Question 1

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 are affected by the transactions.E) B) and D)
F) None of the above

Question 2

The graph shown portrays a subsidy to buyers. Before the subsidy was put in place, sellers sold _______ units and received _______ for each one.

Accepted Answer

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

Question 3

Suppose a $5 tax is imposed on sellers in the market shown in the graph. Which of the following statements is true?Producers bear more of the tax burden than consumers.The tax-inclusive price (or after-tax price) received by sellers is $8.The deadweight loss is $15,000.

Accepted Answer

A)  I only
B)  II and III only
C)  I and II only
D)  I, II, and IIIE) None of the above
F) All of the above

Question 4

Why might a government impose a minimum wage?

Accepted Answer

A)  To correct a market failure
B)  To redistribute surplus in a market
C)  To encourage the consumption of inferior goods
D)  To discourage the consumption of inferior goodsE) All of the above
F) None of the above

Question 5

The graph shown best represents:

Accepted Answer

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

Question 6

If a price floor is set at $23 in the market shown in the graph:

Accepted Answer

A)  excess supply of 27 will occur.
B)  excess supply of 37 will occur.
C)  excess supply of 10 will occur.
D)  no excess supply will occur.E) B) and D)
F) A) and B)

Question 7

If a price floor is set at $23 in the market shown in the graph, which area(s) would represent consumer surplus?

Accepted Answer

A)  A
B)  A + B
C)  A + B + C
D)  A + B + C + DE) C) and D)
F) None of the above

Question 8

Suppose a tax is imposed on buyers in the market shown in the graph. What area(s) will represent deadweight loss?

Accepted Answer

A)  E
B)  D + H
C)  K
D)  I + ME) All of the above
F) B) and C)

Question 9

If a price floor is set at $23 in the market shown in the graph:

Accepted Answer

A)  some surplus will be transferred from consumers to producers.
B)  some surplus will be transferred from producers to consumers.
C)  all producers will be better off.
D)  all consumers will be better off.E) A) and B)
F) None of the above

Question 10

The graph shown portrays a subsidy to buyers. With the subsidy, sellers sell _______ units, and the post-subsidy price received for each one is _______.

Accepted Answer

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

Question 11

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

Accepted Answer

A)  The sellers
B)  The buyers
C)  The government
D)  The incidence is equally shared between buyers and sellers.E) B) and C)
F) A) and C)

Question 12

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

Accepted Answer

A)  15; $16
B)  31; $9
C)  31; $19
D)  15; $6E) All of the above
F) B) and D)

Question 13

Governments might 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 correct.E) All of the above
F) C) and D)

Question 14

A tax on sellers shifts the ______ by the amount of the tax.

Accepted Answer

A)  supply curve left
B)  demand curve left
C)  supply curve up
D)  demand curve downE) A) and B)
F) A) and C)

Question 15

The graph shown portrays a subsidy to buyers. What area(s) represent the deadweight loss that arises from this subsidy?

Accepted Answer

A)  D + H
B)  K
C)  E
D)  I + ME) A) and B)
F) None of the above

Question 16

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

Accepted Answer

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

Question 17

If the intended aim of the price ceiling set at $6, as shown in the graph, was a net increase in the well-being of consumers, then positive analysis would conclude that the policy was:

Accepted Answer

A)  effective because areas A + C are larger than areas B + D.
B)  effective because area B is smaller than area D.
C)  ineffective because area D is larger than area E.
D)  ineffective because areas A + C + D are larger than areas B + E.E) B) and C)
F) None of the above

Question 18

If a price ceiling is set at $8 in the market shown in the graph:

Accepted Answer

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

Question 19

In general, price controls have a _______ effect in the _______ than in the _______ because demand and supply become _______ elastic over time.

Accepted Answer

A)  larger; long run; short run; more
B)  larger; short run; long run; more
C)  smaller; long run; short run; less
D)  smaller; short run; long run; lessE) C) and D)
F) None of the above

Question 20

A price ceiling that is set at $8 in the market shown in the graph is:

Accepted Answer

A)  non-binding and would not affect the market.
B)  binding and would cause a shortage.
C)  binding and would cause excess supply.
D)  non-binding and would not prevent the market from reaching equilibrium.E) A) and C)
F) None of the above

Exam 6: Government Intervention

If a price ceiling is set at $8 in the market shown in the graph:

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The graph shown portrays a subsidy to buyers. With the subsidy, sellers sell _______ units, and the post-subsidy price received for each one is _______.

Correct AnswerverifiedShow Answer

A tax on sellers shifts the ______ by the amount of the tax.

Correct AnswerverifiedShow Answer

If a price floor is set at $23 in the market shown in the graph:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A market failure is most likely to occur when:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The graph shown best represents:

Correct AnswerverifiedShow Answer

If the intended aim of the price ceiling set at $6, as shown in the graph, was a net increase in the well-being of consumers, then positive analysis would conclude that the policy was:

Correct AnswerverifiedShow Answer

In general, price controls have a _______ effect in the _______ than in the _______ because demand and supply become _______ elastic over time.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a price floor is set at $23 in the market shown in the graph:

Correct AnswerverifiedShow Answer

Suppose a $5 tax is imposed on sellers in the market shown in the graph. Which of the following statements is true?Producers bear more of the tax burden than consumers.The tax-inclusive price (or after-tax price) received by sellers is $8.The deadweight loss is $15,000.

Correct AnswerverifiedShow Answer

A price ceiling that is set at $8 in the market shown in the graph is:

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

Correct AnswerverifiedShow Answer

Why might a government impose a minimum wage?

Correct AnswerverifiedShow Answer

Suppose a tax is imposed on buyers in the market shown in the graph. What area(s) will represent deadweight loss?

Correct AnswerverifiedShow Answer

The graph shown portrays a subsidy to buyers. Before the subsidy was put in place, sellers sold _______ units and received _______ for each one.

Correct AnswerverifiedShow Answer

The graph shown portrays a subsidy to buyers. What area(s) represent the deadweight loss that arises from this subsidy?

Correct AnswerverifiedShow Answer

If a price floor is set at $23 in the market shown in the graph, which area(s) would represent consumer surplus?

Correct AnswerverifiedShow Answer

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The graph shown portrays a subsidy to buyers. With the subsidy, sellers sell _ units, and the post-subsidy price received for each one is _.

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

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In general, price controls have a ___ effect in the _ than in the _ because demand and supply become ___ elastic over time.

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The graph shown portrays a subsidy to buyers. Before the subsidy was put in place, sellers sold _ units and received _ for each one.

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