Deck 6: When Governments Intervene in Markets

Question 1

Which of the following is NOT a way that the government can intervene in markets?

A)The government can set minimum wages.
B)The government can raise taxes on a particular item.
C)The government can pass laws on sales taxes.
D)The government can stop the forces of demand and supply from working in markets.

Answer 1

D

Question 2

A tax on sellers shifts the:

A)supply curve to the left.
B)supply curve to the right.
C)demand curve to the left.
D)demand curve to the right.

Answer 2

A

Question 3

A tax on sellers:

A)decreases the price that the seller charges the buyer.
B)increases the price that buyers pay and decreases the price that sellers receive.
C)does not have any impact on the market price for the product.
D)does not represent any economic burden on the buyer.

Answer 3

B

Question 4

In 2004, Kenya became the first country to abolish the sales tax on menstrual products. The effect of this tax repeal would be:

A)an increase in prices for consumers.
B)a decrease in profits for sellers.
C)an increase in sales of menstrual products.
D)a reduction of taxes on other products in the market.

Question 5

In 2016, Amazon began charging a 5.75% sales tax on products it sells in the District of Columbia. Holding all else constant, the effect of this tax would be to _____ in the District of Columbia.

A)increase Amazon sales
B)decrease Amazon sales
C)decrease prices for local businesses
D)decrease the number of consumers

Question 6

In 2018, the state of Kentucky raised the tax on cigarettes by 50 cents per pack. Holding all else constant, the effect of this tax would be to _____ in Kentucky.

A)decrease prices of cigarettes
B)increase sales of cigarettes
C)increase profits for stores selling cigarettes
D)decrease smoking of cigarettes

Question 7

In 2017, eBay started charging a 20% value-added tax on fees charged to small businesses in the United Kingdom. Holding all else constant, this would _____ in the United Kingdom.

A)raise the prices that eBay sellers charge their customers
B)shift the supply curve of eBay products to the right
C)lead to increased sales for eBay sellers
D)shift the demand for eBay products to the right

Question 8

The statutory burden of a tax is the:

A)government-designated burden of a tax payment.
B)burden created by the change in after-tax prices faced by buyers and sellers.
C)percentage increase in the tax on an item.
D)laws governing sales taxes in a country.

Question 9

The economic burden of a tax is the:

A)government-designated burden of a tax payment.
B)burden created by the change in after-tax prices faced by buyers and sellers.
C)percentage increase in the tax on an item.
D)laws governing sales taxes in a country.

Question 10

(Figure: Tax on Seller) In the graph shown, the original equilibrium price is $50. A $6 tax is placed on the seller in this market. Who bears the statutory burden of this tax?

A)the seller
B)the buyer
C)the government
D)the people who make the law on taxes

Question 11

(Figure: Tax on Seller) In the graph shown, the original equilibrium price is $50. A $6 tax is placed on the seller in this market. The economic burden of this tax on the buyer is $_____.

A)6
B)1
C)2
D)5

Question 12

(Figure: Tax on Seller) In the graph shown, the original equilibrium price is $50. A $6 tax is placed on the seller in this market. The economic burden of this tax on the seller is $ _____.

A)6
B)1
C)2
D)5

Question 13

(Figure: Tax on Seller) In the graph shown, the original equilibrium price is $50. A $6 tax is placed on the seller in this market. As a result of the tax, the equilibrium quantity in the market changed from _____ units to _____ units.

A)50, 45
B)45, 51
C)50, 51
D)45, 50

Question 14

(Figure: Tax on Sellers of Soft Drinks) In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. The amount of the tax is $ _____.

A)3.00
B)0.50
C)1.00
D)1.50

Question 15

(Figure: Tax on Sellers of Soft Drinks) In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. The economic burden of this tax on the seller is $ _____.

A)3.00
B)0.50
C)1.00
D)1.50

Question 16

(Figure: Tax on Sellers of Soft Drinks) In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. The economic burden of this tax on the buyer is $ _____.

A)3.00
B)0.50
C)1.00
D)1.50

Question 17

(Figure: Tax on Sellers of Soft Drinks) In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. As a result of the tax, the equilibrium quantity in the market changed from _____ million bottles to _____ million bottles.

A)2.5, 1.5
B)0.5, 1
C)1.5, 1
D)1, 1.5

Question 18

(Figure: Tax on Sellers of Soft Drinks) In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. The incidence of the tax on the buyer is ____ % and the incidence of the tax on the seller is _____ %.

A)50, 50
B)100, 0
C)20, 80
D)70, 30

Question 19

(Figure: Market for Plastic Bags) In the market for plastic bags shown here, the original equilibrium price is 50 cents per bag. In an effort to reduce plastics usage, a tax is then placed on the buyers of plastic bags. The amount of the tax is _____ cents.

A)20
B)10
C)40
D)60

Question 20

(Figure: Market for Plastic Bags) In the market for plastic bags shown here, the original equilibrium price is 50 cents per bag. In an effort to reduce plastics usage, a tax is then placed on the buyers of plastic bags. The economic burden of this tax on the seller is _____ cents.

A)20
B)10
C)40
D)60

Question 21

(Figure: Market for Plastic Bags) In the market for plastic bags shown here, the original equilibrium price is 50 cents per bag. In an effort to reduce plastics usage, a tax is then placed on the buyers of plastic bags. The economic burden of this tax on the buyer is _____ cents.

A)10
B)40
C)20
D)60

Question 22

(Figure: Market for Plastic Bags) In the market for plastic bags shown here, the original equilibrium price is 50 cents per bag. In an effort to reduce plastics usage, a tax is then placed on the buyers of plastic bags. As a result of the tax, the equilibrium quantity in the market _____ by _____ million plastic bags.

A)increased, 50
B)decreased, 10
C)increased, 10
D)decreased, 40

Question 23

(Figure: Market for Plastic Bags) In the market for plastic bags shown here, the original equilibrium price is 50 cents per bag. In an effort to reduce plastics usage, a tax is then placed on the buyers of plastic bags. The incidence of the tax on the buyer is ____ % and the incidence of the tax on the seller is _____ %.

A)60, 40
B)20, 80
C)40, 60
D)50, 50

Question 24

(Figure: Market for Pesticides) In the market for pesticides shown here, the original equilibrium price is $25. In an effort to reduce the usage of pesticides, a tax is then placed on the buyers in this market. Who bears the statutory burden of this tax?

A)the seller
B)the buyer
C)the government
D)the people who make the law on taxes

Question 25

(Figure: Market for Pesticides) In the market for pesticides shown here, the original equilibrium price is $25. In an effort to reduce the usage of pesticides, a tax is then placed on the buyers in this market. The economic burden of this tax on the buyer is $ _____.

A)7
B)8
C)2
D)6

Question 26

(Figure: Market for Pesticides) In the market for pesticides shown here, the original equilibrium price is $25. In an effort to reduce the usage of pesticides, a tax is then placed on the buyers in this market. The economic burden of this tax on the seller is $ _____.

A)7
B)8
C)6
D)2

Question 27

(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. The amount of the tax is _____ cents.

A)6
B)8
C)4
D)2

Question 28

(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. After the implementation of the tax, the buyer pays a price of _____ cents per unit of the product.

A)58
B)60
C)64
D)90

Question 29

(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. The economic burden of this tax on the buyer is _____ cents.

A)6
B)8
C)4
D)2

Question 30

(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. The economic burden of this tax on the seller is _____ cents.

A)6
B)8
C)4
D)2

Question 31

(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. After the implementation of the tax, the seller receives _____ cents per unit of the product.

A)58
B)60
C)64
D)90

Question 32

(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. After the introduction of the tax, the equilibrium quantity in this market _____ by _____ units.

A)increased, 4
B)decreased, 4
C)increased, 6
D)decreased, 6

Question 33

A tax on sellers causes which of the following?
(i) a leftward shift of the supply curve
(ii) a decrease in quantity sold
(iii) an increase in the price buyers pay

A)(i), (ii), and (iii)
B)(i) and (iii)
C)(ii) and (iii)
D)only (i)

Question 34

A tax on buyers causes which of the following?
(i) a leftward shift of the demand curve
(ii) a decrease in quantity sold
(iii) an increase in the price buyers pay

A)(i), (ii), and (iii)
B)(i) and (iii)
C)(ii) and (iii)
D)only (i)

Question 35

A tax on buyers shifts the:

A)supply curve to the left.
B)supply curve to the right.
C)demand curve to the left.
D)demand curve to the right.

Question 36

A tax on sellers would not cause a decrease in quantity sold if:

A)supply is inelastic.
B)there are few competing products.
C)demand is perfectly inelastic.
D)demand is perfectly elastic.

Question 37

A tax on buyers would not cause a decrease in quantity sold if:

A)demand is inelastic.
B)there are few competing products.
C)supply is perfectly elastic.
D)supply is perfectly inelastic.

Question 38

The statutory burden of a tax:

A)determines who finally pays the entire tax being levied.
B)does not change the incidence of the tax.
C)always leads to an equal allocation of the tax between buyer and seller.
D)does not play a role in determining where demand or supply shifts as a result of the tax.

Question 39

When the price elasticity of demand is _____ relative to the price elasticity of supply, then buyers bear _____ of the economic burden of a tax.

A)small; all
B)small; none
C)large; a smaller share
D)large; a bigger share

Question 40

When the price elasticity of supply is _____ relative to the price elasticity of demand, then sellers bear _____ of the economic burden of a tax.

A)small; all
B)small; none
C)large; a bigger share
D)large; a smaller share

Question 41

Buyers bear all the economic burden of a tax if the demand curve is _____, given an upward sloping supply curve.

A)perfectly elastic
B)relatively inelastic
C)perfectly inelastic
D)downward sloping

Question 42

(Figure: Market for Timber) Refer to the figure which shows the market for timber. Which of the following statements is correct?

A)There is no statutory burden for this tax.
B)The economic burden of this tax is greater on the buyer.
C)The economic burden of this tax is being split equally between buyer and seller.
D)The economic burden of this tax is greater on the seller.

Question 43

(Figure: Market for Timber) Refer to the figure which shows the market for timber. Which of the following statements is correct?

A)The incidence of the tax on the buyer is 10% and on the seller is 90%.
B)The incidence of this tax is greater on the buyer.
C)The incidence of this tax is 50% on the buyer and 50% on the seller.
D)The incidence of this tax is greater on the seller.

Question 44

(Figure: Market for Electrical Components) Refer to the figure which shows the market for electrical components. Which of the following statements is correct?

A)There is no statutory burden for this tax.
B)The economic burden of this tax is greater on the buyer.
C)The economic burden of this tax is being split equally between buyer and seller.
D)The economic burden of this tax is greater on the seller.

Question 45

(Figure: Market for Electrical Components) Refer to the figure which shows the market for electrical components. Which of the following statements is correct?

A)The incidence of the tax on the buyer is 45% and on the seller is 55%.
B)The incidence of this tax is greater on the buyer.
C)The incidence of this tax is 50% on the buyer and 50% on the seller.
D)The incidence of this tax is greater on the seller.

Question 46

Buyers bear a smaller incidence of the tax when:

A)the tax is higher.
B)supply is more elastic than demand.
C)demand is more elastic than supply.
D)demand is perfectly inelastic.

Question 47

Sellers bear a smaller incidence of a tax when:

A)the tax is higher.
B)supply is more elastic relative to demand.
C)demand is more elastic relative to supply.
D)demand is perfectly inelastic.

Question 48

A subsidy is a:

A)form of tax.
B)government regulation of the quantity sold in a market.
C)a tax designed to encourage particular purchases or productive activities.
D)a government payment designed to encourage particular purchases or productive activities.

Question 49

The incidence of a tax is

A)the same as the statutory burden of the tax.
B)the division of the economic burden of a tax between buyers and sellers.
C)determined by the government.
D)the same dollar amount as the subsidy on an item.

Question 50

When looking at a demand and supply graph, if a tax is implemented on a buyer, the vertical distance between the old and new demand curves at the new equilibrium quantity will be equivalent to the

A)amount of the tax.
B)economic burden of the tax on the buyer.
C)economic burden of the tax on the seller.
D)price of the item.

Question 51

When looking at a demand and supply graph, if a tax is implemented on a seller, the vertical distance between the old and new supply curves at the new equilibrium quantity will be equivalent to the

A)economic burden of the tax on the seller.
B)economic burden of the tax on the buyer.
C)amount of the tax.
D)price of the item.

Question 52

Which of the following is caused by a subsidy for buyers of a particular item?
(i) a leftward shift of the demand curve
(ii) an increase in quantity sold
(iii) a rightward shift of the demand curve

A)(i), (ii), and (iii)
B)(i) and (iii)
C)(ii) and (iii)
D)only (i)

Question 53

A subsidy is
(i) a negative tax.
(ii) a tax rebate given to those who make a specific choice.
(iii) a payment made by the government to those who make a specific choice.

A)(i), (ii), and (iii)
B)(i) and (iii)
C)(ii) and (iii)
D)(i) only

Question 54

A subsidy for buyers of a product shifts the:

A)supply curve to the left.
B)supply curve to the right.
C)demand curve to the left.
D)demand curve to the right.

Question 55

Which of the following is caused by a subsidy for sellers of a particular item?
(i) a leftward shift of the supply curve
(ii) an increase in quantity sold
(iii) a rightward shift of the supply curve

A)(i), (ii), and (iii)
B)(i) and (iii)
C)(ii) and (iii)
D)only (i)

Question 56

Which of the following is caused by a subsidy for sellers of a particular item?
(i) an increase in supply
(ii) an increase in quantity sold
(iii) a leftward shift of demand curve

A)(i), (ii), and (iii)
B)(i) and (ii)
C)(ii) and (iii)
D)only (i)

Question 57

A subsidy for a seller of a product shifts the:

A)supply curve to the left.
B)supply curve to the right.
C)demand curve to the left.
D)demand curve to the right.

Question 58

(Figure: Market for Reusable Jute Shopping Bags) Refer to the market for reusable jute shopping bags that is shown in the figure. The original equilibrium price is $7 per bag. A subsidy is now introduced for buyers of the bags. The amount of the subsidy is:

A)$2.
B)$8.
C)$1.
D)$3.

Question 59

(Figure: Market for Reusable Jute Shopping Bags) Refer to the market for reusable jute shopping bags that is shown in the figure. The original equilibrium price is $7 per bag. A subsidy is now introduced for buyers of the bags. As a result of the subsidy, the equilibrium quantity in the market _____ by _____ units.

A)rises; 7,000
B)falls; 1,000
C)rises; 1,000
D)falls; 6,000

Question 60

(Figure: Market for Reusable Jute Shopping Bags) Refer to the market for reusable jute shopping bags that is shown in the figure. The original equilibrium price is $7 per bag. After the subsidy is implemented, the amount that buyers pay is:

A)$8.
B)$6.
C)$7.
D)$5.

Question 61

(Figure: Market for Reusable Jute Shopping Bags) Refer to the market for reusable jute shopping bags that is shown in the figure. The original equilibrium price is $7 per bag. After the subsidy is implemented, the amount that sellers receive is:

A)$8.
B)$6.
C)$7.
D)$5.

Question 62

(Figure: Market for Child Care) Refer to the market for child care that is shown in the figure. The original equilibrium price is $10,000. A subsidy is now introduced for parents who pay for child care. The amount of the subsidy is:

A)$9,000.
B)$2,000.
C)$1,000.
D)$11,000.

Question 63

(Figure: Market for Child Care) Refer to the market for child care that is shown in the figure. The original equilibrium price is $10,000. A subsidy is now introduced for parents who pay for child care. The equilibrium price and quantity before the subsidy were_____ and ____.

A)$9,000; 6,000
B)$10,000; 5,000
C)$1,000; 2,000
D)$10,000; 6,000

Question 64

(Figure: Market for Child Care) Refer to the market for child care that is shown in the figure. The original equilibrium price is $10,000. A subsidy is now introduced for parents who pay for child care. After the subsidy is implemented, the amount that parents pay is:

A)$9,000.
B)$2,000.
C)$1,000.
D)$11,000.

Question 65

(Figure: Market for Child Care) Refer to the market for child care that is shown in the figure. The original equilibrium price is $10,000. A subsidy is now introduced for parents who pay for child care. After the subsidy is implemented, the amount that sellers receive is:

A)$9,000.
B)$2,000.
C)$1,000.
D)$11,000.

Question 66

A price ceiling is:

A)the maximum price that a seller can charge in a market.
B)the minimum price that a seller can charge in a market.
C)the average price that a seller can charge in a market.
D)any price above the equilibrium price.

Question 67

A binding price ceiling is:

A)the minimum price that a seller can charge in a market.
B)always at the equilibrium price.
C)always above the equilibrium price.
D)always below the equilibrium price.

Question 68

(Figure: Price Ceilings) A binding price ceiling can be seen in:

A) figure A.
B) figure B.
C) figure C.
D) figure D.

Question 69

(Figure: Markets) In the set of figures shown, Figures A, C and D are all:
​

A)equilibrium prices.
B)binding price ceilings.
C)non-binding price ceilings.
D)prices that lead to shortages.

Question 70

A binding price floor is:

A)the maximum price that a seller can charge in a market.
B)always at the equilibrium price.
C)always above the equilibrium price.
D)always below the equilibrium price.

Question 71

(Figure: Markets) In the set of figures shown,
​

A)figure A is a binding price floor.
B)figure B is a binding price floor.
C)figure C is a binding price floor.
D)figure D is a binding price ceiling.

Question 72

(Figure: Markets) In the set of figures shown,
​

A)figure A is a binding ceiling.
B)figure B is a binding price floor.
C)figure C is a binding price ceiling.
D)figure D is a binding price floor.

Question 73

(Figure: Market for Printed Houses) Consider the market for environmentally friendly three-dimensional printed houses that is shown in the figure. The government wants to encourage buyers to buy such houses and places a price ceiling on the market at $200,000 per house. The market quantity sold after the implementation of the price ceiling is _____ houses.

A)200,000
B)400,000
C)300,000
D)100,000

Question 74

(Figure: Market for Printed Houses) Consider the market for environmentally friendly three-dimensional printed houses that is shown in the figure. The government wants to encourage buyers to buy such houses and places a price ceiling on the market at $200,000 per house. After the implementation of the price ceiling, the market quantity sold falls by _____ houses.

A)200,000
B)400,000
C)300,000
D)100,000

Question 75

(Figure: Market for Printed Houses) Consider the market for environmentally friendly three-dimensional printed houses that is shown in the figure. The government wants to encourage buyers to buy such houses and places a price ceiling on the market at $200,000 per house. What occurs in this market after the implementation of the price ceiling?

A)a shortage of 100,000 houses.
B)a shortage of 300,000 houses.
C)a surplus of 200,000 houses.
D)a surplus of 100,000 houses.

Question 76

(Figure: Market for Sustainable Furniture) Consider the market for furniture made from sustainable, man-made forests that is shown in the figure. The government wants to encourage buyers to buy such furniture and places a price ceiling of $250 on the market. The market quantity actually sold after the implementation of the price ceiling is _____ thousand pieces of furniture.

A)700
B)300
C)500
D)350

Question 77

(Figure: Market for Sustainable Furniture) Consider the market for furniture made from sustainable, man-made forests that is shown in the figure. The government wants to encourage buyers to buy such furniture and places a price ceiling of $250 on the market. After the implementation of the price ceiling, the market quantity sold falls by _____ thousand units.

A)400
B)300
C)200
D)500

Question 78

(Figure: Market for Sustainable Furniture) The graph depicts the market for furniture made from sustainable, man-made forests. The government wants to encourage buyers to buy such furniture and imposes a price ceiling of $250. What occurs as a result of the price ceiling?

A)a shortage of 400,000 pieces of furniture.
B)a shortage of 200,000 pieces of furniture.
C)a surplus of 300,000 pieces of furniture.
D)a surplus of 400,000 pieces of furniture.

Question 79

(Figure: Kenyan Labor Market) The government of Kenya implements a minimum wage of 15,000 Kenyan shillings per month. After the implementation of the wage, _____ workers are hired.

A)20,000
B)36,000
C)30,000
D)45,000

Question 80

(Figure: Kenyan Labor Market) The labor market begins in equilibrium. Then, the government of Kenya implements a minimum wage of 15,000 Kenyan shillings per month. After the implementation of the minimum wage, the number of workers hired _____ people.

A)falls by 10,000
B)falls by 6,000
C)rises by 9,000
D)rises by 10,000