# Micro Ch 29 and 30 Practice Problems Key

```Micro Ch 29 and 30 Practice Problems Key
\$
S1 = S0 + tax
S0
P4 = 63
P3 = 55
P2 = 43
P1 = 35
D
0
Q1 Q2
9,000 11,000
Cases of bourbon, week
In the diagram above:
S0 = supply curve for bourbon (seller's supply)
D = demand curve for bourbon
St = supply for bourbon plus excise tax on bourbon
(effective supply as seen by buyers)
tax = an excise tax on bourbon (of \$20 per case)
1. The excise tax on bourbon as described in the diagram is ultimately paid:
A)
B)
by sellers only.
C)
D)
40 percent by buyers and 60 percent by sellers.
60 percent by buyers and 40 percent by sellers.
Wage
S Labor+ tax
S Labor
\$5.40
\$5.00
\$4.90
D
0
Q Labor
2. Refer to the above graph. Suppose the labor market above is in equilibrium at a wage rate of \$5.00 per hour.
Now the government decides to impose a wage tax of \$.50 per hour on the market. If the number of workers
hired after the imposition of the tax is 1,000, then the total amount of the tax is:
A)
\$200. B) \$300. C) \$400. D) \$500.
3. Refer to the above graph. It shows the supply curve for a product before tax (S0 ) and after a \$1 excise tax is
imposed (S1 ). The excise tax on the product is ultimately paid:
A)
75 percent by buyers and 25 percent by sellers.
B)
by sellers only. D)
25 percent by buyers and 75 percent by sellers.
4. Refer to the above graph. It shows the supply curve for a product before tax (S0 ) and after a \$1 excise tax is
imposed (S1 ). If 500 units of the product are sold after the tax is imposed, the amount of tax revenue going to the
government is:
A)
\$125. B) \$250. C) \$375. D) \$500.
5. Refer to the above graph. It shows the supply curve for a product before tax (S0 ) and after a \$1 excise tax is
imposed (S1 ). If 500 units of the product are sold after the tax is imposed, the amount of the tax borne by the
consumer is:
A)
\$125. B) \$250. C) \$375. D) \$500.
6. Refer to the above graph. A tax is imposed that shifts the supply curve from S to S + tax. What is the difference
in revenue kept by producers before the tax was imposed and after the tax was imposed?
A)
\$0.75 B) \$2.25 C) \$4.75 D) \$11.25
7. Refer to the above graph. A tax is imposed that shifts the supply curve from S to S + tax. What is the amount of
the tax borne by producers?
A)
\$0.75 B) \$1.50 C) \$11.25 D) \$16.00
8. Refer to the above graph. A tax is imposed that shifts the supply curve from S to S + tax. What is the amount of
the tax borne by consumers?
A)
\$0.75 B) \$1.50 C) \$11.25 D) \$13.50
9. The graph above represents the market for a product where D1 and S1 show the supply and demand curves
before the imposition of a sales tax. Following the tax, the government's tax revenue is:
A)
FIJG. B) ACEG. C) BCEF. D) ABFG.
10. The basic purpose of antitrust laws is to:
A)
C)
control prices to protect consumers.
B)
limit monopoly power in industry. D)
enforce laws that restrict competition.
11. Conglomerate mergers are combinations of:
A)
many small firms.
B)
firms producing the same product.
C)
firms producing unrelated products.
D)
firms operating at different stages in a given production process.
12. A merger between one firm and another firm that is its supplier is known as a:
A)
horizontal merger. B) vertical merger. C) conglomerate merger. D) parallel merger.
13. A merger between McDonald's and Burger King would be an example of a:
A)
conglomerate merger. B) horizontal merger. C) vertical merger. D) parallel merger.