Practice Questions
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What is the primary effect of government subsidies on the market for a specific good?
Subsidies help lower the cost of making a good. Other options are incorrect because Some might think subsidies always make people want more of a good;...
How do subsidies typically affect consumer behavior in a market?
Subsidies lower the cost of a product. Other options are incorrect because Some might think subsidies make people want less of a product; It's a commo...
How do taxes and subsidies affect market equilibrium and public welfare in an economy?
Taxes make it harder for businesses to produce goods, which can lower public welfare. Other options are incorrect because This answer suggests that ta...
How do taxes on goods with inelastic demand affect economic efficiency and externalities in a market?
Taxes on goods that people need, like medicine, can make the market less efficient. Other options are incorrect because This answer suggests that taxe...
How do taxes intended to reduce negative externalities impact government revenue and social welfare?
Taxes can help the government earn money while also making society better. Other options are incorrect because Some people think taxes always bring in...
What is the primary effect of an increase in taxes on consumer spending?
When taxes go up, people have less money left after paying taxes. Other options are incorrect because Some might think higher taxes give people more m...
What is the primary effect of a subsidy provided to farmers on the price of agricultural products?
A subsidy helps farmers by giving them money. Other options are incorrect because Some might think subsidies don't change prices at all; It's a common...
What is the likely effect of a subsidy on the market equilibrium price and quantity of a good?
A subsidy helps producers by giving them extra money. Other options are incorrect because Some might think that a subsidy would raise prices; This opt...
Taxes on goods that are underproduced are to market efficiency as subsidies on goods with negative externalities are to what?
Subsidies encourage more production of goods that cause harm. Other options are incorrect because Some might think subsidies help allocate resources w...
Arrange the following steps in the correct order regarding the impact of a tax on a good that is already underproduced: A) Tax is imposed on the good, B) The quantity produced decreases further, C) The market experiences increased deadweight loss, D) Allocative efficiency is further reduced.
When a tax is added, it raises the cost of making the good. Other options are incorrect because This option suggests that the market experiences deadw...
In a market where a good is underproduced, how would the imposition of a tax most likely affect overall efficiency and production levels?
When a tax is added, it makes producing the good more expensive. Other options are incorrect because Some might think a tax helps fix overproduction, ...
If a tax is imposed on a good that is already underproduced, what is the most likely outcome in terms of market efficiency?
When a tax is added to a good that is already not being produced enough, it makes things worse. Other options are incorrect because Some might think t...
How do taxes on a good that is already underproduced affect market efficiency?
Taxes on a good that is already not made enough make it even less appealing to produce. Other options are incorrect because Some might think taxes enc...
Which of the following statements accurately describe the effects of taxes and subsidies on market efficiency? Select all that apply.
Other options are incorrect because Some might think taxes can boost production in low supply areas; It's a common belief that subsidies always help p...
A government decides to impose a tax on the production of sugary beverages, aiming to reduce consumption due to health concerns. Which of the following categories does this action most closely align with regarding its economic implications?
When a tax is added, it raises the cost for producers. Other options are incorrect because Some might think the tax helps produce more goods efficient...
When a tax is imposed on a good that is already underproduced, the result is that the good will be produced even less, leading to an increase in _____. This phenomenon occurs because the tax discourages production, moving the market further away from allocative efficiency.
Deadweight loss happens when a tax makes a good harder to produce. Other options are incorrect because Some might think that a tax helps consumers by ...
A local government decides to impose a tax on sugary drinks to reduce consumption and improve public health. What is the likely economic effect of this tax on the market for sugary drinks?
When a tax is added, it costs more to sell sugary drinks. Other options are incorrect because Some might think that higher prices will make people wan...
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