Question 1

Government-created price floors are typically imposed to

Accepted Answer

A)   help consumers.
B)   help producers.
C)   raise tax revenue.
D)   shift the supply curve to the right.E) None of the above
F) B) and D) B

Question 2

Rent controls typically end up

Accepted Answer

A)   increasing rents received by landlords.
B)   raising property values.
C)   encouraging landlords to overspend for maintenance.
D)   discouraging new housing construction.E) C) and D)
F) A) and B)

Question 3

The ultimate burden of a tax falls most heavily on the side of the market that is less elastic.

Accepted Answer

A) True 
 B)False

Question 4

The government is thinking about increasing the tax on petrol to raise additional revenue rather than to promote conservation. The tax will result in the greatest amount of tax revenue if the price elasticity of demand for petrol equals

Accepted Answer

A)   1.8
B)   1.4
C)   1.0
D)   0.5E) A) and B)
F) A) and C)

Question 5

A subsidy is the opposite of a tax. The government pays buyers a €0.50 subsidy for each bus ticket purchased.
a) What happens to the effective price paid by consumers buying bus tickets, the effective price received by bus companies and the quantity traded? Create a graph to justify your answer.
b) Who gains and who loses from this policy?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> a) The effect of a €0.50 per bus ticket...

Question 6

A price floor

Accepted Answer

A)   always determines the price at which a good must be sold.
B)   sets a legal maximum on the price at which a good can be sold.
C)   is not a binding constraint if it is set above the equilibrium price.
D)   sets a legal minimum on the price at which a good can be sold.E) A) and D)
F) A) and C)

Question 7

A tax of €1.00 per litre on petrol

Accepted Answer

A)   places a tax wedge of €1.00 between the price the buyers pay and the price the sellers receive.
B)   decreases the price the sellers receive by €1.00 per litre.
C)   increases the price the buyers pay by €1.00 per litre.
D)   increases the price the buyers pay by precisely €0.50 and reduces the price received by sellers by precisely €0.50.E) None of the above
F) A) and D)

Question 8

How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The tax burden fall...

Question 9

Refer to the graph below. Which of the following statements is correct?

Accepted Answer

A)   The amount of the tax per unit is €6.
B)   The tax leaves the size of the market unchanged.
C)   The tax is levied on buyers of the good, rather than on sellers.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 10

The tax burden will fall most heavily on sellers of the good when the demand curve

Accepted Answer

A)   is relatively steep, and the supply curve is relatively flat.
B)   is relatively flat, and the supply curve is relatively steep.
C)   and the supply curve are both relatively flat.
D)   and the supply curve are both relatively steep.E) B) and D)
F) B) and C)

Question 11

The surplus caused by a binding price floor will be greatest if

Accepted Answer

A)   demand is inelastic and supply is elastic.
B)   supply is inelastic and demand is elastic.
C)   both supply and demand are elastic.
D)   both supply and demand are inelastic.E) None of the above
F) B) and D) C

Question 12

Which of the following statements about the burden of a tax is correct?

Accepted Answer

A)   The tax burden generated from a tax placed on a good that consumers perceive to be a necessity will fall most heavily on the sellers of the good.
B)   The burden of a tax falls on the side of the market (buyers or sellers)  from which it is collected.
C)   The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and is not determined by legislation.
D)   The tax burden falls most heavily on the side of the market (buyers or sellers)  that is most willing to leave the market when price movements are unfavourable to them.E) A) and D)
F) All of the above

Question 13

A subsidy given to suppliers has the effect of shifting the demand curve outwards.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is true if the government places a price ceiling on petrol at €1.50 per litre and the equilibrium price is €1.00 per litre?

Accepted Answer

A)   A significant increase in the demand for petrol could cause the price ceiling to become a binding constraint.
B)   A significant increase in the supply of petrol could cause the price ceiling to become a binding constraint.
C)   There will be a shortage of petrol.
D)   There will be a surplus of petrol.E) All of the above
F) A) and B)

Question 15

For a price ceiling to be a binding constraint on the market, the government must set it

Accepted Answer

A)   above the equilibrium price.
B)   below the equilibrium price.
C)   precisely at the equilibrium price.
D)   at any price because all price ceilings are binding constraints.E) C) and D)
F) All of the above

Question 16

Which of the following takes place when a tax is placed on a good?

Accepted Answer

A)   a decrease in the price buyers pay, an increase in the price sellers receive, and a decrease in the quantity sold
B)   an increase in the price buyers pay, a decrease in the price sellers receive, and an increase in the quantity sold
C)   a decrease in the price buyers pay, an increase in the price sellers receive, and an increase in the quantity sold
D)   an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity soldE) A) and B)
F) B) and C) D

Question 17

What is the difference between a price ceiling and a price floor?

Accepted Answer

A price ceiling or a price cap is a lega...

Question 18

The burden of a tax falls more heavily on the buyers in a market when

Accepted Answer

A)   both supply and demand are inelastic.
B)   demand is elastic and supply is inelastic.
C)   both supply and demand are elastic.
D)   demand is inelastic and supply is elastic.E) A) and D)
F) All of the above

Question 19

Using the graph below, analyze the effect a €300 price ceiling would have on the market for ten-speed bicycles. Would this be a binding price ceiling?

Accepted Answer

For this example, a €300 price ceiling w...

Question 20

If the government imposes a binding price floor on sugar, it may also have to

Accepted Answer

A)   establish programs to expand supply in the private sector.
B)   establish programs to reduce demand in the private sector.
C)   produce some sugar itself.
D)   purchase the surplus sugar.E) A) and D)
F) All of the above

Exam 8: Supply, Demand and Government Policies

Government-created price floors are typically imposed to

Correct Answer
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B

Rent controls typically end up

Correct Answer
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The ultimate burden of a tax falls most heavily on the side of the market that is less elastic.

Correct Answer
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The government is thinking about increasing the tax on petrol to raise additional revenue rather than to promote conservation. The tax will result in the greatest amount of tax revenue if the price elasticity of demand for petrol equals

Correct Answer
verified

Correct Answer
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a) The effect of a €0.50 per bus ticket...
View Answer

A price floor

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A tax of €1.00 per litre on petrol

Correct Answer
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How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.

Correct Answer
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The tax burden fall...
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Refer to the graph below. Which of the following statements is correct?

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The tax burden will fall most heavily on sellers of the good when the demand curve

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The surplus caused by a binding price floor will be greatest if

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C

Which of the following statements about the burden of a tax is correct?

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A subsidy given to suppliers has the effect of shifting the demand curve outwards.

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Which of the following statements is true if the government places a price ceiling on petrol at €1.50 per litre and the equilibrium price is €1.00 per litre?

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For a price ceiling to be a binding constraint on the market, the government must set it

Correct Answer
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Which of the following takes place when a tax is placed on a good?

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D

What is the difference between a price ceiling and a price floor?

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A price ceiling or a price cap is a lega...
View Answer

The burden of a tax falls more heavily on the buyers in a market when

Correct Answer
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Using the graph below, analyze the effect a €300 price ceiling would have on the market for ten-speed bicycles. Would this be a binding price ceiling?

Correct Answer
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For this example, a €300 price ceiling w...
View Answer

If the government imposes a binding price floor on sugar, it may also have to

Correct Answer
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Exam 8: Supply, Demand and Government Policies

Government-created price floors are typically imposed to

Correct AnswerverifiedB

Rent controls typically end up

Correct AnswerverifiedShow Answer

The ultimate burden of a tax falls most heavily on the side of the market that is less elastic.

Correct AnswerverifiedShow Answer

The government is thinking about increasing the tax on petrol to raise additional revenue rather than to promote conservation. The tax will result in the greatest amount of tax revenue if the price elasticity of demand for petrol equals

Correct AnswerverifiedShow Answer

Correct Answerverified a) The effect of a €0.50 per bus ticket...View AnswerShow Answer

A price floor

Correct AnswerverifiedShow Answer

A tax of €1.00 per litre on petrol

Correct AnswerverifiedShow Answer

How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams.

Correct Answerverified The tax burden fall...View AnswerShow Answer

Refer to the graph below. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The tax burden will fall most heavily on sellers of the good when the demand curve

Correct AnswerverifiedShow Answer

The surplus caused by a binding price floor will be greatest if

Correct AnswerverifiedC

Which of the following statements about the burden of a tax is correct?

Correct AnswerverifiedShow Answer

A subsidy given to suppliers has the effect of shifting the demand curve outwards.

Correct AnswerverifiedShow Answer

Which of the following statements is true if the government places a price ceiling on petrol at €1.50 per litre and the equilibrium price is €1.00 per litre?

Correct AnswerverifiedShow Answer

For a price ceiling to be a binding constraint on the market, the government must set it

Correct AnswerverifiedShow Answer

Which of the following takes place when a tax is placed on a good?

Correct AnswerverifiedD

What is the difference between a price ceiling and a price floor?

Correct AnswerverifiedA price ceiling or a price cap is a lega...View AnswerShow Answer

The burden of a tax falls more heavily on the buyers in a market when

Correct AnswerverifiedShow Answer

Using the graph below, analyze the effect a €300 price ceiling would have on the market for ten-speed bicycles. Would this be a binding price ceiling?

Correct AnswerverifiedFor this example, a €300 price ceiling w...View AnswerShow Answer

If the government imposes a binding price floor on sugar, it may also have to

Correct AnswerverifiedShow Answer

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B

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a) The effect of a €0.50 per bus ticket...
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The tax burden fall...
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C

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D

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A price ceiling or a price cap is a lega...
View Answer

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For this example, a €300 price ceiling w...
View Answer

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