Question

2. If the government imposes a $50 excise subsidy on the production of textbooks, then from the perspective of consumers (students), the “effective” or after-subsidy supply curve for textbooks will shift

up vertically by exactly $50.

down vertically by more than $50.

right horizontally by more than $50.

down vertically by less than $50.

down vertically by exactly $50.

left horizontally by exactly $50.

3. Which of the following would decrease the quantity supplied of smartphones, ceteris paribus?

An increase in the price of HDTVs, assuming that smartphones and HDTVs are substitutes in production.

A decrease in the number of smartphone producers.

A decrease in consumer income, assuming that smartphones are normal goods.

An increase in the wages of smartphone production workers.

All of the changes listed for this question will decrease the quantity supplied of smartphones.

4. According to the law of supply, a(n) _____ in price of good X will _____ of good X, ceteris paribus.

decrease, increase the quantity demanded.

decrease, increase the supply.

increase, increase the quantity supplied.

increase, decrease the quantity supplied.

increase, increase the supply.

increase, decrease the demand.

5. If the government imposes an excise tax of $2 per pizza on the consumption of pizza, then from the perspective of pizza producers, the “effective” or after-tax demand curve for pizza will shift

up vertically by less than $2.

up vertically by more than $2.

left horizontally by less than $2.

right horizontally by less than $2.

up vertically by exactly $2.

down vertically by exactly $2.

Answer 1

For question 2 -

Statement - If the government imposes a $50 excise subsidy on the production of textbooks, then from the perspective of consumers (students), the “effective” or after-subsidy supply curve for textbooks will shift

Answer - down vertically by exactly $50.

Explanation - In the case when the government imposes $50 subsidy on the production of textbooks, it will lead to a reduction in the overall cost of textbooks by $50. This will translate to the a shift in the supply curve which would be a downward vertical shift of $50 in the price of the textbook. This would also mean that the post subsidy curve would be parallel to the original curve and would ideally shift to the right to an extent which would depend upon the elasticity of textbooks.