Question 1

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) A) and B)

Question 2

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) A) and B)

Question 3

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

Question 4

Because a price ceiling causes:

Accepted Answer

A)   a shortage, some form of rationing must occur.
B)   a surplus, some form of rationing must occur.
C)   a shortage, the outcome will be efficient.
D)   a surplus, the outcome will be inefficient.E) B) and C)
F) A) and B)

Question 5

Assume a subsidy to buyers has been enacted in the market in the graph shown.With the subsidy,the buyers buy _____ units and pay _____ for each of them.

Accepted Answer

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

Question 6

A subsidy to buyers has been placed in the market in the graph shown.Why might the government enact such a policy?

Accepted Answer

A)   As a way to encourage the consumption of the good
B)   As a way to encourage consumers to substitute away from the good
C)   As a way to discourage the production of the good
D)   As a way to discourage the consumption of the goodE) C) and D)
F) B) and D)

Question 7

Consider the graph shown.What would most likely be the cause of a shift from S1 to S2?

Accepted Answer

A)   A tax on sellers
B)   A tax on buyers
C)   A subsidy for sellers
D)   A subsidy for buyersE) All of the above
F) B) and D)

Question 8

Price controls:

Accepted Answer

A)   are regulations that sets a maximum or minimum legal price for a particular good.
B)   allow a market to reach equilibrium.
C)   prevent a good from being bought or sold.
D)   All of these are true.E) A) and B)
F) None of the above

Question 9

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 B)
F) C) and D)

Question 10

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) A) and D)

Question 11

Governments may attempt to protect dairy farmers from low milk prices by:

Accepted Answer

A)   banning the hoarding of milk by households.
B)   setting a minimum price on milk.
C)   increasing taxes on dairy farmers.
D)   reducing subsidies on the price of milk.E) A) and D)
F) C) and D)

Question 12

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 13

If a price ceiling of $8 were placed in the market in the graph shown:

Accepted Answer

A)   a shortage of 7 would occur.
B)   a shortage of 15 would occur.
C)   a shortage of 23 would occur.
D)   a shortage of 8 would occur.E) C) and D)
F) B) and D)

Question 14

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

Question 15

The graph shown demonstrates a tax on buyers.Before the tax was imposed,the sellers produced ________ units and received __________ for each one sold.

Accepted Answer

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

Question 16

If a price ceiling of $8 were placed in the market in the graph shown:

Accepted Answer

A)   an excess supply of 7 would occur.
B)   an excess supply of 15 would occur.
C)   an excess supply of 23 would occur.
D)   None of these is true.E) A) and B)
F) None of the above

Question 17

A tax on sellers:

Accepted Answer

A)   shifts the supply curve left by the amount of the tax.
B)   shifts the demand curve left by the amount of the tax.
C)   shifts the supply curve up by the amount of the tax.
D)   shifts the demand curve down by the amount of the tax.E) A) and B)
F) A) and C)

Question 18

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,then positive analysis would consider:

Accepted Answer

A)   whether the surplus transferred from consumers to producers is larger than the consumer surplus lost to deadweight loss.
B)   whether the producer surplus lost to deadweight loss is larger than the producer surplus gained from a higher price.
C)   whether the surplus transferred from producers to consumers is larger than the consumer surplus lost to deadweight loss.
D)   whether the producer surplus lost due to lower prices is larger than the producer surplus lost due to fewer transactions taking place.E) A) and D)
F) A) and C)

Question 19

The graph shown best represents:

Accepted Answer

A)   a non-binding price ceiling.
B)   a non-binding price floor.
C)   a missing market.
D)   a market for an inferior good.E) None of the above
F) C) and D)

Question 20

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,then positive analysis would conclude:

Accepted Answer

A)   the policy was effective, since surplus gained by consumers through lower prices is greater than the surplus they lost through deadweight loss.
B)   the policy was ineffective, since surplus gained by consumers through lower prices is less than the surplus they lost through deadweight loss.
C)   the policy was effective, since surplus lost by producers through lower prices is less than the surplus gained by consumers through lower prices.
D)   the policy was ineffective, since the amount of deadweight loss is greater than the surplus gained by consumers from lower prices.E) A) and B)
F) A) and C)

Exam 6: Government Intervention Microeconomics

Governments may attempt to protect dairy farmers from low milk prices by:

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

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When a tax is placed on sellers:

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A tax on sellers:

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If a price ceiling of $8 were placed in the market in the graph shown:

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A subsidy:

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The graph shown demonstrates a tax on buyers.Before the tax was imposed,the sellers produced ________ units and received __________ for each one sold.

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The graph shown best represents:

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Price controls:

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Consider the graph shown.What would most likely be the cause of a shift from S1 to S2?

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

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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,then positive analysis would conclude:

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Because a price ceiling causes:

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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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A subsidy to buyers has been placed in the market in the graph shown.Why might the government enact such a policy?

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If a price ceiling of $8 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,then positive analysis would consider:

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

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Assume a subsidy to buyers has been enacted in the market in the graph shown.With the subsidy,the buyers buy _____ units and pay _____ for each of them.

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

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The graph shown demonstrates a tax on buyers.Before the tax was imposed,the sellers produced units and received __ for each one sold.

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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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Assume a subsidy to buyers has been enacted in the market in the graph shown.With the subsidy,the buyers buy _ units and pay _ for each of them.

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