Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) If government regulations increase the cost of producing gasoline while at the same time 1)
government regulations reduce the cost of driving a relatively inefficient sport utility vehicle
(SUV),
A) the demand for gasoline is expected to decrease.
B) the price of gasoline is expected to increase, whereas the total consumption of gasoline can
increase, decrease, or stay the same.
C) the quantity supplied of gasoline is expected to increase.
D) the supply of gasoline is expected to increase.

2) If the demand for high definition televisions increases and the supply of high definition televisions 2)
increases, then
A) it is clear that prices will increase, the change in the quantity of televisions sold is ambiguous.
B) it is clear that prices will decrease, the change in the quantity of televisions sold is ambiguous.
C) it is clear that quantity sold will decrease, the change in the price of televisions is ambiguous.
D) it is clear that quantity sold will increase, the change in the price of televisions is ambiguous.

3) Consider that the U.S. places a quota on imports of steel from South Korea, which of the following 3)
would NOT likely occur
A) the price of steel in the United States would increase.
B) the demand for steel in the United States will increase.
C) the quantity of steel produced in the United States would increase or stay the same.
D) the quantity demanded for steel in the United States will decrease.

4) Suppose the market for potatoes can be expressed as follows: 4)

Supply: QS = -20 + 10p

If the government sets a maximum price of $10 per unit, the quantity demanded is ______;
quantity supplied is ______; and ______.
A) 120; 120; the market is at equilibrium.
B) 120; 220; there will be excess supply of 100 units.
C) 200; 80; there will be excess demand of 120 units.
D) 220; 120; there will be excess demand of 100 units.

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 5) Suppose the market for potatoes can be expressed as follows: 5)

Supply: QS = -20 + 10p

Suppose the government artificially restricts the quantity to 100 units, the quantity demanded is
______; the quantity supplied is ______; price is $______; and ______.
A) 100; 100; 15; the market is in equilibrium.
B) 100; 100; 15; the market is in disequilibrium.
C) 160; 100; indeterminate; the market is in disequilibrium.
D) 160; 100; 12; there is excess demand of 60 units.

6) Consumers will always pay the entire amount of a specific (unit) tax whenever: 6)
A) demand is perfectly inelastic. B) supply is perfectly elastic.
C) A or B. D) Neither A nor B.

7) If a government wants to maximize revenues from a tax it should: 7)

8) Suppose the demand curve for a good is downward sloping and the supply curve is upward 8)
sloping. At the market equilibrium, if demand is more elastic than supply in absolute value, a $1
specific (unit) tax will:
A) raise the price to consumers by 50 cents.
B) raise the price to consumers by $1.
C) raise the price to consumers by more than 50 cents.
D) raise the price to consumers by less than 50 cents.

9) In the case of a specific (unit) tax, economic incidence is independent of who pays the tax: 9)
A) only when supply and demand elasticities are not constant.
B) in most but not all cases.
C) only when the tax is collected from consumers.
D) in all cases.

10) Suppose the market for grass seed can be expressed as 10)

Demand: QD = 100 - 2p
Supply: QS = 3p

If government imposes a $5 specific (unit) tax to be collected from sellers, the burden on
consumers is $______; the burden on producers is $______; and tax revenue is $______.
A) 4; 1; 310 B) 2; 3; 270 C) 1; 4; 310 D) 3; 2; 270

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11) Suppose the market for grass seed can be expressed as 11)

Demand: QD = 100 - 2p
Supply: QS = 3p

If government imposes a $5 specific (unit) tax to be collected from sellers, the point price elasticity
of supply at the original equilibrium point is ______; and the point price elasticity of demand at the
original equilibrium point is ______.
A) 2; 3 B) 1; 2/3 C) 3; 2 D) 1; 3/2 E) 1; 1/4

12) Suppose the market for grass seed can be expressed as 12)

Demand: QD = 200 - 5p
Supply: QS = 40 + 5p

If government imposes a $5 specific (unit) tax to be collected from sellers, the burden on
consumers is $______; the burden on producers is $______; and tax revenue is $______.
A) 4.5; 0.5; 537.5
B) 2.5; 2.5; 537.5
C) 2.5; 2.5; 600
D) 0.5; 4.5; 537.5
E) 0.5; 4.5; 600

13) Suppose the market for grass seed can be expressed as 13)

Demand: QD = 200 - 5p
Supply: QS = 40 + 5p

If government imposes a $5 specific (unit) tax to be collected from sellers, the point price elasticity
of supply at the original equilibrium pont is ______; and the point price elasticity of demand at the
original equilibrium point is ______.
A) 1; 1 B) .67; .67 C) 1; 9 D) 9; 1 E) 5; 1

14) The price elasticity of demand is -1.5. The price elasticity of supply is 1.5. The fraction of a specific 14)
tax that is borne by producers is ________.
A) 0.5 B) 1 C) 0.25 D) 0.75 E) 0

15) From 1970 to 2010, the real price of eggs decreased. Which of the following would cause an 15)
unambiguous decrease in the real price of eggs?
A) A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for
eggs.
B) A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for
eggs.
C) A shift to the right in the supply curve for eggs and a shift to the left in the demand curve for
eggs.
D) A shift to the right in the supply curve for eggs and a shift to the right in the demand curve
for eggs.

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16) From 1970 to 2010, the real price of eggs decreased and the total annual consumption of eggs 16)
decreased. Which of the following would cause an unambiguous decrease in the real price of eggs
and an unambiguous decrease in the quantity of eggs consumed?
A) A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for
eggs.
B) A shift to the right in the supply curve for eggs and a shift to the right in the demand curve
for eggs.
C) A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for
eggs.
D) none of the above

17) We observe that both the price of and quantity sold of golf balls are rising over time. This is due to: 17)
A) more stringent professional requirements on the quality of golf balls requiring producers to
use more expensive raw materials.
B) increases in the price of golf clubs over time.
C) decreases in membership fees for country clubs with golf facilities.
D) continual improvements in the technology used to produce golf balls.

18) The burden of a tax per unit of output will fall heavily on consumers when demand is relatively 18)
________ and supply is relatively ________.
A) elastic; elastic B) inelastic; elastic
C) elastic; inelastic D) inelastic; inelastic

19) The deadweight loss of a specific tax will be a small share of the tax revenue collected if: 19)
A) demand is more inelastic than supply. B) supply and demand are both inelastic.
C) supply and demand are both elastic. D) supply is more inelastic than demand.

20) Why is there a deadweight loss associated with subsidy payments? 20)
A) Quantity supplied is less than the equilibrium amount, so consumers and producers lose
surplus value on those units that are no longer produced.
B) The subsidy payment does not distort quantities in the market, but the government cost
exceeds consumer willingness to pay for the quantity demanded.
C) There is no deadweight loss from a subsidy.
D) Quantity supplied exceeds the equilibrium amount, and consumer willingness to pay for
these additional units is smaller than the marginal cost of producing them.

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Answer Key
Testname: 217 SAMPLE POST Q1 F20-21

1) B
2) D
3) B
4) C
5) B
6) C
7) A
8) D
9) D
10) D
11) B
12) B
13) B
14) A
15) C
16) D
17) C
18) B
19) B
20) D