Question 1

Does a subsidy to buyers affect the supply curve?

Accepted Answer

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

Question 2

An effective price floor:

Accepted Answer

A)  must be set above the equilibrium price.
B)  must be set below the equilibrium price.
C)  must be set at the equilibrium price.
D)  can result in an increase in the quantity sold.E) All of the above
F) B) and D)

Question 3

When a tax is placed on buyers:

Accepted Answer

A)  the resulting price paid by consumers is the same as if the tax were placed on sellers.
B)  the resulting price received by sellers is the same as if the tax were placed on sellers.
C)  the equilibrium quantity will unequivocally decrease.
D)  All of these are true.E) None of the above
F) All of the above

Question 4

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 inelastic than the demand curve.
C)  Yes,if the supply curve is relatively more inelastic than the demand curve.
D)  Producers can never benefit more than buyers from a subsidy to buyers.E) B) and C)
F) A) and B)

Question 5

One way to ensure all producers benefit from a price floor is:

Accepted Answer

A)  give a government guarantee to buy all surplus.
B)  ration a certain quantity per household.
C)  give them to the friends and family of the producers.
D)  All of these are examples of ensuring all producers benefit using non-price methods.E) None of the above
F) A) and B)

Question 6

Positive analysis:

Accepted Answer

A)  is the best way to analyze a policy.
B)  leads to the best solutions.
C)  makes concluding actions obvious for policymakers.
D)  examines if the policy actually accomplished its goals.E) A) and B)
F) B) and C)

Question 7

Government attempts to stabilize prices can:

Accepted Answer

A)  keep a market at its equilibrium.
B)  decrease total surplus.
C)  prove the usefulness of a central planner.
D)  increase prices in the long run.E) All of the above
F) A) and C) B

Question 8

Government attempts to lower prices can:

Accepted Answer

A)  lead to more producer surplus.
B)  create missing markets.
C)  prevent a market from reaching its equilibrium.
D)  always create a better outcome.E) A) and B)
F) All of the above C

Question 9

Any tax on a good can:

Accepted Answer

A)  discourage consumption of the good.
B)  discourage production of the good.
C)  create a new source of public revenue.
D)  All of these are true.E) C) and D)
F) B) and D)

Question 10

A market failure is most likely to occur when:

Accepted Answer

A)  a sole producer of a good faces no threat of competition.
B)  several producers of a good compete for customers by having price wars.
C)  several producers of a good search for the lowest-cost method of production.
D)  many producers produce identical products,and only the consumers and producers are affected by the transactions.E) B) and D)
F) B) and C)

Question 11

In an effort to prevent hunger in their nation,a government might respond to rising food prices by:

Accepted Answer

A)  setting a price ceiling on basic food necessities.
B)  setting a price floor on basic food necessities.
C)  demanding neighboring countries provide free food to their citizens.
D)  setting a minimum quantity each farmer must provide free of charge.E) A) and D)
F) A) and C) A

Question 12

If the producers bear a larger portion of tax incidence than the buyers,which of the following must be true?

Accepted Answer

A)  They are not as business savvy as the buyers.
B)  Their supply curve must be more inelastic than the buyers demand curve.
C)  They face a very inelastic demand.
D)  Their supply curve must be more elastic than the buyers demand curve.E) C) and D)
F) B) and C)

Question 13

A subsidy:

Accepted Answer

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

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

Question 15

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 an excess supply.E) A) and D)
F) None of the above

Question 16

An effective price ceiling:

Accepted Answer

A)  must be set above the equilibrium price.
B)  must be set below the equilibrium price.
C)  must be set at the equilibrium price.
D)  can lead more goods to be produced in a market.E) A) and B)
F) B) and C)

Question 17

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) B) and D)

Question 18

Governments may intervene in a market because:

Accepted Answer

A)  the government wants to decrease total surplus in the market.
B)  the government wants to increase both consumer and producer surplus at the same time.
C)  the government wants to redistribute the surplus in a market.
D)  None of these is reasons for a government to intervene.E) A) and B)
F) B) and C)

Question 19

The government is deciding where to put a $1 tax-either in a market with elastic supply and demand curves,or a market with inelastic supply and demand curves.If their aim is to raise the most revenue with the smallest deadweight loss,where should the tax be placed?

Accepted Answer

A)  In the market with elastic supply and demand curves
B)  In the market with inelastic supply and demand curves
C)  It is impossible to say without more information
D)  Since the burden is shared,it doesn't matter which market it is placed inE) B) and D)
F) None of the above

Question 20

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 increase total surplus.
B)  government intervention will decrease consumer and producer surplus.
C)  government intervention will change prices and have no effect on surplus.
D)  government intervention will make things better for everyone.E) None of the above
F) C) and D)

Exam 6: Government Intervention

Does a subsidy to buyers affect the supply curve?

Correct AnswerverifiedShow Answer

An effective price floor:

Correct AnswerverifiedShow Answer

When a tax is placed on buyers:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One way to ensure all producers benefit from a price floor is:

Correct AnswerverifiedShow Answer

Positive analysis:

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Government attempts to stabilize prices can:

Correct AnswerverifiedB

Government attempts to lower prices can:

Correct AnswerverifiedC

Any tax on a good can:

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A market failure is most likely to occur when:

Correct AnswerverifiedShow Answer

In an effort to prevent hunger in their nation,a government might respond to rising food prices by:

Correct AnswerverifiedA

If the producers bear a larger portion of tax incidence than the buyers,which of the following must be true?

Correct AnswerverifiedShow Answer

A subsidy:

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Tax incidence:

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A subsidy:

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An effective price ceiling:

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

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Governments may intervene in a market because:

Correct AnswerverifiedShow Answer

The government is deciding where to put a $1 tax-either in a market with elastic supply and demand curves,or a market with inelastic supply and demand curves.If their aim is to raise the most revenue with the smallest deadweight loss,where should the tax be placed?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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B

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C

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A

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