Question 1

If a binding price floor were placed in the market in the graph shown:

Accepted Answer

A)   quantity demanded would exceed quantity supplied.
B)   quantity supplied would exceed quantity demanded.
C)   the demand curve would have to shift.
D)   the supply curve would have to shift.E) A) and D)
F) All of the above

Question 2

The graph shown portrays a subsidy to buyers.Once the subsidy is in place,the buyers pay _____ and the sellers receive ________; the difference is ___________.

Accepted Answer

A)   $24; $40; the amount of the subsidy
B)   $30; $46; the amount of the subsidy
C)   $40; $24; the amount of the subsidy
D)   $24; $40; the amount of government revenueE) All of the above
F) A) and C)

Question 3

A binding price floor:

Accepted Answer

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

Question 4

Policymakers who wish to discourage businesses that pollute by taxing them:

Accepted Answer

A)   forget that businesses will pass the entire tax onto consumers of their products.
B)   should place a tax on consumers instead of the producers in order to increase the burden on sellers.
C)   should place a tax on producers instead of the consumers in order to increase the burden on sellers.
D)   forget that some of the tax burden will be shared by consumers.E) B) and C)
F) A) and D)

Question 5

The graph shown best represents:

Accepted Answer

A)   a binding price ceiling.
B)   a binding price floor.
C)   a missing market.
D)   a market for an inferior good.E) A) and C)
F) B) and C)

Question 6

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

Accepted Answer

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

Question 7

Suppose a tax on buyers has been imposed in the graph shown.The amount of deadweight loss generated by this tax is:

Accepted Answer

A)   $0.
B)   $18.
C)   $36.
D)   $72.E) A) and D)
F) All of the above

Question 8

The graph shown best represents:

Accepted Answer

A)   a non-binding price ceiling.
B)   a non-binding price floor.
C)   a missing market.
D)   a market for an inferior good.E) A) and C)
F) C) and D)

Question 9

One way to allocate the scarce good created from an effective price ceiling is to:

Accepted Answer

A)   offer it on a first-come, first-served basis.
B)   ration a certain quantity per household.
C)   give them to the friends and family of the producers.
D)   All of these are examples of allocating using non-price methods.E) A) and B)
F) None of the above

Question 10

If a price ceiling of $8 were placed on the market in the graph shown,which area represents the surplus that is transferred from producers to consumers?

Accepted Answer

A)   C + D + F + G
B)   C + D
C)   F + G
D)   CE) A) and B)
F) C) and D)

Question 11

Suppose the market supply is initially at S1 and a price ceiling is set at 8.If supply shifts from S1 to S2,then

Accepted Answer

A)   The price ceiling will no longer bind.
B)   The price ceiling will prevent output from changing.
C)   The size of the shortage will increase.
D)   The market will not reach equilibrium.E) B) and C)
F) A) and B)

Question 12

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

Accepted Answer

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

Question 13

The graph shown demonstrates a tax a 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) B) and D)
F) A) and B)

Question 14

With reference to the graph above,if the intended aim of the price ceiling set at $6 was a net increase in the well-being of consumers,then normative analysis would conclude that:

Accepted Answer

A)   the policy was effective, since surplus gained by consumers through lower prices is less than the surplus they lost through deadweight loss.
B)   the policy was ineffective, since surplus gained by consumers through lower prices is less than the surplus they lost through deadweight loss.
C)   the policy was effective, since surplus lost by producers through lower prices is less than the surplus gained by consumers through lower prices.
D)   there is no "right" conclusion to be reached (in a normative sense) , since people have different opinions concerning what constitutes a better outcome.E) All of the above
F) A) and B)

Question 15

A price ceiling 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) B) and C)

Question 16

Suppose a tax has been imposed in the graph shown.Which kind of tax is most likely demonstrated by this graph?

Accepted Answer

A)   A tax on sellers
B)   A tax on buyers
C)   A tax on big corporations
D)   A price ceilingE) A) and D)
F) B) and C)

Question 17

Positive analysis:

Accepted Answer

A)   involves the formulation and testing of hypotheses.
B)   involves value judgments concerning the desirability of alternative outcomes.
C)   weighs the fairness of a policy.
D)   examines if the outcome is desirable.E) C) and D)
F) B) and D)

Question 18

In order for a price ceiling to "bind," it:

Accepted Answer

A)   must be set above the equilibrium price, and will likely cause a shortage.
B)   must be set below the equilibrium price, and will likely cause a shortage.
C)   must be set above the equilibrium price, and will likely cause a surplus.
D)   must be set below the equilibrium price, and will likely cause a surplus.E) B) and C)
F) A) and C)

Question 19

A price ceiling is non-binding when:

Accepted Answer

A)   it is set above the equilibrium price.
B)   it is set below the equilibrium price.
C)   it reduces the output in a market.
D)   it increases the output in a market.E) B) and D)
F) A) and B)

Question 20

Which of the following changes to the market in the graph shown could cause the price ceiling to become non-binding?

Accepted Answer

A)   Demand could increase, and shift to the right.
B)   Supply could increase, and shift to the left.
C)   Supply could increase, and shift to the right.
D)   Supply could decrease, and shift to the left.E) C) and D)
F) B) and D)

Exam 6: Government Intervention Microeconomics

If a binding price floor were placed in the market in the graph shown:

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

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A binding price floor:

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With reference to the graph above,if the intended aim of the price ceiling set at $6 was a net increase in the well-being of consumers,then normative analysis would conclude that:

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The graph shown portrays a subsidy to buyers.Once the subsidy is in place,the buyers pay _____ and the sellers receive ________; the difference is ___________.

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The graph shown best represents:

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

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Which of the following changes to the market in the graph shown could cause the price ceiling to become non-binding?

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A price ceiling is non-binding when:

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Policymakers who wish to discourage businesses that pollute by taxing them:

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A price ceiling is:

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One way to allocate the scarce good created from an effective price ceiling is to:

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The graph shown best represents:

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Suppose a tax has been imposed in the graph shown.Which kind of tax is most likely demonstrated by this graph?

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In order for a price ceiling to "bind," it:

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If a price ceiling of $8 were placed on the market in the graph shown,which area represents the surplus that is transferred from producers to consumers?

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

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Suppose the market supply is initially at S1 and a price ceiling is set at 8.If supply shifts from S1 to S2,then

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Suppose a tax on buyers has been imposed in the graph shown.The amount of deadweight loss generated by this tax is:

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Positive analysis:

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The graph shown portrays a subsidy to buyers.Once the subsidy is in place,the buyers pay _ and the sellers receive ; the difference is _______.

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

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