Question 1

After a price floor of $23 is placed on the market in the graph shown, which area represents consumer surplus?

Accepted Answer

A)   A
B)   A + B
C)   A + B + C
D)   A + B + C + DE) B) and C)
F) A) and B)

Question 2

After a price ceiling of $8 is placed on the market in the graph shown, which area represents producer surplus?

Accepted Answer

A)   C + D + E
B)   C + D + F + G
C)   E
D)   A + C + EE) A) and D)
F) B) and C)

Question 3

When a tax is imposed on a market:

Accepted Answer

A)   the price the buyer pays is higher than the amount the seller receives.
B)   the buyers' equilibrium tax-inclusive price increases and the equilibrium quantity decreases.
C)   fewer total transactions take place in the market.
D)   All of these are true.E) All of the above
F) B) and C)

Question 4

If a non-binding price floor were to be set in the market in the graph shown, it could be set at:

Accepted Answer

A)   $30.
B)   $23.
C)   $16.
D)   All of these would be binding price floors for this market.E) A) and B)
F) A) and C)

Question 5

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

Question 6

One way to ensure all producers benefit from a price floor is to:

Accepted Answer

A)   give a government guarantee to buy all surplus.
B)   ration a certain quantity per consumer.
C)   ration a certain quantity per producer .
D)   All of these are examples of ensuring all producers benefit using non-price methods.E) B) and D)
F) B) and C)

Question 7

Government attempts to set prices below market equilibrium can:

Accepted Answer

A)   lead to more producer surplus.
B)   encourage more production.
C)   reduce the total surplus in the market.
D)   always create a better outcome.E) B) and C)
F) C) and D)

Question 8

In order for a price ceiling to "bind," it:

Accepted Answer

A)   must be set above the equilibrium price, and will likely cause a shortage.
B)   must be set below the equilibrium price, and will likely cause a shortage.
C)   must be set above the equilibrium price, and will likely cause a surplus.
D)   must be set below the equilibrium price, and will likely cause a surplus.E) A) and B)
F) A) and C)

Question 9

An unintended consequence of price ceilings is:

Accepted Answer

A)   the loss of surplus always outweighs the benefits of the policy.
B)   non-price rationing must occur, and can lead to bribes.
C)   the transfer of surplus from producer to consumer rarely is recognized.
D)   the producers increase the quality of the goods sold.E) A) and B)
F) C) and D)

Question 10

A subsidy:

Accepted Answer

A)   All of these statements are true.
B)   is a requirement that the government pay an extra amount to producers or consumers of a good.
C)   is used by governments to encourage the production and consumption of a particular good or service.
D)   is used by governments as an alternative to price controls to benefit certain groups without generating a shortage or a surplus.E) All of the above
F) C) and D)

Question 11

The graph shown demonstrates a tax on sellers. Before the tax was imposed, the buyers purchased ____ units and paid _____ for each one.

Accepted Answer

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

Question 12

Normative analysis:

Accepted Answer

A)   involves the formulation and testing of hypotheses.
B)   is a value-free evaluation of a policy.
C)   is a matter of values and opinions.
D)   examines if the policy actually accomplished its goal.E) B) and C)
F) B) and D) C

Question 13

If a price floor of $23 were placed on the market in the graph shown, which area represents the surplus that is transferred?

Accepted Answer

A)   B + C + D
B)   B + C
C)   C
D)   BE) B) and C)
F) C) and D)

Question 14

When a tax is placed on sellers:

Accepted Answer

A)   sellers always bear a higher incidence than buyers.
B)   buyers always bear a higher incidence than sellers.
C)   the effect on the price buyers pay and sellers receive is the same as a tax on buyers.
D)   None of these is true.E) A) and B)
F) A) and C)

Question 15

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

Question 16

The graph shown shows a subsidy to buyers. Before the subsidy is put in place, the buyers bought _____ units and paid _____ for each of them.

Accepted Answer

A)   100; $46
B)   100; $30
C)   150; $40
D)   150; $24E) None of the above
F) C) and D)

Question 17

The government is deciding where to put a $1 tax-either in a market with elastic supply and demand curves, or a market with inelastic supply and demand curves. If their aim is to raise the most revenue with the smallest deadweight loss, where should the tax be placed?

Accepted Answer

A)   In the market with elastic supply and demand curves
B)   In the market with inelastic supply and demand curves
C)   It is impossible to say without more information
D)   Since the burden is shared, it doesn't matter in which market it is placedE) B) and C)
F) B) and D)

Question 18

Suppose a tax on buyers has been imposed in the graph shown. Once the tax is in place, the buyers purchase ____ units and pay ____ for each one.

Accepted Answer

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

Question 19

Does a tax on sellers affect the supply 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 supplied, but the supply curve does not move.E) C) and D)
F) A) and B)

Question 20

The graph shown portrays a subsidy to buyers. Once the subsidy is in place, the buyers pay _____ and the sellers receive ________; the difference is ___________.

Accepted Answer

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

Exam 6: Government Intervention

After a price floor of $23 is placed on the market in the graph shown, which area represents consumer surplus?

Correct AnswerverifiedShow Answer

After a price ceiling of $8 is placed on the market in the graph shown, which area represents producer surplus?

Correct AnswerverifiedShow Answer

When a tax is imposed on a market:

Correct AnswerverifiedShow Answer

If a non-binding price floor were to be set in the market in the graph shown, it could be set at:

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

One way to ensure all producers benefit from a price floor is to:

Correct AnswerverifiedShow Answer

Government attempts to set prices below market equilibrium can:

Correct AnswerverifiedShow Answer

In order for a price ceiling to "bind," it:

Correct AnswerverifiedShow Answer

An unintended consequence of price ceilings is:

Correct AnswerverifiedShow Answer

A subsidy:

Correct AnswerverifiedShow Answer

The graph shown demonstrates a tax on sellers. Before the tax was imposed, the buyers purchased ____ units and paid _____ for each one.

Correct AnswerverifiedShow Answer

Normative analysis:

Correct AnswerverifiedC

If a price floor of $23 were placed on the market in the graph shown, which area represents the surplus that is transferred?

Correct AnswerverifiedShow Answer

When a tax is placed on sellers:

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedC

The graph shown shows a subsidy to buyers. Before the subsidy is put in place, the buyers bought _____ units and paid _____ for each of them.

Correct AnswerverifiedShow Answer

The government is deciding where to put a $1 tax-either in a market with elastic supply and demand curves, or a market with inelastic supply and demand curves. If their aim is to raise the most revenue with the smallest deadweight loss, where should the tax be placed?

Correct AnswerverifiedShow Answer

Suppose a tax on buyers has been imposed in the graph shown. Once the tax is in place, the buyers purchase ____ units and pay ____ for each one.

Correct AnswerverifiedB

Does a tax on sellers affect the supply curve?

Correct AnswerverifiedShow Answer

The graph shown portrays a subsidy to buyers. Once the subsidy is in place, the buyers pay _____ and the sellers receive ________; the difference is ___________.

Correct AnswerverifiedShow Answer

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The graph shown demonstrates a tax on sellers. Before the tax was imposed, the buyers purchased units and paid _ for each one.

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C

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C

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

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Suppose a tax on buyers has been imposed in the graph shown. Once the tax is in place, the buyers purchase units and pay for each one.

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B

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The graph shown portrays a subsidy to buyers. Once the subsidy is in place, the buyers pay _ and the sellers receive ; the difference is _______.

Correct Answer
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