Question 1

Figure 4-25
 
-Refer to Figure 4-25. Consumer surplus before the tax was levied is represented by area
A)A.
B)A + B + C.
C)D + E + F.
D)F.

Accepted Answer

The answer of Figure 4-25
 
-Refer to Figure 4-25. Consumer...

Question 2

Figure 4-25
 
-Refer to Figure 4-25. Producer surplus before the tax was levied is represented by area
A)A.
B)A + B + C.
C)D + E + F.
D)F.

Accepted Answer

The answer of Figure 4-25
 
-Refer to Figure 4-25. Producer...

Question 3

Figure 4-24
 
-Refer to Figure 4-24. The per-unit burden of the tax on sellers is
A)P₃ - P₁.
B)P₃ - P₂.
C)P₂ - P₁.
D)Q₂ - Q₁.

Accepted Answer

The answer of Figure 4-24
 
-Refer to Figure 4-24. The...

Question 4

Figure 4-24
 
-Refer to Figure 4-24. The per unit burden of the tax on buyers is
A)P₃ - P₁.
B)P₃ - P₂.
C)P₂ - P₁.
D)Q₂ - Q₁.

Accepted Answer

The per unit burden of tax on buyers is the difference between the original equilibrium price P₂ and the new price paid by buyers after the tax is imposed, which is P₃. Therefore, the per unit burden of tax on buyers is P₃ - P₂.

Question 5

Figure 4-25
 
-Refer to Figure 4-25. The equilibrium price before the tax is imposed is
A)P₁.
B)P₂.
C)P₃.
D)impossible to determine from the figure.

Accepted Answer

The answer of Figure 4-25
 
-Refer to Figure 4-25. The...

Question 6

If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market?
A)an increase in demand for unskilled labor
B)a decrease in the supply of unskilled labor
C)a shortage of unskilled labor
D)a surplus of unskilled labor

Accepted Answer

If the price (wage) of unskilled labor is pushed above market equilibrium, it means that employers are legally required to pay a higher wage than what they would normally offer in a free market. As a result, employers are likely to reduce their demand for unskilled labor, which means fewer job opportunities for unskilled workers. This reduction in demand is likely to lead to a surplus of unskilled labor, as more people are willing to work at the higher wage rate. Therefore, D is the correct answer. A would be incorrect because an increase in the government-imposed minimum wage is likely to reduce the demand for unskilled labor rather than increase it. B would also be incorrect because there is no reason to expect a decrease in the supply of unskilled labor as a result of an increase in the minimum wage. C would be incorrect because a shortage of unskilled labor is unlikely when the wage rate is above the market equilibrium.

Question 7

The average tax rate (ATR) is defined as
A)taxable income divided by tax liability.
B)change in tax liability divided by change in taxable income.
C)tax liability divided by taxable income.
D)change in taxable income divided by change in tax liability.

Accepted Answer

The average tax rate (ATR) is the total tax liability divided by taxable income. This represents the percentage of your taxable income that you owe in taxes. Therefore, the correct option is C, tax liability divided by taxable income.

Question 8

Figure 4-24
 
-Refer to Figure 4-24. The amount of deadweight loss associated with the tax is equal to
A)P₃ A C P₁.
B)A B C.
C)P₂ A D P₃.
D)P₁ D C P₂.

Accepted Answer

The answer of Figure 4-24
 
-Refer to Figure 4-24. The...

Question 9

Figure 4-25
 
-Refer to Figure 4-25. The tax causes a reduction in producer surplus that is represented by area
A)A.
B)B + C.
C)D + E.
D)F.

Accepted Answer

The answer of Figure 4-25
 
-Refer to Figure 4-25. The...

Question 10

Figure 4-25
 
-Refer to Figure 4-25. After the tax is levied, consumer surplus is represented by area
A)A.
B)A + B + C.
C)D + E + F.
D)F.

Accepted Answer

The answer of Figure 4-25
 
-Refer to Figure 4-25. After...

Question 11

Figure 4-25
 
-Refer to Figure 4-25. The tax causes a reduction in consumer surplus that is represented by area
A)A.
B)B + C.
C)D + E.
D)F.

Accepted Answer

The answer of Figure 4-25
 
-Refer to Figure 4-25. The...

Question 12

Figure 4-25
 
-Refer to Figure 4-25. After the tax is levied, producer surplus is represented by area
A)A.
B)A + B + C.
C)D + E + F.
D)F.

Accepted Answer

After the tax is levied, producer surplus is reduced to the area between the supply curve and the new equilibrium price, represented by area F. Therefore, the answer is D.

Question 13

An increase in the demand for a product will cause output to
A)increase and both the demand for and prices of the resources used to produce the product to increase.
B)increase and both the demand for and prices of the resources used to produce the product to decrease.
C)decrease; the demand for the resources used to produce the product will remain constant.
D)decrease; the price of resources used to produce the product will decrease.

Accepted Answer

An increase in demand for a product will lead to an increase in output to meet the demand. As a result, the demand for resources used to produce the product will also increase, leading to an increase in their prices. This is because the increase in demand for the product will lead to an increase in demand for the resources needed to produce it. Hence, option A is the correct answer.

Question 14

Figure 4-24
 
-Refer to Figure 4-24. The amount of the tax on each unit of the good is
A)P₃ - P₁.
B)P₃ - P₂.
C)P₂ - P₁.
D)Q₂ - Q₁.

Accepted Answer

The answer of Figure 4-24
 
-Refer to Figure 4-24. The...

Question 15

Figure 4-24
 
-Refer to Figure 4-24. The amount of tax revenue received by the government is equal to the area
A)P₃ A C P₁.
B)A B C.
C)P₂ D A P₃.
D)P₁ C D P₂.

Accepted Answer

The answer of Figure 4-24
 
-Refer to Figure 4-24. The...

Question 16

Which of the following is a true statement regarding the economic impact of a subsidy?
A)The distribution of the benefits from a subsidy will depend on whether the subsidy is legally granted to the buyer or seller.
B)When demand is relatively inelastic, the benefits of a subsidy will mainly accrue to sellers.
C)When supply is relatively elastic, the benefits of a subsidy will mainly accrue to buyers.
D)When demand is relatively elastic, the benefits of a subsidy will mainly accrue to buyers.

Accepted Answer

The answer of Which of the following is a true...

Question 17

Figure 4-25
 
-Refer to Figure 4-25. The price that buyers pay after the tax is imposed is
A)P₁.
B)P₂.
C)P₃.
D)impossible to determine from the figure.

Accepted Answer

The answer of Figure 4-25
 
-Refer to Figure 4-25. The...

Question 18

During the imposition of price controls in the 1970s, long gasoline lines were common. In the absence of price controls, markets would have eliminated such excess demand by
A)allowing the price to rise, so gas was rationed to those willing to pay the most for it.
B)increasing the gap between supply and demand.
C)allowing price to decline, so the poor could afford to buy more gas.
D)mandating a 50-mile-per-hour speed limit to reduce consumption.

Accepted Answer

The imposition of price controls led to a situation where the quantity demanded of gasoline exceeded the quantity supplied at the artificially low price. In the absence of price controls, the market would have reacted by allowing the price to rise, which would have reduced excess demand by rationing the limited supply of gasoline to those who were willing to pay the most for it. This would have resulted in fewer people driving or driving less, reducing demand and bringing it more in line with supply.

Question 19

Figure 4-25
 
-Refer to Figure 4-25. The benefit to the government is
A)measured by tax revenue and is represented by area A + B.
B)measured by tax revenue and is represented by area B + D.
C)measured by the net gain in total surplus and is represented by area B + D.
D)measured by the net gain in total surplus and is represented by area D + E.

Accepted Answer

The answer of Figure 4-25
 
-Refer to Figure 4-25. The...

Question 20

Figure 4-25
 
-Refer to Figure 4-25. The price that sellers receive after the tax is imposed is
A)P₁.
B)P₂.
C)P₃.
D)impossible to determine from the figure.

Accepted Answer

The price that sellers receive after the tax is imposed is represented by P₂, which is the midpoint between the original equilibrium price (P₀) and the price paid by buyers after the tax (P₁). This is because the tax shifts the supply curve upward by the amount of the tax, causing the quantity supplied to decrease and the price received by sellers to decrease. The final price received by sellers (P₂) is lower than the original equilibrium price (P₀), but higher than the price paid by buyers (P₁).

Quiz 4: B: Supply and Demand: Applications and Extensions

Figure 4-25 -Refer to Figure 4-25. Consumer surplus before the tax was levied is represented by area

Figure 4-25 -Refer to Figure 4-25. Producer surplus before the tax was levied is represented by area

Figure 4-24 -Refer to Figure 4-24. The per-unit burden of the tax on sellers is

Figure 4-24 -Refer to Figure 4-24. The per unit burden of the tax on buyers is

Figure 4-25 -Refer to Figure 4-25. The equilibrium price before the tax is imposed is

If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market?

The average tax rate (ATR) is defined as

Figure 4-24 -Refer to Figure 4-24. The amount of deadweight loss associated with the tax is equal to

Figure 4-25 -Refer to Figure 4-25. The tax causes a reduction in producer surplus that is represented by area

Figure 4-25 -Refer to Figure 4-25. After the tax is levied, consumer surplus is represented by area

Figure 4-25 -Refer to Figure 4-25. The tax causes a reduction in consumer surplus that is represented by area

Figure 4-25 -Refer to Figure 4-25. After the tax is levied, producer surplus is represented by area

An increase in the demand for a product will cause output to

Figure 4-24 -Refer to Figure 4-24. The amount of the tax on each unit of the good is

Figure 4-24 -Refer to Figure 4-24. The amount of tax revenue received by the government is equal to the area

Which of the following is a true statement regarding the economic impact of a subsidy?

Figure 4-25 -Refer to Figure 4-25. The price that buyers pay after the tax is imposed is

During the imposition of price controls in the 1970s, long gasoline lines were common. In the absence of price controls, markets would have eliminated such excess demand by

Figure 4-25 -Refer to Figure 4-25. The benefit to the government is

Figure 4-25 -Refer to Figure 4-25. The price that sellers receive after the tax is imposed is