module 1.3 questions

The minimum wage is an example of a a) price ceiling. b) price floor. c) wage subsidy. d) tax.

b) price floor.

The maximum price that a buyer will pay for a good is called the a) equity. b) willingness to pay. c) efficiency. d) cost.

b) willingness to pay.

The federal government uses the revenue from the FICA (Federal Insurance Contribution Act) tax to pay for a) Social Security and Medicare. b) unemployment compensation. c) the salaries of members of Congress. d) housing subsidies for low-income people.

a) Social Security and Medicare.

Congress intended that a) half the FICA tax be paid by workers, and half be paid by firms. b) the entire FICA tax be paid by firms. c) the entire FICA tax be paid by workers. d) one-quarter of the FICA tax be paid by workers, and three-quarters be paid by firms.

a) half the FICA tax be paid by workers, and half be paid by firms.

The Federal Insurance Contribution Act (FICA) tax is an example of a(n) a) payroll tax. b) farm subsidy. c) income subsidy. d) sales tax.

a) payroll tax.

Welfare economics is the study of how a) the allocation of resources affects economic well-being. b) a consumer's optimal choice affects her demand curve. c) a price ceiling compares to a price floor. d) the government helps poor people.

a) the allocation of resources affects economic well-being.

Producer surplus equals a) Value to buyers - Costs of sellers. b) Amount received by sellers - Costs of sellers. c) Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers. d) Value to buyers - Amount paid by buyers.

b) Amount received by sellers - Costs of sellers.

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his a) producer deficit. b) cost of building fences. c) profit. d) producer surplus.

b) cost of building fences.

An example of positive analysis is studying a) if income distributions are fair. b) how market forces produce equilibrium. c) whether equilibrium outcomes are socially desirable. d) whether equilibrium outcomes are fair.

b) how market forces produce equilibrium.

Minimum-wage laws dictate the a) highest price employers may pay for labor. b) lowest price employers may pay for labor. c) average price employers must pay for labor. d) the highest and lowest prices employers may pay for labor.

b) lowest price employers may pay for labor.

In a market, the marginal buyer is the buyer a) whose willingness to pay is lower than that of all other buyers and potential buyers. b) who would be the first to leave the market if the price were any higher. c) who is willing to buy exactly one unit of the good. d) whose willingness to pay is higher than that of all other buyers and potential buyers.

b) who would be the first to leave the market if the price were any higher.

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called a) consumer surplus. b) willingness to pay. c) producer surplus. d) deadweight loss.

b) willingness to pay.

Which of the following is correct? A tax burden a) falls more heavily on the side of the market that is closest to unit elastic. b) falls more heavily on the side of the market that is more elastic. c) falls more heavily on the side of the market that is less elastic. d) is distributed independently of the relative elasticities of supply and demand.

c) falls more heavily on the side of the market that is less elastic.

A payroll tax is a a) tax that each firm must pay to the government before the firm can hire workers and operate its business. b) tax on all wages above the minimum wage. c) tax on the wages that firms pay their workers. d) fixed number of dollars that every firm must pay to the government for each worker that the firm hires.

c) tax on the wages that firms pay their workers.

The minimum wage has its greatest impact on the market for a) older labor. b) black labor. c) teenage labor. d) female labor.

c) teenage labor.

Policymakers use taxes a) to raise revenue for public purposes but not to influence market outcomes. b) only in those markets in which the burden of the tax falls clearly on the sellers. c) when they realize that price controls alone are insufficient to correct market inequities. d) both to raise revenue for public purposes and to influence market outcomes.

d) both to raise revenue for public purposes and to influence market outcomes.

When a payroll tax is enacted, the wage received by workers a) falls, and the wage paid by firms falls. b) rises, and the wage paid by firms falls. c) rises, and the wage paid by firms rises. d) falls, and the wage paid by firms rises.

d) falls, and the wage paid by firms rises.

Market power and externalities are examples of a) welfare economics. b) laissez-faire economics. c) public policy. d) market failure.

d) market failure.

Externalities are a) external forces that help establish equilibrium price. b) side effects of government intervention in markets. c) external forces that cause the price of a good to be higher than it otherwise would be. d) side effects passed on to a party other than the buyers and sellers in the market.

d) side effects passed on to a party other than the buyers and sellers in the market.

The study of how the allocation of resources affects economic well-being is called a) willingness-to-pay economics. b) consumer economics. c) macroeconomics. d) welfare economics.

d) welfare economics.