Question 1

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

Accepted Answer

A)   the buyers will bear a greater tax incidence.
B)   the sellers will bear a greater tax incidence.
C)   the buyers will bear a smaller tax burden than sellers.
D)   the sellers will bear a greater tax burden than buyers.E) None of the above
F) A) and C)

Question 2

A price ceiling of $8 placed on the market in the graph shown:

Accepted Answer

A)   is non-binding, and does not affect the market.
B)   is binding, and causes a shortage.
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) C) and D)

Question 3

With reference to the graph above,if the intended aim of the price ceiling shown was a net increase in the well-being of consumers,then positive analysis would conclude:

Accepted Answer

A)  the policy was effective,since area A + C is larger than B + D.
B)  the policy was effective,since area B is smaller than area D.
C)  the policy was ineffective,since D is larger than E.
D)  the policy was ineffective,since A + C + D is larger than B + E.E) None of the above
F) All of the above

Question 4

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 5

Governments may choose to intervene in a market in an attempt to:

Accepted Answer

A)   encourage the consumption of certain goods.
B)   discourage the consumption of certain goods.
C)   redistribute surplus.
D)   All of these are true.E) None of the above
F) C) and D)

Question 6

If the producers bear a smaller tax incidence than the buyers in a market,which of the following must be true?

Accepted Answer

A)   It must be a market for inferior goods.
B)   It must be a market for luxury items.
C)   Their supply curve must be more elastic than the buyers demand curve in this market.
D)   Their supply curve must be less elastic than the buyers demand curve in this market.E) None of the above
F) B) and D)

Question 7

Suppose a tax has been imposed 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)   None of these is true.E) B) and C)
F) None of the above

Question 8

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

Question 9

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

Question 10

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

Question 11

A prominent argument against the use of price ceilings is:

Accepted Answer

A)   they are unfair.
B)   they lead to a surplus and a waste of society's resources.
C)   they lead to rent seeking.
D)   they raise corporate profits.E) B) and C)
F) A) and B)

Question 12

Because a price floor causes:

Accepted Answer

A)   a shortage, some form of rationing must occur.
B)   a surplus, some producers may ultimately lose because they won't have enough customers.
C)   a shortage, rent-seeking will occur.
D)   a surplus, everyone will be better off.E) B) and C)
F) A) and B)

Question 13

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

Accepted Answer

A)   the consumer surplus is greater than in a competitive equilibrium.
B)   the price is set inefficiently high.
C)   the price is set below the competitive equilibrium price.
D)   the market is efficient.E) B) and D)
F) A) and C)

Question 14

Tax incidence:

Accepted Answer

A)   depends on the relative elasticity of the supply and demand curves in a market.
B)   depends on whether it is a buyers tax or sellers tax that is being imposed.
C)   depends on the amount of tax revenue generated once administrative burdens are taken into account.
D)   depends on whether the tax revenue is greater than the deadweight loss caused by the tax.E) A) and D)
F) A) and C)

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

Question 16

If the intended aim of the price floor set in the graph shown was a net increase in the well-being of producers,then positive analysis would have us consider:

Accepted Answer

A)  the policy to be effective if area C is larger than area E.
B)  the policy to be effective if area E + B is larger than C +D + F.
C)  the policy to be ineffective if area B is larger than area E.
D)  the policy to be ineffective if area E + B is larger than A+C+D+ F.E) B) and C)
F) A) and D)

Question 17

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

Question 18

The graph shown demonstrates a tax on buyers.What is the amount of tax revenue being generated from the tax?

Accepted Answer

A)   $72
B)   $36
C)   $48
D)   $96E) All of the above
F) A) and B)

Question 19

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) A) and C)

Question 20

Who benefits from a subsidy to buyers?

Accepted Answer

A)   Only sellers benefit from any kind of subsidy.
B)   Only consumers benefit, since it is their subsidy.
C)   The benefit is shared depending on the elasticity of the supply and demand curves.
D)   None of these statements is true.E) A) and B)
F) A) and C)

Exam 6: Government Intervention Microeconomics

If the producers bear a smaller tax incidence than the buyers in a market,which of the following must be true?

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

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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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Normative analysis:

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A prominent argument against the use of price ceilings is:

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Governments may choose to intervene in a market in an attempt to:

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Because a price floor causes:

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Government attempts to set prices below market equilibrium can:

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With reference to the graph above,if the intended aim of the price ceiling shown was a net increase in the well-being of consumers,then positive analysis would conclude:

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A subsidy:

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Does a tax on buyers affect the supply curve?

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A price ceiling of $8 placed on the market in the graph shown:

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If the intended aim of the price floor set in the graph shown was a net increase in the well-being of producers,then positive analysis would have us consider:

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The graph shown demonstrates a tax on buyers.What is the amount of tax revenue being generated from the tax?

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

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

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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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Who benefits from a subsidy to buyers?

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Tax incidence:

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An unintended consequence of price ceilings is:

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