d.
lump-sum taxes.
100. If the government wants to generate large revenues from placing a tax on the consumption of a
particular good, it should choose a good for which
a.
the demand is price elastic
b.
the demand is unitary elastic
c.
the demand is price inelastic
d.
there are many good substitutes available for the good
101. If the demand for a good is very price elastic, the imposition of a tax on that good
a.
places the largest portion of the burden on the sellers of that product
b.
places the burden of the tax equally on buyers and sellers
c.
places the largest portion of the tax on consumers
d.
will make demand more elastic than it was before the tax
e.
will make demand more inelastic than it was before the tax
102. A tax tends to
a.
increase formal market activity because it decreases prices
b.
reduce formal market activity because it increases work incentives
c.
reduce formal market activity because it lowers the return on such activity
d.
reduce activity in the underground economy because people are afraid of being connected
with tax fraud
103. If the government wants to raise tax revenue and shift most of the tax burden to the consumers, it
would impose a tax on a good with a
a.
flat (elastic) demand curve and a steep (inelastic) supply curve.
b.
steep (inelastic) demand curve and a flat (elastic) supply curve.
c.
steep (inelastic) demand curve and steep (inelastic) demand curve.
d.
flat (elastic) demand curve and a flat (elastic) supply curve.
104. If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would
impose a tax on a good with a
a.
flat (elastic) demand curve and a steep (inelastic) supply curve.
b.
steep (inelastic) demand curve and a flat (elastic) supply curve.
c.
steep (inelastic) demand curve and steep (inelastic) supply curve.
d.
flat (elastic) demand curve and a flat (elastic) supply curve.
105. The actual incidence (or burden) of a tax refers to
a.
the governmental agency responsible for collecting the tax.
b.
who actually bears the burden of a tax once changes in market prices are taken into
account.
c.
the degree of progressiveness in the rate structure of the tax.
d.
who the tax is legally or statutorily imposed on.
106. The statutory incidence (or burden) of a tax refers to
a.
the governmental agency responsible for collecting the tax.
b.
who actually bears the burden of a tax once changes in market prices are taken into
account.
c.
the degree of progressiveness in the rate structure of the tax.
d.
who the tax is legally or statutorily imposed on.
107. The actual burden of a tax is determined primarily by
a.
the elasticities of demand and supply.
b.
the legal (or statutory) assignment of the tax.
c.
the number of exchanges that are eliminated from the market as a result of the tax.
d.
none of the above.
108. If a $5,000 tax is placed legally (statutorily) on the sellers of new automobiles and as a result the price
of automobiles to consumers rises by $4,000, then the actual burden of the tax
a.
falls completely on automobile buyers.
b.
falls completely on automobile sellers.
c.
is $4,000 on automobile buyers and $1,000 on sellers.
d.
is $1,000 on automobile buyers and $4,000 on sellers.
109. If a $5,000 property tax is placed legally (statutorily) on the buyers of new automobiles and as a result
the price of automobiles at dealerships rises by $2,000, the actual burden of the tax
a.
falls completely on automobile buyers.
b.
falls completely on automobile sellers.
c.
is $2,000 on automobile buyers and $3,000 on sellers.
d.
is $3,000 on automobile buyers and $2,000 on sellers.
110. If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and if as a
result, the price to consumers of a pack of cigarettes went up by 40 cents, the
a.
actual burden of this tax falls mostly on consumers.
b.
actual burden of this tax falls mostly on manufacturers.
c.
actual burden of the tax would be shared equally by producers and consumers.
d.
tax would clearly be a progressive tax.
111. Suppose a property tax of $300 per month is legally (statutorily) imposed on the owners of rental
housing. Which of the following is likely to occur?
a.
The monthly rental rate paid by tenants would increase.
b.
The quantity of rental housing available would decline.
c.
There would be a deadweight loss (or excess burden) created in the rental housing market.
d.
All of the above are likely to happen.
112. An excise tax levied on a product will impose a smaller relative burden on consumers (and a larger
relative burden on sellers) when
a.
the supply of the product is relatively inelastic.
b.
the supply of the product is relatively elastic.
c.
the demand for the product is relatively elastic.
d.
either a or c is true.
113. An excise tax levied on a product will impose a larger relative burden on consumers (and a smaller
relative burden on sellers) when
a.
the supply of the product is relatively inelastic.
b.
the supply of the product is relatively elastic.
c.
the demand for the product is relatively inelastic.
d.
either b or c is true
114. Which of the following statements is correct?
a.
Whenever a per-unit tax is imposed, sellers always pass on the full amount of the tax to
consumers in the form of higher prices.
b.
The burden of a per-unit tax on cigarettes would likely fall more on consumers than would
the burden of a tax on imported bottled water.
c.
The burden of a per-unit tax is always equally shared between producers and consumers.
d.
When a per-unit tax is imposed, the total losses to producers and consumers exactly equal
the amount of revenue collected by the government.
115. Which of the following generalizations about the burden of an excise tax is correct?
a.
The more inelastic the supply of a product, the larger the portion of an excise tax will be
paid by buyers.
b.
The more inelastic the demand for a product, the larger the portion of an excise tax will be
paid by buyers.
c.
The more elastic the supply of a product, the smaller the portion of an excise tax will be
paid by buyers.
d.
The burden of an excise tax on a product is independent of the elasticity of the supply and
demand for the product on which the tax is levied.
116. The burden of a tax will fall primarily on sellers when the
a.
demand for the product is highly inelastic and the supply is relatively elastic.
b.
demand for the product is highly elastic and the supply is relatively inelastic.
c.
tax is legally (statutorily) imposed on the seller of the product.
d.
tax is legally (statutorily) imposed on the buyer of the product.
117. The burden of a tax will fall primarily on buyers when the
a.
demand for the product is highly inelastic and the supply is relatively elastic.
b.
demand for the product is highly elastic and the supply is relatively inelastic.
c.
tax is legally (statutorily) imposed on the seller of the product.
d.
tax is legally (statutorily) imposed on the buyer of the product.
118. Suppose that the federal government levies a 50 cent excise tax on gasoline and that the demand for
gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the burden of
the tax
a.
will fall primarily on producers.
b.
will fall primarily on consumers.
c.
will be split equally between consumers and producers.
d.
cannot be determined because the burden of a tax is not influenced by the elasticities of
supply and demand.
119. In 2010 the federal government reduced the Social Security tax withholding rate from 12.4 percent
(6.2 percent on both the employer and employee) to 8.4 percent (4.2 percent on both the employer and
employee) on the wages of all workers. If the supply of labor is relatively inelastic when compared to
the elasticity of the demand for labor, the burden of this tax will
a.
continue to fall primarily on employees.
b.
continue to fall primarily on employers.
c.
be divided equally between employees and employers.
d.
change from primarily falling on employees to employers.
120. In 2010 the federal government reduced the Social Security tax withholding rate from 12.4 percent
(6.2 percent on both the employer and employee) to 8.4 percent (4.2 percent on both the employer and
employee) on the wages of all workers. If the tax were redefined such that the entire 12.4 percent was
statutorily levied on employers, economic analysis suggests that the actual burden of the tax would
a.
remain unchanged.
b.
shift more heavily toward employers.
c.
shift more heavily toward employees.
d.
be different than if the entire 12.4 percent was statutorily imposed on employees.
121. Studies indicate the demand for cigarettes is highly inelastic, while the demand for green peas tends to
be elastic. Other things constant, how will this affect the incidence of an excise tax on these products?
a.
Consumers will tend to bear a greater share of the burden of an excise tax on cigarettes
than of an excise tax on peas.
b.
Consumers will tend to bear a greater share of the burden of an excise tax on peas than of
an excise tax on cigarettes.
c.
Producers will bear a greater share of the burden of an excise tax on cigarettes than of an
excise tax on peas.
d.
Uncertain; elasticity of demand exerts no impact on how the burden of an excise tax is
distributed between consumers and producers.
122. A tax is levied on products A and B, both of which have the same price elasticity of supply. The
demand for A is more inelastic than is the demand for B. Other things constant, how will this affect the
incidence of an excise tax on these products?
a.
Producers will bear a smaller share (and consumers a larger share) of the tax burden on A
than B.
b.
Consumers will bear a smaller share (and producers a larger share) of the tax burden on A
than B.
c.
The deadweight loss (or excess burden) will be larger for good A than B.
d.
All of the above are true.
123. If a $2 tax per bottle of wine is imposed on wine producers, which of the following will occur?
a.
The price of wine will increase, fewer bottles will be purchased, and there will be a
deadweight loss from this tax.
b.
The price of wine will increase, more bottles will be purchased, and consumers will gain
as the result of this tax.
c.
The price of wine will decrease, more bottles will be purchased, and there will be a
deadweight loss from this tax.
d.
The price of wine and quantity sold will be unchanged.
124. The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the
a.
tax revenue raised by the government as the result of the tax.
b.
loss of potential gains from trade from activities forgone because of the tax.
c.
increase in the price of an activity as the result of the tax levied on it.
d.
marginal benefits derived from the expansion in government activities made possible by
the increase in tax revenues.
125. The term “deadweight loss” or “excess burden” is used to describe the
a.
expenditures on exercise and weight-reducing programs by individuals who are
overweight.
b.
loss from the elimination of mutually beneficial exchanges that results from the imposition
of a tax in a market.
c.
difference between the value consumers place on a good and the price they have to pay for
it.
d.
reduction in consumer welfare that occurs when the firms in a market make a profit.
126. The excess burden or deadweight loss of a tax refers to the
a.
increase in product price as a result of the tax.
b.
growth in government funded programs as a result of the revenue generated by the tax.
c.
loss of disposable income consumers suffer from the tax.
d.
reduction in gains from mutually beneficial exchanges that are eliminated as a result of the
tax.
127. When a tax is levied on the sale of an item,
a.
consumers will generally buy more of it.
b.
producers will generally supply more of it.
c.
the price (including the tax) of the product will generally decline.
d.
less of the item will generally be bought and sold.
128. Suppose an excise tax is imposed on two products X and Y, both of which have identical supply
elasticities. The demand for good X is highly elastic, while the demand for good Y is highly inelastic.
The deadweight loss (or excess burden) will be
a.
equal in both cases.
b.
larger for good X than good Y.
c.
larger for good Y than good X.
d.
zero in both cases.
129. The average tax rate is defined as
a.
the average number of times a circulating dollar is taxed during a year.
b.
the change in the tax rate as income increases.
c.
the change in the tax rate as income decreases.
d.
tax liability divided by taxable income.
130. Which tax rate measures the percent of your income paid in taxes?
a.
the marginal tax rate
b.
the average tax rate
c.
progressive tax coefficient
d.
the excise tax rate
131. If a household has $40,000 in taxable income and its tax liability is $20,000, the household’s average
tax rate is
a.
10 percent.
b.
25 percent.
c.
40 percent.
d.
50 percent
132. If a household has $40,000 in taxable income and its tax liability is $4,000, the household’s average tax
rate is
a.
10 percent.
b.
25 percent.
c.
40 percent.
d.
50 percent
133. If a household has $40,000 in taxable income and its tax liability is $10,000, the household’s average
tax rate is
a.
10 percent.
b.
25 percent.
c.
40 percent.
d.
50 percent
134. The marginal tax rate is defined as
a.
tax liability divided by taxable income.
b.
tax liability multiplied by taxable income.
c.
the change in tax liability divided by the change in taxable income.
d.
the change in tax liability minus the change in taxable income.
135. If Heather’s tax liability increases from $10,000 to $15,000 when her income increases from $30,000
to $40,000, her marginal tax rate is
a.
33 percent.
b.
35 percent.
c.
50 percent.
d.
60 percent.
136. If Heather’s tax liability increases from $10,000 to $16,000 when her income increases from $30,000
to $40,000, her marginal tax rate is
a.
33 percent.
b.
35 percent.
c.
50 percent.
d.
60 percent.
137. If Heather’s tax liability increases from $10,000 to $13,500 when her income increases from $30,000
to $40,000, her marginal tax rate is
a.
33 percent.
b.
35 percent.
c.
50 percent.
d.
60 percent.
138. If Lex’s income increases from $30,000 to $40,000 and his tax liability increases from $6,000 to
$10,000, which of the following is true?
a.
His marginal tax rate is 20 percent in this range.
b.
His average tax rate is 40 percent at his new income level of $40,000.
c.
He faces a regressive tax in this income range.
d.
He faces a progressive tax in this income range.
139. If Neleh’s income increases from $60,000 to $80,000 and her tax liability increases from $12,000 to
$16,000, which of the following is true?
a.
Her marginal tax rate is 20 percent in this income range.
b.
Her average tax rate is 30 percent at her new income level of $80,000.
c.
She faces a regressive tax in this income range.
d.
She faces a progressive tax in this income range.
140. If Sally were to get a $3,000 bonus from her employer, which of the following tax rates would most
accurately reflect the percent of this additional income that she would owe in taxes?
a.
her marginal tax rate
b.
her average tax rate
c.
her progressive tax coefficient
d.
the rate of excess burden
141. Kathy works full time during the day as an economist and faces a 90 percent marginal tax rate. If
Kathy were to get an offer to work a second job in the evenings doing consulting work for a local
business for $10,000 per year, how much of this additional income would she be able to keep as net
pay after taxes?
a.
$1,000
b.
$4,000
c.
$6,000
d.
$10,000
142. Kathy works full time during the day as an economist and faces a 50 percent marginal tax rate. If
Kathy were to get an offer to work a second job in the evenings doing consulting work for a local
business for $10,000 per year, how much of this additional income would she be able to keep as net
pay after taxes?
a.
$1,000
b.
$4,000
c.
$5,000
d.
$10,000
143. Kathy works full time during the day as an economist and faces a 60 percent marginal tax rate. If
Kathy were to get an offer to work a second job in the evenings doing consulting work for a local
business for $10,000 per year, how much of this additional income would she be able to keep as net
pay after taxes?
a.
$1,000
b.
$4,000
c.
$6,000
d.
$10,000
144. Ron works full time as a teacher making $50,000 while his wife Ellen stays at home taking care of
their two children. Ron’s income puts the family in a tax bracket with a 40 percent marginal tax rate.
Ellen receives a full-time job offer as an administrative assistant making $30,000 per year, however to
take the job would require the family to start paying $8,000 per year in child care expenses. If Ellen
were to accept the job offer, after paying taxes and subtracting child care expenses, by how much
would the family’s net disposable income increase?
a.
$8,000
b.
$10,000
c.
$20,000
d.
$30,000
145. Susan works as an advertising executive for a small business making $40,000 per year and is in a tax
bracket with a 30 percent marginal rate. She currently purchases a $5,000 health insurance plan outside
of her employer from her net pay. Her employer offers her the option to purchase the same health
insurance plan on a pretax basis through the company (in other words, the cost of the health insurance
is subtracted out of her gross pay before her taxes are computed). If she decides to do so, the purchase
of the $5,000 health insurance plan through her employer would now only cost her how much in terms
of a reduction in her net pay?
a.
$1,000
b.
$1,500
c.
$3,500
d.
$5,000
146. Use the table below to choose the correct answer.
Income
Tax Liability
(dollars)
(dollars)
20,000
1,000
25,000
2,500
30,000
6,000
The marginal tax rate on income in the $25,000 to $30,000 range is
a.
10 percent.
b.
20 percent.
c.
50 percent.
d.
70 percent.
147. Use the table below to choose the correct answer.
Income
Tax Liability
(dollars)
(dollars)
20,000
2,000
25,000
3,000
30,000
4,500
The marginal tax rate on income in the $20,000 to $25,000 range is
a.
10 percent.
b.
12 percent.
c.
20 percent.
d.
30 percent.
148. An income tax is defined as regressive if
a.
the tax liability of those with higher incomes exceeds the tax liability of those with low
incomes.
b.
the tax liability of those with higher incomes is less than the tax liability of those with low
incomes.
c.
those with higher incomes pay a higher percentage of their incomes in taxes than those
with low incomes.
d.
those with higher incomes pay a lower percentage of their incomes in taxes than those
with low incomes.
149. A regressive tax
a.
taxes individuals with higher incomes at a higher rate than individuals with lower
incomes.
b.
takes a similar percentage of income at all income levels.
c.
takes a higher percentage of the income of those with lower incomes than for those with
higher incomes.
d.
taxes savings at a higher rate than consumption.
150. A tax for which the average tax rate decreases with income is defined as a
a.
regressive tax.
b.
proportional tax.
c.
neutral tax.
d.
progressive tax.
151. Which of the following examples illustrates a regressive income tax?
a.
I earn $500 and pay $50 in taxes; you earn $1,000 and pay $90 in taxes.
b.
I earn $500 and pay $50 in taxes; you earn $1,000 and pay $100 in taxes.
c.
I earn $500 and pay $50 in taxes; you earn $1,000 and pay $110 in taxes.
d.
I earn $500 and pay $50 in taxes; you earn $1,000 and pay $125 in taxes.
152. Many economists believe a general sales tax (particularly on items such as food) takes a larger
proportion of income from low-income households than from high-income households. If this is true, a
general sales tax is a
a.
regressive tax.
b.
proportional tax.
c.
neutral tax.
d.
progressive tax.
153. An income tax is progressive if the
a.
tax rate decreases as income increases.
b.
percentage of income paid in taxes increases as income increases.
c.
percentage of income paid in taxes stays the same regardless of the size of income.
d.
dollar amount paid in taxes increases with income.
154. A progressive tax
a.
is one that taxes those with higher incomes at a higher rate than those with lower incomes.
b.
takes a similar percentage in the form of taxes from those with higher incomes as it does
from those with lower incomes.
c.
takes a higher percentage of income in the form of taxes from those with lower incomes
than from those with higher incomes.
d.
is any tax in which the dollar amount of taxes paid increases with income.
155. A tax for which the average tax rate rises with income is defined as a
a.
regressive tax.
b.
proportional tax.
c.
neutral tax.
d.
progressive tax.
156. A progressive tax is defined as a tax for which the
a.
average tax rate rises as income increases.
b.
average tax rate falls as income increases.
c.
average tax rate remains constant at all levels of income.
d.
dollar tax liability of those with higher income is more than the dollar tax liability of those
with lower income.
157. Which of the following examples illustrates a progressive income tax?
a.
I earn $500 and pay $50 in taxes; you earn $1,000 and pay $100 in taxes.
b.
I earn $500 and pay $50 in taxes; you earn $1,000 and pay $50 in taxes.
c.
I earn $500 and pay $50 in taxes; you earn $1,000 and pay $80 in taxes.
d.
I earn $500 and pay $50 in taxes; you earn $1,000 and pay $125 in taxes.
158. An income tax is proportional if
a.
the tax liability of high-income earners exceeds the tax liability of those with low incomes.
b.
the tax liability of high-income earners is less than the tax liability of those with low
incomes.
c.
high-income earners pay a higher percentage of their incomes in taxes than those with low
incomes.
d.
everyone pays the same percentage of their income in the form of income taxes.
159. A tax for which the average tax rate remains constant at all levels of income is defined as a
a.
regressive tax.
b.
proportional tax.
c.
neutral tax.
d.
progressive tax.
160. A proportional tax is defined as a tax for which the
a.
average tax rate rises as income increases.
b.
average tax rate falls as income increases.
c.
average tax rate remains constant at all levels of income.
d.
dollar tax liability of those with higher income is the same as the dollar tax liability of
those with lower income.
161. Which of the following examples illustrates a proportional income tax?
a.
I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,000 in taxes.
b.
I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $500 in taxes.
c.
I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $800 in taxes.
d.
I earn $5,000 and pay $500 in taxes; you earn $10,000 and pay $1,200 in taxes.
162. Use the table below to choose the correct answer.
Income
Tax
(dollars)
(dollars)
10,000
4,000
20,000
5,000
30,000
6,000
For the income range illustrated, the tax shown here is
a.
regressive.
b.
proportional.
c.
progressive.
d.
progressive up to $20,000 but regressive beyond that.
163. Use the table below to choose the correct answer.
Income
Tax
(dollars)
(dollars)
10,000
2,000
20,000
4,000
40,000
8,000
The tax schedule shown here is
a.
regressive.
b.
proportional.
c.
progressive.
d.
proportional up to $20,000 and regressive beyond that.
164. Use the table below to choose the correct answer.
Income
Tax
(dollars)
(dollars)
10,000
1,000
20,000
4,000
30,000
9,000
For the income range illustrated, the tax shown here is
a.
regressive.
b.
proportional.
c.
progressive.
d.
regressive up to $20,000 but progressive beyond that.
165. The Laffer curve illustrates the relationship between
a.
supply and demand.
b.
tax rates and tax revenues.
c.
opportunity cost and inflation.
d.
tax liability and taxable income.
166. The Laffer curve indicates that
a.
when tax rates are low, a decrease in tax rates is likely to increase tax revenues.
b.
when tax rates are high, an increase in tax rates is likely to a decrease in tax revenues.
c.
tax revenue will always increase when tax rates are increased.
d.
tax revenue will always decrease when tax rates are lowered.
167. According to the Laffer curve,
a.
an increase in tax rates will always cause tax revenues to increase.
b.
when marginal tax rates are high, an increase in tax rates is likely to cause tax revenues to
increase.
c.
when marginal taxes are low, an increase in tax rates will probably cause tax revenues to
decline.
d.
when marginal tax rates are high, a reduction in tax rates may increase tax revenue.
168. Suppose the federal excise tax rate on gasoline is increased by 50 percent. Which of the following is
the most likely impact on the tax revenue derived from the federal gas tax?
a.
Tax revenues will increase by less than 50 percent.
b.
Tax revenues will increase by 50 percent.
c.
Tax revenues will increase by more than 50 percent.
d.
The revenue from the gasoline tax will go to zero.
169. About 35,000 general aviation multiengine airplanes are licensed to operate in the United States. If an
additional $1,000-per-year tax was levied on each plane to raise general revenue, economic thinking
suggests the
a.
annual revenue from this tax would be less than $35,000,000.
b.
annual revenue from this tax would be $35,000,000.
c.
annual revenue from this tax would be more than $35,000,000.
d.
number of airplanes would increase dramatically.
170. Approximately 50,000 luxury boats (priced $100,000 or more) are currently produced each year.
Using the economic way of thinking, how much revenue would the government actually generate with
a $10,000 excise tax on luxury boats?
a.
$500 million
b.
less than $500 million
c.
more than $500 million
d.
approximately $5 billion
171. The tax rate that maximizes the revenue generated by a tax
a.
is highly efficient, and therefore, the government should always seek to impose this rate.
b.
is an ideal tax rate from the standpoint of a government that wants to minimize the
deadweight loss (or excess burden) accompanying taxation.
c.
is, from an efficiency standpoint, superior to any lower rate of taxation.
d.
will impose a large deadweight loss (excess burden) relative to the marginal revenues
collected, and therefore, a government interested in the welfare of its citizens should select
a lower tax rate.
172. When the top marginal tax rates were lowered substantially during the 1980s, the inflation-adjusted
income tax revenue collected from the top 1 percent of all income earners
a.
declined sharply.
b.
remained approximately constant.
c.
increased substantially.
d.
did none of the above.
173. Data from the effects of the substantial tax rate reductions in the 1980s
a.
cast serious doubt on the Laffer curve as a guide for tax policy.
b.
are consistent with the principles illustrated in the Laffer curve.
c.
generally reject the idea that lower tax rates can lead to higher tax revenue.
d.
support an “inverted Laffer curve” in which reducing tax rates for those with high incomes
leads to lower tax revenue.
174. When the government increased its involvement in rescue efforts on Mount McKinley (the tallest peak
in North America), the number of mountain climbing deaths
a.
decreased slightly.
b.
decreased substantially.
c.
remained the same.
d.
increased.
175. A payment the government makes to either the buyer or seller, usually on a per-unit basis, when a
good or service is purchased or sold is called a
a.
black market.
b.
interest rate.
c.
subsidy.
d.
tax.
176. A subsidy is defined as
a.
a payment that must be made to the government whenever a good or service is sold.
b.
the number of trades that are eliminated from a market when a tax is imposed.
c.
the difference between total revenue and total cost for a business firm.
d.
a payment to either the buyer or seller of a good or service, usually on a per-unit basis,
when a good or service is purchased.
177. In the supply and demand model, a subsidy granted to buyers is illustrated by
a.
a downward shift in the demand curve, by the per unit amount of the subsidy.
b.
an upward shift in the demand curve, by the per unit amount of the subsidy.
c.
a downward shift in the supply curve, by the per unit amount of the subsidy.
d.
an upward shift in the supply curve, by the per unit amount of the subsidy.
178. The benefit of a subsidy will go primarily to sellers when the
a.
demand for the product is highly inelastic and supply is relatively elastic.
b.
demand for the product is highly elastic and the supply is relatively inelastic.
c.
subsidy is legally (statutorily) granted to the seller of the product.
d.
subsidy is legally (statutorily) granted to the buyer of the product.
179. A $25 government subsidy paid directly to buyers of jeans will result in
a.
a downward shift in the demand curve for jeans by $25.
b.
an upward shift in the demand curve for jeans by $25.
c.
a downward shift in the supply curve for jeans by $25.
d.
an upward shift in the supply curve for jeans by $25.
180. In the supply and demand model, a subsidy granted to sellers is illustrated by
a.
a downward shift in the demand curve, by the per unit amount of the subsidy.
b.
an upward shift in the demand curve, by the per unit amount of the subsidy.
c.
a downward shift in the supply curve, by the per unit amount of the subsidy.
d.
an upward shift in the supply curve, by the per unit amount of the subsidy.
181. A $10 per unit government subsidy paid directly to sellers of heaters will result in
a.
a downward shift in the demand curve for heaters by $10.
b.
an upward shift in the demand curve for heaters by $10.
c.
a downward shift in the supply curve for heaters by $10.
d.
an upward shift in the supply curve for heaters by $10.
182. When a government subsidy is granted to the buyers of a product, sellers can end up capturing some of
the benefit because
a.
the market price of the product will fall in response to the subsidy.
b.
the market price of the product will rise in response to the subsidy.
c.
the market price of the product will not change in response to the subsidy.
d.
buyers will reduce their demand for the product.
183. When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of
the benefit because
a.
the market price of the product will fall in response to the subsidy.
b.
the market price of the product will rise in response to the subsidy.
c.
the market price of the product will not change in response to the subsidy.
d.
producers will reduce the supply of the product.