Question 1

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 B)
F) A) and C)

Question 2

A tax on sellers has what effect on a market?

Accepted Answer

A)   Supply shifts vertically upward by the amount of the tax.
B)   Demand shifts vertically downward by the amount of the tax.
C)   Equilibrium price decreases and equilibrium quantity decreases.
D)   Equilibrium price decreases and equilibrium quantity increases.E) B) and C)
F) All of the above

Question 3

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

Accepted Answer

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

Question 4

Which of the following is a prominent argument against the use of price ceilings?

Accepted Answer

A)   They are unfair.
B)   They lead to an increase in surplus but a waste of society's resources.
C)   They lead to a decrease in total surplus.
D)   They raise corporate profits.E) B) and C)
F) A) and D)

Question 5

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 B)
F) B) and C)

Question 6

Does a tax on sellers affect the supply curve?

Accepted Answer

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

Question 7

The graph shown demonstrates a tax on sellers. What amount of deadweight loss is generated by this tax?

Accepted Answer

A)   $0
B)   $80
C)   $160
D)   $129E) All of the above
F) B) and C)

Question 8

If a price floor is set at $23 in the market shown in the graph, the total number of units traded will:

Accepted Answer

A)   fall by 20, relative to equilibrium.
B)   fall by 27, relative to equilibrium.
C)   fall by 37, relative to equilibrium.
D)   rise by 10, relative to equilibrium.E) C) and D)
F) A) and D) B

Question 9

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, then positive analysis would conclude that the policy was:

Accepted Answer

A)   effective because the surplus gained by consumers through lower prices is greater than the surplus they lost due to fewer transactions taking place.
B)   ineffective because the surplus gained by consumers through lower prices is less than the surplus they lost due to fewer transactions taking place.
C)   effective because the surplus lost by producers through lower prices is less than the surplus gained by consumers through lower prices.
D)   ineffective because the amount of deadweight loss is greater than the surplus gained by consumers from lower prices.E) B) and C)
F) A) and C) A

Question 10

Which of the following is a prominent argument against the use of price floors?

Accepted Answer

A)   Non-price rationing must occur and can lead to consumers waiting for goods or services.
B)   The cost to taxpayers will increase if the government buys all surplus.
C)   Producers will reduce the quality of the goods they sell.
D)   Price floors transfer surplus from producers to consumers.E) B) and C)
F) A) and D)

Question 11

A subsidy:

Accepted Answer

A)   has the exact same impact on the quantity exchanged as a tax.
B)   has a larger impact on the quantity exchanged than a tax of the same amount.
C)   has a smaller impact on the quantity exchanged than a tax of the same amount.
D)   has the exact opposite impact on the quantity exchanged than a tax of the same amount.E) B) and C)
F) A) and C)

Question 12

Suppose a tax on sellers has been imposed in the market shown in the graph. What is the total tax paid per unit of the good?

Accepted Answer

A)   $16
B)   $6
C)   $10
D)   $15E) A) and D)
F) B) and C)

Question 13

Why might a government impose a minimum wage?

Accepted Answer

A)   To correct a market failure
B)   To redistribute surplus in a market
C)   To encourage the consumption of inferior goods
D)   To discourage the consumption of inferior goodsE) None of the above
F) A) and C)

Question 14

How might a government attempt to protect dairy farmers from low milk prices?

Accepted Answer

A)   Banning households from hoarding milk
B)   Setting a minimum price on milk
C)   Increasing taxes on dairy farmers
D)   Reducing subsidies on the price of milkE) A) and B)
F) A) and C)

Question 15

Suppose a $10 tax is imposed on sellers in the market shown in the graph. What will be the deadweight loss?

Accepted Answer

A)   $15,000
B)   $20,000
C)   $12,500
D)   $10,000E) A) and D)
F) B) and C)

Question 16

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

Question 17

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

Question 18

The graph shown best represents:

Accepted Answer

A)   a tax on sellers.
B)   a subsidy to sellers.
C)   a price floor.
D)   a subsidy to buyers.E) A) and B)
F) B) and C)

Question 19

Suppose a tax has been imposed in the market shown in the graph. Which kind of tax is most likely demonstrated by this graph?

Accepted Answer

A)   A tax on sellers
B)   A tax on buyers
C)   A tax on big corporations
D)   A price ceilingE) C) and D)
F) A) and D)

Question 20

Suppose S1 represents the initial market supply in the graph shown. A price ceiling is then set at $8. If supply shifts from S1 to S2, what will occur?

Accepted Answer

A)   The price ceiling will no longer be binding.
B)   The price ceiling will prevent output from changing.
C)   The size of the shortage will increase.
D)   The market will not reach equilibrium.E) A) and C)
F) None of the above A

Exam 6: Governmentintervention

The graph shown best represents:

Correct AnswerverifiedShow Answer

A tax on sellers has what effect on a market?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a prominent argument against the use of price ceilings?

Correct AnswerverifiedShow Answer

Which of the following exemplifies a market failure?

Correct AnswerverifiedShow Answer

Does a tax on sellers affect the supply curve?

Correct AnswerverifiedShow Answer

The graph shown demonstrates a tax on sellers. What amount of deadweight loss is generated by this tax?

Correct AnswerverifiedShow Answer

If a price floor is set at $23 in the market shown in the graph, the total number of units traded will:

Correct AnswerverifiedB

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, then positive analysis would conclude that the policy was:

Correct AnswerverifiedA

Which of the following is a prominent argument against the use of price floors?

Correct AnswerverifiedShow Answer

A subsidy:

Correct AnswerverifiedShow Answer

Suppose a tax on sellers has been imposed in the market shown in the graph. What is the total tax paid per unit of the good?

Correct AnswerverifiedShow Answer

Why might a government impose a minimum wage?

Correct AnswerverifiedShow Answer

How might a government attempt to protect dairy farmers from low milk prices?

Correct AnswerverifiedShow Answer

Suppose a $10 tax is imposed on sellers in the market shown in the graph. What will be the deadweight loss?

Correct AnswerverifiedShow Answer

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

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

The graph shown best represents:

Correct AnswerverifiedShow Answer

Suppose a tax has been imposed in the market shown in the graph. Which kind of tax is most likely demonstrated by this graph?

Correct AnswerverifiedShow Answer

Suppose S1 represents the initial market supply in the graph shown. A price ceiling is then set at $8. If supply shifts from S1 to S2, what will occur?

Correct AnswerverifiedA

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B

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A

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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 _.

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A