Question 1

A tax imposed on a good can:

Accepted Answer

A)   discourage consumption of the good.
B)   encourage production of the good.
C)   increase the supply of complementary goods.
D)   prevent the market from reaching an efficient equilibrium.E) C) and D)
F) All of the above

Question 2

Does a subsidy to buyers affect the demand curve?

Accepted Answer

A)   Yes, it shifts demand up by the amount of the subsidy.
B)   Yes, it shifts demand to the right by the amount of the subsidy.
C)   No, the quantity demanded will increase, but the demand curve does not move.
D)   No, the quantity demanded will decrease, but the demand curve does not move.E) A) and B)
F) All of the above

Question 3

If the government wants to encourage the consumption of a particular good, they should enact:

Accepted Answer

A)   a subsidy to buyers, since they want to affect consumption of the good.
B)   a subsidy to sellers, since they want more to be produced and offered for sale.
C)   a subsidy to buyers, since they deserve the benefit more than the producers.
D)   a subsidy on either buyers or sellers, since they will both have the same effect on the market.E) All of the above
F) C) and D)

Question 4

A subsidy:

Accepted Answer

A)   has the same impact on a market as a tax.
B)   has a larger impact on a market than a tax of the same amount.
C)   has a smaller impact on a market than a tax of the same amount.
D)   is the reverse of a tax.E) A) and D)
F) A) and C)

Question 5

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

Question 6

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

Accepted Answer

A)   a shortage of 37 would occur.
B)   a shortage of 10 would occur.
C)   a shortage of 27 would occur.
D)   None of these would occur.E) A) and C)
F) A) and B)

Question 7

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

Accepted Answer

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

Question 8

After a price ceiling of $8 is placed on the market in the graph shown:

Accepted Answer

A)   some consumers benefit because they pay a lower price.
B)   producers lose because they sell at a lower price.
C)   the quantity traded in the market falls.
D)   All of these are true.E) None of the above
F) B) and D)

Question 9

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

Accepted Answer

A)   the sellers will bear a greater tax incidence than the buyers.
B)   the sellers will bear a smaller tax incidence than the buyers.
C)   the sellers will bear an equal tax incidence as the buyers.
D)   Any of these could be true.E) All of the above
F) A) and D)

Question 10

Consumers may benefit more than sellers from a subsidy to sellers if:

Accepted Answer

A)   they deserve the subsidy more.
B)   the demand curve is relatively more elastic than the supply curve.
C)   the demand curve is relatively less elastic than the supply curve.
D)   Consumers can never benefit more than sellers from a subsidy to sellers.E) B) and D)
F) None of the above

Question 11

Does a tax on buyers 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) A) and B)
F) B) and C)

Question 12

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 C)
F) A) and B)

Question 13

After a price floor of $23 is placed on the market in the graph shown:

Accepted Answer

A)   some consumers lose because they pay a higher price.
B)   some producers gain because they sell at a higher price.
C)   the quantity traded in the market falls.
D)   All of these are true.E) All of the above
F) A) and C)

Question 14

What could happen to render the price ceiling set in the graph shown non-binding?

Accepted Answer

A)   Demand could increase, and shift to the right.
B)   Demand could decrease, and shift to the left.
C)   Supply could decrease, and shift to the left.
D)   None of these would cause the price ceiling to be non-binding.E) B) and C)
F) C) and D)

Question 15

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

Accepted Answer

A)   $15.
B)   $11.
C)   $8.
D)   $30.E) A) and B)
F) A) and C)

Question 16

The relative tax burden borne by buyers and sellers is called the:

Accepted Answer

A)   tax wedge.
B)   tax incidence.
C)   tax revenue.
D)   real tax.E) C) and D)
F) All of the above

Question 17

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

Accepted Answer

A)   A
B)   B + C + E + F
C)   A + B + E
D)   A + B + C + E + FE) A) and C)
F) B) and D)

Question 18

Is it possible for sellers to benefit more than consumers from a subsidy to buyers?

Accepted Answer

A)   Yes, if the sellers need it more.
B)   Yes, if the supply curve is relatively less elastic than the demand curve.
C)   Yes, if the supply curve is relatively more elastic than the demand curve.
D)   Producers can never benefit more than buyers from a subsidy to buyers.E) All of the above
F) C) and D)

Question 19

If a binding price floor were placed in the market in the graph shown:

Accepted Answer

A)   quantity demanded would exceed quantity supplied.
B)   quantity supplied would exceed quantity demanded.
C)   the demand curve would have to shift.
D)   the supply curve would have to shift.E) B) and C)
F) A) and D)

Question 20

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

Accepted Answer

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

Exam 6: Government Intervention

Does a tax on buyers affect the supply curve?

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Is it possible for sellers to benefit more than consumers from a subsidy to buyers?

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A tax imposed on a good can:

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Taxes:

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What could happen to render the price ceiling set in the graph shown non-binding?

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

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

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A subsidy:

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

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Consumers may benefit more than sellers from a subsidy to sellers if:

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After a price floor of $23 is placed on the market in the graph shown:

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

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

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

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Does a subsidy to buyers affect the demand curve?

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If the government wants to encourage the consumption of a particular good, they should enact:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a binding price floor were placed in the market in the graph shown:

Correct AnswerverifiedShow Answer

The relative tax burden borne by buyers and sellers is called the:

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After a price ceiling of $8 is placed on the market in the graph shown:

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