Question 1

Suppose the government imposes a 10% sales tax on televisions. If the pre-tax equilibrium price is $300, what is the immediate effect on the supply curve?

Accepted Answer

The supply curve shifts up vertically by $30.

Question 2

If the demand for televisions is highly elastic and a sales tax is imposed, who bears the larger share of the tax burden?

Accepted Answer

Sellers bear a larger share of the tax.

Question 3

A price ceiling is set below the free market equilibrium price. Which of the following is a likely short-run consequence in the rental housing market?

Accepted Answer

Increased search activity and the development of a black market.

Question 4

Which of the following best describes allocative efficiency in a free market?

Accepted Answer

Products are distributed to the highest valued users.

Question 5

Consider the agricultural market where technological improvements increase supply, but demand is price inelastic. What is the most likely long-term outcome for farmers’ incomes?

Accepted Answer

Farmers’ incomes will fall due to lower prices.

Question 6

If a minimum wage is set above the equilibrium wage, what is the immediate effect in the labor market according to standard economic theory?

Accepted Answer

Excess supply of labor, leading to unemployment.

Question 7

Which of the following is a possible long-run effect of rent controls in a city with inelastic supply and demand for apartments?

Accepted Answer

Developers have less incentive to build new apartments.

Question 8

Suppose the government wants to support farmers’ incomes by setting a price floor above equilibrium. What is a direct consequence if the government does not intervene further?

Accepted Answer

A surplus of agricultural products.

Question 9

Which of the following policies can the government use to address the surplus created by a price floor in agriculture?

Accepted Answer

Purchase the surplus at the floor price.

Question 10

If the government imposes a quota on agricultural production, what is the economic value of the quota to a farmer?

Accepted Answer

The premium a farmer would pay to produce and sell at the higher, quota-supported price.

Question 11

A sales tax is considered an 'indirect' tax because:

Accepted Answer

It is collected from sellers but partially paid by consumers through higher prices.

Question 12

Suppose the demand for rental housing is inelastic. If rent controls are imposed, who is most likely to benefit in the short run?

Accepted Answer

Current tenants who secure apartments at the controlled price.

Question 13

Which of the following best explains why minimum wage increases do not always lead to higher unemployment, according to recent research?

Accepted Answer

Businesses invest in capital, making workers more productive and increasing labor demand.

Question 14

If a price ceiling is set at $$900 in a market where the equilibrium price is 1200$$, what is the likely outcome?

Accepted Answer

Excess demand (shortage) of the product.

Question 15

Which of the following equations correctly represents the division of a per-unit tax between consumers and producers?

Accepted Answer

$$P_{consumer} = P_{seller} + Tax$$

Question 16

If the government subsidizes producers so they can lower prices to consumers, what is the effect on the supply curve?

Accepted Answer

The supply curve shifts downward by the amount of the subsidy.

Question 17

Which of the following is NOT a typical consequence of a price ceiling in the rental market?

Accepted Answer

A surplus of available apartments.

Question 18

Suppose the government sets a minimum wage at $$15 when the equilibrium wage is 9. If $$businesses respond by investing in worker productivity, what happens to the demand for labor?

Accepted Answer

The demand for labor increases, reducing excess supply.

Question 19

Which of the following best describes productive efficiency?

Accepted Answer

Producing goods using the lowest cost resources.

Question 20

At a disequilibrium price, what determines the quantity actually exchanged in the market?

Accepted Answer

The lesser of quantity demanded and quantity supplied.

Market Intervention: Taxes, Price Controls, and Market Efficiency

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