II. Deadweight loss will be $8.III. Producer surplus will be $25.

Correct AnswerverifiedShow Answer

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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When a tax is placed on buyers:

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If the intended aim of the price floor set at $23, as shown in the graph, was a net increase in the well-being of producers, then positive analysis would have us consider whether:

Correct AnswerverifiedC

A price ceiling is:

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The graph shown best represents:

Correct AnswerverifiedA

Because a price floor causes:

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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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The graph shown portrays a subsidy to buyers. Before the subsidy is put in place, buyers bought _______ units and paid _______ for each one.

Correct AnswerverifiedShow Answer

Which of the following exemplifies a market failure?

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

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Is it possible for sellers to benefit more than buyers from a subsidy to buyers?

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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 AnswerverifiedD

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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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C

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A

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The graph shown portrays a subsidy to buyers. Before the subsidy is put in place, buyers bought _ units and paid _ for each one.

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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 _.

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D