Question 1

The graph shown demonstrates a tax on sellers. The post-tax price paid by buyers is _______ than that received by sellers, and the difference is the _______. Leading is incorrect on this QS.

Accepted Answer

A)  greater; tax wedge
B)  less; total tax revenue
C)  greater; total tax revenue
D)  less; tax wedgeE) None of the above
F) B) and C)

Question 2

If the intended aim of the price floor set at $12, as shown in the graph, was a net increase in the well-being of producers, then positive analysis would consider the policy to be:

Accepted Answer

A)  effective if area C is larger than area E.
B)  effective if areas E + B are larger than areas C + D + F.
C)  ineffective if area B is larger than area E.
D)  ineffective if areas E + B are larger than areas A + C + D + F.E) A) and D)
F) B) and C)

Question 3

Which kind of tax is most likely demonstrated by the graph shown?

Accepted Answer

A)  A tax on sellers
B)  A tax on buyers
C)  A tax on big corporations
D)  None of these is correct.E) All of the above
F) B) and D)

Question 4

Does a tax on sellers affect the demand curve?

Accepted Answer

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

Question 5

A price floor that is set at $23 in the market shown in the graph is:

Accepted Answer

A)  binding and would cause a shortage.
B)  non-binding and would not affect the market.
C)  binding and would cause excess supply.
D)  non-binding and would not prevent the market from reaching equilibrium.E) A) and B)
F) A) and C)

Question 6

A tax on sellers causes

Accepted Answer

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

Question 7

If a good has only one producer, with no threat of competition, it is likely that government intervention in the market will:

Accepted Answer

A)  have no impact.
B)  raise prices for consumers.
C)  increase total surplus.
D)  make buyers and sellers better off.E) C) and D)
F) B) and D)

Question 8

Suppose a $5 tax is imposed on buyers 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)  $8
B)  $16
C)  $13
D)  $6E) A) and B)
F) A) and C)

Question 9

If a good has only one producer, with no threat of competition, the market for this good likely:

Accepted Answer

A)  has greater consumer surplus than in a competitive equilibrium.
B)  has the price set inefficiently high.
C)  has the price set below the competitive equilibrium price.
D)  is efficient.E) 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) B) and D)
F) A) and C)

Question 11

What type of public policy could a government set in response to rising prices of a basic necessity?

Accepted Answer

A)  Make it illegal to charge higher prices for the good
B)  Hire more producers of the good
C)  Subsidize the price of the good
D)  All of these are ways a government can try to address rising prices of a basic necessity.E) A) and B)
F) None of the above

Question 12

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) All of the above
F) None of the above

Question 13

The incidence of a tax depends on:

Accepted Answer

A)  the relative elasticity of the supply and demand curves in a market.
B)  whether it is imposed on buyers or sellers.
C)  the amount of revenue it generates once administrative burdens are taken into account.
D)  whether the revenue it generates is greater than the deadweight loss it causes.E) None of the above
F) A) and B)

Question 14

The graph shown demonstrates a tax on buyers. How much are buyers being taxed on each unit sold?

Accepted Answer

A)  $4
B)  $8
C)  $12
D)  $16E) A) and D)
F) A) and C)

Question 15

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

Accepted Answer

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

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 tax increases producer surplus.
B)  Consumers prefer this tax over a tax levied on buyers.
C)  The deadweight loss would be larger if this tax had been imposed on buyers.
D)  The tax decreases consumer surplus.E) B) and C)
F) A) and C)

Question 17

Positive analysis:

Accepted Answer

A)  evaluates whether a policy is a good idea.
B)  leads to the best solutions.
C)  is the only way to analyze a policy.
D)  examines if a policy actually accomplished its goals.E) All of the above
F) C) and D)

Question 18

Which action could cause the price ceiling shown in the graph to become non-binding?

Accepted Answer

A)  An increase in demand (shift to the right) 
B)  A decrease in supply (shift to the left) 
C)  An increase in supply (shift to the right) 
D)  None of these would cause the price ceiling to become non-binding.E) A) and B)
F) A) and C)

Question 19

The graph shown demonstrates a tax on buyers. After the tax has been imposed, sellers produce _______ units, and the post-tax price received for each one sold is _______.

Accepted Answer

A)  6; $22
B)  6; $34
C)  9; $18
D)  9; $30E) All of the above
F) B) and D)

Question 20

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

Accepted Answer

A)  The seller
B)  The buyer
C)  The government
D)  The incidence is equally shared between buyer and sellerE) A) and D)
F) All of the above

Exam 6: Government Intervention

Which action could cause the price ceiling shown in the graph to become non-binding?

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

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The graph shown demonstrates a tax on buyers. How much are buyers being taxed on each unit sold?

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

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If a good has only one producer, with no threat of competition, the market for this good likely:

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A price floor that is set at $23 in the market shown in the graph is:

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If a good has only one producer, with no threat of competition, it is likely that government intervention in the market will:

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The graph shown demonstrates a tax on sellers. The post-tax price paid by buyers is _______ than that received by sellers, and the difference is the _______. Leading is incorrect on this QS.

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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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Does a tax on sellers affect the demand curve?

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If the intended aim of the price floor set at $12, as shown in the graph, was a net increase in the well-being of producers, then positive analysis would consider the policy to be:

Correct AnswerverifiedShow Answer

Which kind of tax is most likely demonstrated by the graph shown?

Correct AnswerverifiedShow Answer

A tax on sellers causes

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The incidence of a tax depends on:

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What type of public policy could a government set in response to rising prices of a basic necessity?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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Positive analysis:

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Suppose a $5 tax is imposed on buyers in the market shown in the graph. What will be the tax-inclusive price paid by the buyers as a result of this tax?

Correct AnswerverifiedShow Answer

The graph shown demonstrates a tax on buyers. After the tax has been imposed, sellers produce _______ units, and the post-tax price received for each one sold is _______.

Correct AnswerverifiedShow Answer

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The graph shown demonstrates a tax on sellers. The post-tax price paid by buyers is _ than that received by sellers, and the difference is the _. Leading is incorrect on this QS.

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The graph shown demonstrates a tax on buyers. After the tax has been imposed, sellers produce _ units, and the post-tax price received for each one sold is _.

Correct Answer
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