1.)If the government sets the minimum price for cigarettes lower than the market clearing price then the price received will be ____ than equilibrium levels and the quantity of cigarettes sold will be ____ than that in equilibrium.

a) Lower, higher
b)Lower, lower
c)Higher, higher
d)Higher, lower
e)unchanged, unchanged

2.)If firms pay some portion of the tax but households pay most of it then we know

a) demand is perfectly elastic
b) demand is relatively more elastic than supply
c) demand is relatively more inelastic than supply
d) demand and supply have equal elasticities
e) there is is not enough information to comment on the relative elasticities of demand and supply.

3.)If the government imposes a $5 tax on all purchases and the market has demand and supply curves of QD = 50 - P and QS = 4P - 20, respectively then

a) consumers will bare the brunt of the tax.
b) producers will bare the brunt of the tax.
c) the tax will be equally divided between consumers and firms.
d) government will receive total tax revenue equal to $200.
e) there is not enough information to answer this question.

4.)A market currently taxed by government experiences an increase in demand. As a result,

a) the producer surplus will decrease.
b) the amount of the dead-weight loss will decrease.
c) the total tax revenue raised by government will increase.
d) the consumer surplus will decrease.
e) None of the above.

5.)When a dead-weight loss occurs in a market, we can be certain that

a) taxes have been imposed on the market.
b) production is not at its optimal level.
c) a subsidy to the market has been removed.
d) everybody in the market experiences a loss.
e) None of the above.

6.)A rent ceiling that is set above the equilibrium rent level

a) restricts the quantity demanded but not the quantity supplied.
b) restricts the quantity supplied but not the quantity demanded.
c) results in a surplus of apartments on the market.
d) Both (a) and (c).
e) None of the above.

7.)A binding minimum wage is a price _____ that ____ the quantity of low-skilled labor demanded.

a) ceiling; decreases
b) ceiling; increases
c) floor; decreases
d) floor; increases
e) floor; does not change

8.)Which of the following statements about an increase of a binding minimum wage is (are) CORRECT?

a) It results in an increase in the quantity of labor supplied.
b) There will be a decrease in the demand for labor.
c) It causes a decrease in unemployment.
d) Both (a) and (b).
e) None of the above.

9.)A market with a binding price floor experiences an increase in supply. Which of the following will result as a consequence?

a) The consumer surplus will increase.
b) the consumer surplus will decrease.
c) The dead-weight loss will increase.
d) Both (b) and (c).
e) None of the above.

10.)If government pays a subsidy in a market and households keep most but not all of the subsidy payment then we know

a) the demand curve is perfectly elastic.
b) the demand curve is relatively more elastic than the supply curve.
c) the demand curve is relatively more inelastic than the supply curve.
d) the demand and supply curves have slopes that are equal in magnitude.
e) more information is needed to comment on the relative elasticities of demand for supply and demand.

11.)When the government imposes a per unit tax on consumers then from the firm's perspective

a) the demand curve shifts to the right by the amount of the tax.
b) the demand curve shifts up by the amount of the tax.
c) the demand curve shifts down by the amount of the tax.
d) the demand curve becomes more sensitive to a price change.
e) None of the above.

12.)Government imposes a price floor above the equilibrium price. Under which of the following situations would the dead-weight loss be the smallest?

a) When the supply curve is perfectly elastic.
b) When the supply curve is perfectly inelastic.
c) When the demand curve is perfectly elastic.
d) When the demand curve is perfectly inelastic.
e) There is no relationship between own-price elasticity and dead-weight loss.

13.)Binding price floors and ceilings

a) cause the marginal benefit from the last unit produced to be greater than the marginal cost of that unit.
b) cause the marginal cost from of last unit produced to be greater than the marginal benefit from that unit.
c) cause a shift of either the demand or supply curve.
d) generate an increase in the producer surplus for the firm producing the product.
e) None of the above.

14.)Which of the following statements is CORRECT?

a) An increase of a binding price ceiling will increase the dead-weight loss.
b) A decrease of a binding price floor will increase the dead-weight loss.
c) An increase in the per unit subsidy paid by government to a market will cause an increase in social welfare.
d) A decrease in the per unit tax levied by government on a market will cause an increase in social welfare.
e) None of the above.

15.)If government gives out a subsidy of $5 per unit on all purchases to firms and the market has demand curves Qd= 50-5P and Qs = 4P - 20, respectively then

a) consumers will receive most of the benefit from the subsidy.
b) producers will receive most of the benefit from the subsidy.
c) the benefit from teh subsidy will be equally divided between consumers and firms.
d) government will make a total subsidy payment of $70.
e) None of the above.