Question 1

Which of the following would tend to increase the wage of coal miners?
A)new environmental laws that make it more costly for firms to use coal in their production process
B)an increase in the price of oil, a substitute for coal
C)a decrease in the demand for coal
D)an increase in the supply of coal miners

Accepted Answer

B

Question 2

The more elastic the supply of a product, the more likely it is that the
A)burden of a tax on the product will fall on sellers.
B)burden of a tax on the product will fall on buyers.
C)burden of a tax on the product will fall equally on both buyers and sellers.
D)deadweight loss of the tax will be smaller.

Accepted Answer

B

Question 3

The Laffer curve illustrates the concept that
A)an increase in marginal tax rates will always cause tax revenues to increase.
B)an increase in marginal tax rates will always cause tax revenues to decrease.
C)when marginal tax rates are quite high, a decrease in the tax rate may cause tax revenues to increase.
D)when marginal taxes are quite low, an increase in the tax rate will probably cause tax revenues to decline.

Accepted Answer

The Laffer curve shows the relationship between tax rates and tax revenues. At very high tax rates, lowering the tax rate may stimulate economic growth and increase taxable activity, resulting in higher tax revenues despite the lower tax rate. However, at very low tax rates, increasing the tax rate may lead to a decrease in taxable activity, resulting in lower tax revenues despite the higher tax rate. Choice A is incorrect because eventually, as tax rates increase, people will have less incentive to work and may turn to tax shelters or other ways to avoid taxes. Choice B is incorrect because if tax rates are at zero, even a small increase will result in some revenue. Choice D is incorrect because low taxes can stimulate economic growth and increase taxable activity, resulting in higher tax revenues.

Question 4

Other things constant, an increase in the demand for motorcycles will
A)decrease the price of motorcycles.
B)decrease the quantity of motorcycles bought and sold.
C)decrease the demand for motorcycle workers and lower their wages.
D)increase the demand for motorcycle workers and increase their wages.

Accepted Answer

An increase in demand for motorcycles will lead to an increase in the production and sales of motorcycles, which in turn will lead to an increase in demand for motorcycle workers. This will create a shortage of workers, leading to an increase in their wages. Therefore, the correct answer is D. Option A is incorrect because an increase in demand will lead to an increase in price (law of demand). Option B is incorrect because an increase in demand will lead to an increase in quantity bought and sold (law of supply and demand). Option C is incorrect because an increase in demand will create a shortage of motorcycle workers, leading to an increase in their wages (law of supply).

Question 5

Which of the following is a major disadvantage of setting the price of a good below equilibrium and using waiting in line rather than price to ration the good?
A)Compared to price rationing, waiting in line is unfair since it is easier for those with higher incomes to wait in line.
B)Waiting in line imposes a cost on the consumer; paying higher prices does not.
C)Both waiting in line and higher prices are costly to consumers, but unlike the payment of a higher price, waiting in line does not provide suppliers with an incentive to expand future output.
D)Waiting in line benefits consumers at the expense of producers.

Accepted Answer

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

Question 6

Which of the following would tend to increase the price of lumber?
A)a technological advance that lowers the cost of cutting timber
B)an increase in the demand for newly constructed homes
C)a decrease in the demand for wooden rocking chairs
D)a decrease in the tax imposed on firms who produce lumber

Accepted Answer

An increase in demand for newly constructed homes would increase demand for lumber as it is a primary material used in construction. This would cause the price of lumber to increase. The other choices would either decrease demand or costs, which would decrease the price of lumber.

Question 7

When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because
A)the market price of the product will fall in response to the subsidy.
B)the market price of the product will rise in response to the subsidy.
C)the market price of the product will not change in response to the subsidy.
D)producers will reduce the supply of the product.

Accepted Answer

When a government subsidy is granted to the sellers of a product, it lowers the cost of production for them, which enables them to offer the product at a lower price than before the subsidy. As a result, the market price of the product tends to fall in response to the subsidy. When that happens, buyers benefit from paying less for the product than they would have had to without the subsidy. Thus, buyers end up capturing some of the benefits of the subsidy.

Question 8

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?
A)an increase in the demand for accountants
B)an increase in the employment of accountants
C)a decrease in the wage rate of accountants
D)an increase in the number of students choosing to major in accounting

Accepted Answer

The answer of A substantial revision of the income tax...

Question 9

How would an increase in the price of paper influence the market for college textbooks?
A)The supply of textbooks would increase causing the price of textbooks to fall.
B)The supply of textbooks would increase causing the price of textbooks to rise.
C)The supply of textbooks would decrease causing the price of textbooks to fall.
D)The supply of textbooks would decrease causing the price of textbooks to rise.

Accepted Answer

Higher paper prices would increase the cost of production for textbook publishers, which would decrease the supply of textbooks in the market. The decrease in supply would cause a rise in the price of textbooks.

Question 10

If there was an increase in the excise tax imposed on beer suppliers, what would be the effect on the equilibrium price and quantity of beer?
A)price increases; quantity decreases
B)price decreases; quantity decreases
C)price increases; quantity increases
D)price decreases; quantity increases

Accepted Answer

An increase in the excise tax would increase the cost of production for beer suppliers, which would result in a leftward shift of the supply curve. This would lead to a higher equilibrium price and lower equilibrium quantity, which is represented by choice (A) - price increases and quantity decreases.

Question 11

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that the below-equilibrium prices established by rent controls would
A)create a surplus of rental housing.
B)promote a rapid increase in the future supply of housing.
C)result in poor service and quality deterioration of many rental units.
D)lead to a reduction in housing discrimination against minorities.

Accepted Answer

Rent controls, by setting prices below the market equilibrium, reduce the incentive for landlords to maintain and improve their properties, leading to poor service and quality deterioration of many rental units.

Question 12

A new law requiring plumbers to pass strict certification tests that reduce the number of plumbers would
A)increase the wage rate of plumbers.
B)decrease the wage rate of plumbers.
C)increase the employment of plumbers.
D)cause no change in the labor market for plumbers.

Accepted Answer

By reducing the number of plumbers, the law is creating a shortage which would drive up the demand for plumbers, and therefore, increase their wage rate.

Question 13

An increase in the number of students attending college would tend to
A)reduce the demand for college professors.
B)decrease the number of college professors employed.
C)increase the demand for college professors.
D)reduce the wage for college professors.

Accepted Answer

An increase in the number of students attending college would increase the demand for college professors because more students would require more teachers to teach them. This would result in job opportunities for more professors and potentially even lead to an increase in their wages due to a higher demand for their services.

Question 14

Which of the following is the most likely result of an increase in the minimum wage?
A)an increase in the employment of unskilled workers
B)a decrease in the number of workers seeking minimum wage jobs
C)an increase in the demand for unskilled workers
D)a decrease in the employment of unskilled workers

Accepted Answer

An increase in the minimum wage would increase labor costs for businesses, causing them to reduce their demand for labor. This would lead to a decrease in the employment of unskilled workers as businesses try to minimize their costs.

Question 15

When a price floor is above the equilibrium price,
A)quantity demanded will exceed quantity supplied, so there will be a shortage.
B)quantity supplied will exceed quantity demanded, so there will be a surplus.
C)the market will be in equilibrium.
D)This is a trick question because price floors are generally set below the equilibrium price.

Accepted Answer

The answer of When a price floor is above the...

Question 16

If the demand for a good is highly inelastic, a tax on the good
A)places the burden of the tax equally on buyers and sellers
B)permits sellers to pass most of the cost increase resulting from the tax on to the consumers of the product
C)reduces the profits earned by sellers since they must write the check to pay the tax
D)makes the demand more inelastic
E)makes the demand more elastic

Accepted Answer

When the demand for a good is highly inelastic, consumers are generally not very responsive to price changes. This means that if a tax is introduced on the good, the sellers can simply pass on most of the additional cost to the consumers without greatly affecting the quantity of the good sold. As a result, the burden of the tax is primarily borne by the consumers, and not by the sellers. Therefore, option B is the correct choice.

Question 17

Other things constant, as the price of a resource increases,
A)the quantity of the resource demanded falls.
B)the quantity of the resource supplied falls.
C)the price of the product the resource helps to produce falls.
D)there is less of an incentive for users of the resource to find substitute resources.

Accepted Answer

As the price of a resource increases, the cost of production increases, and firms tend to use less of that resource to produce their goods or services. Consequently, the quantity of the resource demanded falls.

Question 18

An increase in the number of students graduating with a major in engineering would result in
A)a decrease in the supply of engineers that would increase the wage of engineers and decrease the number employed.
B)an increase in the supply of engineers that would decrease the wage of engineers and increase the number employed.
C)a decrease in the demand for engineers that would decrease the wage of engineers and decrease the number employed.
D)an increase in the demand for engineers that would increase the wage of engineers and increase the number employed.

Accepted Answer

An increase in the number of students graduating with a major in engineering would increase the supply of engineers, leading to a decrease in the wage of engineers and an increase in the number employed. This is because there would be more engineers available to fill the demand from companies, leading to a decrease in the wage as employers do not need to compete as intensely for each individual engineer.

Question 19

Other things constant, a decrease in the demand for computers will
A)increase the price of computers.
B)increase the quantity supplied of computers.
C)increase the demand for computer manufacturing workers.
D)decrease the demand for computer manufacturing workers.

Accepted Answer

The answer of Other things constant, a decrease in the...

Question 20

When a supply and demand model is used to analyze the market for labor,
A)demand is generally no longer downward sloping.
B)the wage rate is used on the vertical axis as the market price.
C)employment is used on the horizontal axis as the market quantity.
D)both b andc.

Accepted Answer

In a supply and demand model for the labor market, the wage rate is depicted on the vertical axis as the market price and the quantity of labor is depicted on the horizontal axis as the market quantity. Demand for labor is downward sloping in most cases, but there can be certain exceptions where the demand curve may slope upward depending on factors such as network effects and complementarity. Therefore, option A is incorrect. As for options B and C, they are both accurate statements and are commonly used in labor market analysis. Thus, the correct answer is D.

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

Which of the following would tend to increase the wage of coal miners?

The more elastic the supply of a product, the more likely it is that the

The Laffer curve illustrates the concept that

Other things constant, an increase in the demand for motorcycles will

Which of the following is a major disadvantage of setting the price of a good below equilibrium and using waiting in line rather than price to ration the good?

Which of the following would tend to increase the price of lumber?

When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?

How would an increase in the price of paper influence the market for college textbooks?

If there was an increase in the excise tax imposed on beer suppliers, what would be the effect on the equilibrium price and quantity of beer?

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that the below-equilibrium prices established by rent controls would

A new law requiring plumbers to pass strict certification tests that reduce the number of plumbers would

An increase in the number of students attending college would tend to

Which of the following is the most likely result of an increase in the minimum wage?

When a price floor is above the equilibrium price,

If the demand for a good is highly inelastic, a tax on the good

Other things constant, as the price of a resource increases,

An increase in the number of students graduating with a major in engineering would result in

Other things constant, a decrease in the demand for computers will

When a supply and demand model is used to analyze the market for labor,