Module 7 Quizes

Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What Will be the likely effect on the market for sparkling wine in Vinyardia? A) quantity demanded will decrease, quantity supplied will increase, and a surplus will result B) quantity demanded will increase, quantity supplied will decrease, and a surplus will result C) quantity demanded will increase, quantity supplied will decrease, and a shortage will result D) quantity demanded will decrease, quantity supplied will increase, and a shortage will result

Quantity demanded will decrease, quantity supplied will increase, and a surplus will result

Rent control is an example of... A) A price ceiling B) A black market C) A subsidy for low skilled workers D) A price floor

A price ceiling

Which term refers to a legally established minimum price that firms may charge? A) A price ceiling B) A subsidy C) A price floor D) A tariff

A price floor

A gallon of milk coasts $4. If the government fixes the price at $3.50, _______. A) A shortage of milk will occur in the market B) The quantity demanded of milk will fall C) there will be an excess supply of milk in the market D) The quality of milk supplied will increase

A shortage of milk will occur in the market

If the sellers of a good or tax for each unit sold, A) A larger quantity of the good is sold B) The price that sellers receive increases C) A smaller quantity of the good is sold D) The price that buyers need to pay falls

A smaller quantity of the good is sold

When the government taxes a good or service, it... A) eliminates the deadweight loss associated with the good or service B) increases producer surplus for the good or service C) increases consumer surplus for the good or service D) affects the market equilibrium for that good or service

Affects of the market equilibrium for that good or service

Suppose the government forced all bread manufacturers to sell their products at a "fair trade" that was half the current, free-market price. To keep it simple, assume that people must wait in line to get bread at the controlled price. Would consumer surplus rise, fall, or can't you tell with the information given?

Consumer surplus decreases

The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the... A) demand curve for imported champagne is horizontal B) demand curve for imported champagne is vertical C) demand curve is downward sloping in the supply curve is upward sloping D) supply curve for imported champagne is vertical

Demand curve for imported champagne is vertical

A price floor set above the equilibrium price leads to a(n) _________. A) excess demand for goods in the market B) excess supply of goods in the market C) positive externality D) increase in social well-being

Excess supply of goods in the market

The division of the burden of a tax between buyers and sellers in a market is called allocation. True or false

False

The incidence of a tax depends on whether the government collects the tax from buyers or sellers. True or false

False

When the demand for a product is more elastic than the supply... A) consumers pay the majority of the tax on the product B) consumers pay the entire tax on the product C) firms pay the entire tax on the product D) Firms pay the majority of the tax on the product

Firms pay the majority of the tax on the product

Which of the following is true of a progressive tax system? A) Low income households pay higher percentage of their income as taxes B) all households pay the same amount of taxes irrespective of their income C) all households pay the same percentage of their income as taxes D) High income households pay A higher percentage of their income as taxes

Higher income households pay a higher percentage of their income as taxes

In a regressive tax system... A) all households pay the same amount of taxes irrespective of their income B) high income households pay a higher percentage of their income as taxes C) all households pay the same percentage of their income as taxes D) Low income households pay a higher percentage of their income as taxes

Low income households pay a higher percentage of their income as taxes

A price floor is the ________. A) minimum price that the seller accepts for a good B) lower limit on the price of a good C) maximum willingness to pay for a good D) upper limit on the price of a good

Lower limit on the price of a good

In order to be binding, a price ceiling... A) must coincide with the free market equilibrium price B) must lie below the free market equilibrium price C) must lie above the free market equilibrium price D) must be high enough for firms to earn a profit

Must lie below the free market equilibrium price

The government of Lithasia has decided to set a minimum price for certain agricultural products in order to safeguard the interests of farmers. This is an example of a ________. A) pigouvian tax B) pigouvian subsidy C) Price ceiling D) Price floor

Price floor

In the US, income taxes are... A) regressive B) marginal C) Progressive D) proportional

Progressive

In the US, The federal income tax is an example of a... A) regressive tax B) proportional tax C) Progressive tax D)Flat tax

Progressive tax

If you pay $2,000 in taxes on an income of $20,000, and a tax of $3,000 on an income of $30,000, then over this range of income tax is... A) regressive B) proportional C) progressive D) there is insufficient information to answer the question

Proportional

Rent control... A) puts a legal limit on the rent that landlords can charge for an apartment B) is a government policy which limits apartment rental to those whose incomes are less than $50,000 per year C) only applies to those apartments which are owned and rented out by the local government D) is a price floor which sets a minimum rent for apartments

Put a legal limit on the rent that landlord can charge for an apartment

When a price ceiling is in place keeping the price below the market price, what is larger: quantity demanded or quantity supplied?

Quantity demanded

Which of the following is likely to happen if a price control below the equilibrium price is imposed? A) quantity demanded will exceed quantity supplied B) consumer surplus will decrease C) Producer surplus will increase D) quantity supplied will exceed quantity demanded

Quantity demanded will exceed quantity supplied

Which of the following is likely to happen if a price control above the equilibrium price is imposed? A) consumer surplus will increase B) Producer surplus will decrease C) quantity supplied will exceed quantity demanded D) quantity demanded will exceed quantity supplied

Quantity supplied will exceed quantity demanded

In a _______ tax system, the marginal tax rate declines with income. A) regressive B) proportional C) progressive D) marginal

Regressive

The actual division of the burden of a tax between buyers and sellers in a market is called... A) tax parity B) tax liability C) tax incidence D) tax bearer

Tax incidence

The incidence of a per-unit tax on a good is identical for buyers and sellers of the good if... A) the elasticity of market demand exceeds the elasticity of market supply B) the market supply curve is flatter than the market demand curve C) the buyers and sellers of the good are equally sensitive to proce changes D) the market demand curve is horizontal

The buyers and sellers of the good are equally sensitive to price changes

If a tax is imposed on each unit of a good purchased, A) The supply curve shifts to the right B) The demand curve shifts to the left C) the demand curve shifts to the right D) the supply curve shifts to the left

The demand curve shifts to the left

The deadweight loss if taxation on a good is higher if... A) there is only one seller in the market B) A progressive tax system is practiced C) A lower rate of tax is imposed on the sale of the good D) The demand or the supply think it is relatively price elastic

The demand or the supply of the good is relatively price elastic

The tax incidence on buyers is higher if... A) the number of sellers in a market is larger than the number buyers B) the elasticity of the market supply curve is higher than the elasticity C) The buyers and sellers of a good are equally sensitive to price changes D) The elasticity of the market demand curve is higher than the elasticity of the market supply curve

The elasticity of the market supply curve is higher than the elasticity of the market demand curve

A price ceiling does not lead to a deadweight loss if ______. A) The price elasticity of market demand is greater than one B) The price elasticity of market supply is greater than one C) The equilibrium market price lies above the price ceiling D) The equilibrium market price lies below the price ceiling

The equilibrium market price lies below the price ceiling

If the tax is imposed on a good, A) The quantity of the good traded in the market increases B) consumer surplus increases C) The equilibrium quantity of the good in the market falls D) Producer surplus increases

The equilibrium quantity of the good in the market falls

The marginal tax rate is... A) The amount of taxes paid as a percentage of gross domestic product B) The amount of per capita taxes paid C) The fraction of each additional dollar of income that must be paid in taxes D) The amount of taxes paid as a percentage of income

The fraction of each additional dollar of income that must be paid in taxes

In reference to the federal income tax system, a tax bracket is... A) used to determine the average tax rate B) The estimated amount of federal income tax firms withhold from their employees paychecks C) The income range within which a tax rate applies D) The formula the federal government uses to determine the dollar amount of the personal exemption and the amounts taxpayers are allowed for deductions from there incomes

The income range within which a tax rate applies

The burden of attacks falls entirely on buyers if... A) The price elasticity of demand is zero (perfectly inelastic) B) The price elasticity of supply is unitary elastic C) The income elasticity of demand is high D) The price elasticity of demand is greater than one

The price elasticity of demand is zero (perfectly and inelastic)

With an increase in the demand for a good, if prices are not allowed to increase, A) a surplus will occur in the market B) there will be no incentive for firms to increase the quantity supplied of the good C) there will be an increase in overall efficiency in the market D) social sir plus will be maintained at maximum

There will be no incentive for firms to increase the quantity supplied of the good

A price ceiling is a legally determined maximum price that sellers may charge. True or false

True

If the government wants to minimize the welfare loss of a tax, it should tax goods with more inelastic demands or supplies. True or false

True