Macroeconomics/Microeconomics
Machine-graded Assessment Items
Module: Government Action
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4.0.0.0 Evaluate the consequences of government policies in markets.
Short Title: Government Action
4.1.0.0 Analyze the consequences of the government setting a binding price ceiling
Short Title: Price Ceilings
4.1.0.1 Price ceilings typically result in ________.
 shortages*
 excess supply
 price equilibrium
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4.1.0.2 Price ceilings attempt to make consumer prices ________.
 lower*
 higher
 at equilibrium
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4.1.0.3 Refer to the figure below. If the government set a price ceiling of $8, there would be a:
(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/price-floor.png)
shortage of 4 units*
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excess supply of 4 units
shortage of 8 units
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4.1.0.4 Refer to the figure below. If the government set a price ceiling of $6,
(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/price-floor.png)
consumers would demand 14 units.*
there would be a shortage of 14 units.
there would be an excess supply of 6 units.
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4.1.0.5 Refer to the figure below. If the government set a price ceiling at $10, there would be a(n):
(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/price-ceiling.png)
shortage of 24 units.*
excess supply of 32 units.
excess supply of 80 units.
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4.1.a.0 Identify the market’s equilibrium price and quantity under a price ceiling
Short Title: Equilibrium Under Price Ceilings
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4.1.a.1 A government decides to set a price ceiling on bread so that bread is affordable to the poor. The conditions
of demand and supply are given in the table below. What is the equilibrium price before the price ceiling? What
will the excess supply or the shortage be if the price ceiling is set at $2.40?
Price
Qd
Qs
$1.60
9,000
5,000
$2.00
8,500
5,500
$2.40
8,000
6,400
$2.80
7,500
7,500
$3.20
7,000
9,000
$3.60
6,500
11,000
$4.00
6,000
15,000
$2.80; 1,600 shortage*
$2.40; 1,600 shortage
$2.80; 1,600 excess supply
// Content page - Reading: Price Ceilings
// Updated 10/22/2015 question and answer choices edited
4.1.a.2 A government decides to set a price ceiling on bread so that bread is affordable to the poor. The conditions
of demand and supply are given in the table below. What will the excess supply or the shortage be if the price
ceiling is set at $2.00?
Price
Qd
Qs
$1.60
9,000
5,000
$2.00
8,500
5,500
$2.40
8,000
6,400
$2.80
7,500
7,500
$3.20
7,000
9,000
$3.60
6,500
11,000
$4.00
6,000
15,000
3,000 excess supply
3,000 shortage*
8,500 shortage
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// Updated 10/22/2015 question and answer choices edited
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4.1.a.3 A government decides to set a price ceiling on bread of $2.40 so that bread is affordable to the poor. The
conditions of demand and supply are given in the table below. What will be the price and quantity of bread
purchased?
Price
Qd
Qs
$1.60
9,000
5,000
$2.00
8,500
5,500
$2.40
8,000
6,400
$2.80
7,500
7,500
$3.20
7,000
9,000
$3.60
6,500
11,000
$4.00
6,000
15,000
 $2.40; 8,000
 $2.40; 6,400*
 $2.00; 7,000
// Content page - Reading: Price Ceilings
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4.1.b.0 Compute the market shortage resulting from a price ceiling and show graphically
Short Title: Market Shortages from Price Ceilings
4.1.b.1 Suppose the local government is concerned about the health of local school children, and for that reason
imposes a price ceiling of $3 on yogurt. Based on the graph below, which of the following is true?
(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/shortage.png)
 The quantity demanded will be 5 yogurts. *
 The quantity supplied will be 3 yogurts. *
 There will be a shortage of 2 yogurts. *
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4.1.b.2 Suppose, in the graph below, there is a price ceiling of $3. Then there is a shortage of:
(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/shortage-surplus.png)
 3 units.
 6 units. *
 0 units.
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4.1.b.3 Suppose, in the graph below, there is a price ceiling of $6. Then there is a shortage of
(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/shortage-surplus.png)
 3 units.
 6 units.
 0 units. *
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4.2.0.0 Analyze the consequences of the government setting a binding price floor
Short Title: Price Floors
4.2.0.1 The local government is concerned about poverty so it institutes a minimum wage of $9 per hour. If the
demand and supply for labor are given in the graph above, there will be
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(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/shortage-surplus.png)
 a surplus of 3 workers.
 a surplus of 6 workers.*
 a shortage of 6 workers.
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4.2.0.2 A price floor attempts to keep prices ________.
higher than the equilibrium price*
lower than the equilibrium price
at the equilibrium price
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// Updated 10/22/2015 answer choices edited
4.2.0.3 ________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to
keep prices from falling.
 price floors*
 price ceilings
 rent controls
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// Removed 10/22/2015
4.2.0.3 The federal minimum wage is an example of a:
price floor.*
price ceiling.
rent control.
// Content page - Reading: Price Floors
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4.2.0.4 Price floors typically result in ________.
 excess supply*
 excess demand
 quantity supplied equals quantity demanded
// Content page - Reading: Price Floors
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4.2.a.0 Identify the market’s equilibrium price and quantity for a price floor
Short Title: Equilibrium for Price Floors
4.2.a.1 Supply and demand for bushels of wheat (millions) are shown in the following table. A $10.00 price floor
would result in:
Price
Qd
Qs
$5.00
26
16
$6.00
24
18
$7.00
22
20
$8.00
21
21
$9.00
20
22
$10.00
19
23
$11.00
18
24
a price of $10.00 and an excess supply of 4 million bushels.*
a price of $8.00 and an excess supply of zero.
a price of $9.00 and an excess supply of 2 million bushels.
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4.2.a.2 Refer to the figure below. If the government sets a price floor of $80, the excess supply will be:
(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/price-ceiling.png)
16*
80
28
// Content page - Reading: Price Floors
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4.2.a.3 Refer to the figure below. If the governments set a price floor of $80, there would be:
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(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/price-ceiling.png)
 12 units sold.*
 28 units sold.
 16 units sold.
// Removed 10/22/2015
Refer to the figure below. If the government sets a price floor of $80, the price would be:
(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/price-ceiling.png)
$30 higher than the equilibrium price.*
$30 lower than the equilibrium price.
The same as the equilibrium price.
// Content page - Reading: Price Floors
// New 10/22/2015
4.2.b.0 Compute the market surplus resulting from a price floor and show graphically
Short Title: Market Surpluses from Price Floors
4.2.b.1 If the government sets floor prices for wheat or corn that guarantee farmers an above-market price for
that product, the most probable result would be what?
over production.*
more suppliers would leave the market.
the market would suffer shortages.
// Content page - Reading: Price Floors
// Updated 10/22/2015 question and answer choices edited
4.2.b.2 Refer to the figure below. If the government set a price floor of $30, there would be:
October 30, 2015
(img https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/price-ceiling.png)
excess supply of 16 units
excess supply of 12 units
zero excess supply*
// Content page - Reading: Price Floors
// Updated 10/22/2015 question and answer choices edited
4.2.b.3 Supply and demand for bushels of wheat (millions) are shown in the following table. A $9.00 government
mandated price floor would result in:
Price
Qd
Qs
$5.00
26
16
$6.00
24
18
$7.00
22
20
$8.00
21
21
$9.00
20
22
$10.00
19
23
$11.00
18
24
an excess supply of 2 million bushels of wheat.*
a shortage of 2 million bushels of wheat.
zero excess supply.
// Content page - Reading: Price Floors
// Updated 10/22/2015 answer choices edited
4.2.c.0 Explain the outcome of a binding price ceiling or price floor on the price and quantity of a product sold
Short Title: Impact of Binding Price Ceilings or Price Floors
4.2.c.1 A price ceiling creates _____ when it is set _____ the equilibrium price.
 excess demand — below*
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 excess demand — above
 excess supply — below
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4.2.c.2 A price floor creates _____ when it is set ______ the equilibrium price.
 excess demand — below
 excess supply — below
 excess supply — above*
// Content page - Reading: Price Floors
4.2.c.3 How does a price floor set above the equilibrium price affect quantity demanded and quantity supplied?
It results in a greater quantity supplied than the quantity demanded, otherwise known as excess supply.*
It results in a greater quantity supplied than the quantity demanded, otherwise known as a shortage.
It results in a smaller quantity supplied than the quantity demanded, otherwise known as a shortage.
// Content page - Reading: Price Floors
// Updated 10/22/2015 question and answer choices edited
4.3.0.0 Explain how the price elasticities of demand and supply affect the incidence of a sales tax
Short Title: Tax Incidence
4.3.0.1 When supply is inelastic and demand is elastic, the tax incidence falls on ________.
 the producer*
 the consumer
 government
// Content page - Reading: Tax Incidence
4.3.0.2 When supply is elastic and demand is inelastic, the tax incidence falls on the ________.
 consumer*
 producer
 government
// Content page - Reading: Tax Incidence
4.3.0.3 The demand for cigarettes is highly inelastic. This suggests that the incidence of a higher tax on cigarettes
will fall primarily on:
 Cigarette consumers.*
 Cigarette sellers.
 Government.
// Content page - Reading: Tax Incidence
4.4.0.0 Define progressive, proportional, and regressive taxes
Short Title: Taxation
4.4.0.1 Which of the following example(s) describe a progressive tax?
 Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income
households*
October 30, 2015

Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above
$117,000
 Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn
// Content page - Reading: Financing Government
4.4.0.2 Which of the following example(s) describe a regressive tax?
 Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above
$117,000*
 Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income
households
 Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn
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4.4.0.3 Which of the following example(s) describe a proportional tax?
 Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn*
 Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above
$117,000
 Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income
households
// Content page - Reading: Financing Government
Property taxes are:
imposed based on ownership of assets such as real estate and autos.*
generally considered to be regressive.
generally considered to be progressive.*
// Content Page – Reading: Types of Taxes
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Sales taxes are:
imposed as a percentage of the value of the purchase.*
generally considered to be regressive.*
a tax burden that is entirely paid by consumers.
// Content Page – Reading: Types of Taxes
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The ability to pay principle of taxation holds that:
people with more income should pay more taxes.*
people who receive more of the benefit of government spending should pay more taxes.
taxes should be proportional to income.
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// New 10/22/2015
A flat tax:
may not be realistic because most actual proposals exempt lower income households from paying taxes.*
is a progressive tax.
imposes a single, identical tax rate on the income of all taxpayers.*
// Content Page – Reading: Types of Taxes
// New 10/22/2015
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Tom earns $35,000 per year. The income tax rate on incomes below $20,000 is 10 percent. The rate on income
between $20,001 and $35,000 is 15 percent. Which of the following is/are true?
Tom’s marginal income tax rate is 15 percent.*
The income tax is progressive.*
The income tax is regressive.
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