Question 1

Taxes:

Accepted Answer

A)   may benefit many of the consumers in the market.
B)   are sometimes used to correct market failures.
C)   are sometimes used to transfer surplus from producers to consumers.
D)   are sometimes used to transfer surplus from consumers to producers.E) A) and D)
F) B) and D)

Question 2

A tax wedge:

Accepted Answer

A)   refers to the difference in the price the buyer pays and the price the seller keeps.
B)   only occurs in markets when the tax is placed on sellers.
C)   only occurs in markets when the tax is placed on buyers.
D)   only occurs in markets when taxes are placed on large corporations.E) A) and D)
F) B) and C)

Question 3

If the demand curve is more elastic than the supply curve,then:

Accepted Answer

A)   the buyers will bear a greater tax incidence than sellers.
B)   the sellers will bear a greater tax incidence than buyers.
C)   tax incidence will be shared equally by buyer and seller.
D)   None of these is true.E) A) and D)
F) A) and C)

Question 4

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

Question 5

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

Accepted Answer

A)   A + C
B)   A + B
C)   A + B + C
D)   A + B + C + D + F + GE) A) and D)
F) None of the above

Question 6

If a price floor of $23 were placed in the market in the graph shown:

Accepted Answer

A)   a surplus of 27 would occur.
B)   a surplus of 37 would occur.
C)   a surplus of 10 would occur.
D)   a surplus of 20 would occur.E) All of the above
F) None of the above

Question 7

Governments may intervene in markets to:

Accepted Answer

A)   increase the efficiency of the market.
B)   reduce consumption certain products deemed "bad".
C)   correct a market failure.
D)   all of the above are reasons why governments intervene in market.E) A) and D)
F) C) and D)

Question 8

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 price paid by buyers is greater than that received by sellers, and the difference is the tax wedge.
B)   The price paid by buyers is less than that received by sellers, and the difference is the total tax revenue.
C)   The price paid by buyers is greater than that received by sellers, and the difference is the total tax revenue.
D)   The price paid by buyers and received by sellers is higher than it was before the tax was imposed.E) C) and D)
F) All of the above

Question 9

The government imposing a minimum wage is an example of an attempt to:

Accepted Answer

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

Question 10

According to the graph above,a price ceiling in this market would be non-binding if it were set at:

Accepted Answer

A)   $5.
B)   $8.
C)   $10.
D)   $13.E) None of the above
F) C) and D)

Question 11

A price floor of $23 placed on the market in the graph shown:

Accepted Answer

A)   is binding, and causes a shortage.
B)   is non-binding, and does not affect the market.
C)   is binding, and causes a surplus.
D)   is non-binding, and does not prevent the market from reaching equilibrium.E) None of the above
F) All of the above

Question 12

Governments can discourage consumption of certain goods by:

Accepted Answer

A)   a subsidy to consumers in those markets.
B)   taxing substitute goods.
C)   imposing a minimum price above the equilibrium price.
D)   None of these policies decrease consumption of goods.E) C) and D)
F) A) and C)

Question 13

A binding price floor that could be set in the market in the graph shown would be:

Accepted Answer

A)   $23.
B)   $16.
C)   $8.
D)   $12.E) None of the above
F) All of the above

Question 14

If there is a sole producer of a good,and he faces no threat of competition,it is likely that:

Accepted Answer

A)   government intervention will have no impact on the market.
B)   government intervention will raise prices to consumers.
C)   government intervention will increase total surplus.
D)   government intervention will make things better for buyers and sellers.E) A) and C)
F) B) and C)

Question 15

Would you expect a tax on cigarettes to be more effective at discouraging consumption over the long run or the short run?

Accepted Answer

A)   Long run because demand becomes more elastic over time
B)   Long run because demand becomes less elastic over time
C)   Short run because demand becomes more elastic over time
D)   Short run because demand becomes less elastic over timeE) A) and B)
F) A) and D)

Question 16

After a price floor of $23 is placed on the market in the graph shown,the total number of units traded:

Accepted Answer

A)   falls by 20 relative to equilibrium.
B)   falls by 27 relative to equilibrium.
C)   falls by 37 relative to equilibrium.
D)   increases by 10 relative to equilibrium.E) None of the above
F) A) and B)

Question 17

A type of public policy set in response to rising prices of a basic necessity,such as food,might be:

Accepted Answer

A)   to make it illegal to charge higher prices for those goods.
B)   to hire more producers of those goods.
C)   to subsidize the price of those goods.
D)   All of these are ways government can try to address rising prices of a basic necessity.E) B) and D)
F) B) and C)

Question 18

Governments tend to set price ceilings:

Accepted Answer

A)   to ensure everyone can afford certain goods.
B)   to ensure producers make enough for everyone.
C)   to ensure producers make enough profit to stay in the industry.
D)   to prevent consumers from choosing the wrong goods.E) B) and D)
F) B) and C)

Question 19

With reference to the graph above,if the intended aim of the price ceiling set at $6 was a net increase in the well-being of consumers:

Accepted Answer

A)   then the policy was effective since consumers gained in surplus overall.
B)   then the policy was ineffective since consumers gained in surplus overall.
C)   then the policy was ineffective since consumers lost surplus overall.
D)   then the policy was effective since consumers lost surplus overall.E) B) and C)
F) A) and D)

Question 20

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

Exam 6: Government Intervention Microeconomics

A tax on sellers has what effect on a market?

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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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Governments tend to set price ceilings:

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If the demand curve is more elastic than the supply curve,then:

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A price floor of $23 placed on the market in the graph shown:

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If a price floor of $23 were placed in the market in the graph shown:

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With reference to the graph above,if the intended aim of the price ceiling set at $6 was a net increase in the well-being of consumers:

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If there is a sole producer of a good,and he faces no threat of competition,it is likely that:

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Would you expect a tax on cigarettes to be more effective at discouraging consumption over the long run or the short run?

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After a price floor of $23 is placed on the market in the graph shown,the total number of units traded:

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Does a tax on sellers affect the supply curve?

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A binding price floor that could be set in the market in the graph shown would be:

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A tax wedge:

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According to the graph above,a price ceiling in this market would be non-binding if it were set at:

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Governments can discourage consumption of certain goods by:

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The government imposing a minimum wage is an example of an attempt to:

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Governments may intervene in markets to:

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

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Taxes:

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A type of public policy set in response to rising prices of a basic necessity,such as food,might be:

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