Question 1

Government attempts to lower,raise,or simply stabilize prices can:

Accepted Answer

A)   shift the distribution of surplus.
B)   create unintended side effects.
C)   reduce efficiency of a market.
D)   All of these are true.E) A) and B)
F) A) and C)

Question 2

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 in which market it is placedE) B) and C)
F) None of the above

Question 3

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

Question 4

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

Accepted Answer

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

Question 5

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)   whether the surplus transferred from producers to consumers is larger than the consumer surplus lost to deadweight loss.
B)   whether the surplus transferred from consumers to producers is larger than the consumer surplus lost to deadweight loss.
C)   whether the producer surplus lost to deadweight loss is greater than the producer surplus gained from a higher price.
D)   whether the producer surplus lost due to lower prices is greater than the producer surplus lost due to fewer transactions taking place.E) None of the above
F) A) and C)

Question 6

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

Accepted Answer

A)   100; $46
B)   100; $30
C)   150; $40
D)   150; $24E) All of the above
F) A) and B)

Question 7

A price floor is:

Accepted Answer

A)   a legal maximum price.
B)   a legal minimum price.
C)   a legal maximum quantity that can be sold at a particular price.
D)   a legal minimum quantity that can be sold at a particular price.E) None of the above
F) A) and C)

Question 8

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

Question 9

The graph shown portrays a subsidy to buyers.Before the subsidy is put in place,the producers sold _____ units and received _____ for each of them.

Accepted Answer

A)   100; $46
B)   100; $30
C)   150; $40
D)   150; $24E) B) and C)
F) A) and D)

Question 10

Does a subsidy to sellers 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) All of the above
F) C) and D)

Question 11

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 C)
F) A) and B)

Question 12

The graph shown demonstrates a tax on buyers.Before the tax was imposed,the buyers purchased ____ units and paid _____ for each one.

Accepted Answer

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

Question 13

A binding price ceiling:

Accepted Answer

A)   will cause quantity supplied to exceed quantity demanded.
B)   will increase total well-being.
C)   will set a legal minimum price in a market.
D)   will cause quantity demanded to exceed quantity supplied.E) A) and C)
F) All of the above

Question 14

If a price floor of $23 were placed in the market in the graph shown,which area represents deadweight loss?

Accepted Answer

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

Question 15

In general,price controls have a:

Accepted Answer

A)   larger effect in the long run because demand and supply become more elastic over time.
B)   larger effect in the short run since demand and supply become more elastic over time.
C)   smaller effect in the long run since demand and supply become less elastic over time.
D)   smaller effect in the short run because demand and supply become less elastic over time.E) A) and B)
F) A) and C)

Question 16

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

Accepted Answer

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

Question 17

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) B) and C)

Question 18

Suppose a tax on sellers has been imposed as shown in the graph.Once the tax is in place,the buyers experience:

Accepted Answer

A)   a decrease in demand.
B)   an increase in demand.
C)   a decrease in quantity demanded.
D)   an increase in quantity demanded.E) A) and B)
F) A) and C)

Question 19

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) None of the above
F) B) and C)

Question 20

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) None of the above
F) B) and C)

Exam 6: Government Intervention Microeconomics

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

In general,price controls have a:

Correct AnswerverifiedShow Answer

If a price floor of $23 were placed in the market in the graph shown,which area represents deadweight loss?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose a tax on sellers has been imposed as shown in the graph.Once the tax is in place,the buyers experience:

Correct AnswerverifiedShow Answer

The graph shown demonstrates a tax on buyers.Before the tax was imposed,the buyers purchased ____ units and paid _____ for each one.

Correct AnswerverifiedShow Answer

A tax imposed on a good can:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A binding price ceiling:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

A price floor is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A market failure is most likely to occur when:

Correct AnswerverifiedShow Answer

The graph shown portrays a subsidy to buyers.Before the subsidy is put in place,the producers sold _____ units and received _____ for each of them.

Correct AnswerverifiedShow Answer

Government attempts to lower,raise,or simply stabilize prices can:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Does a subsidy to sellers affect the demand curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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The graph shown demonstrates a tax on buyers.Before the tax was imposed,the buyers purchased units and paid _ for each one.

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The graph shown portrays a subsidy to buyers.Before the subsidy is put in place,the producers sold _ units and received _ for each of them.

Correct Answer
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