Week 7 · Quiz

Week 7 — Quiz · Government Intervention: Price Controls, Taxes & Subsidies

Principles of Microeconomics · ECON 1 Fall 2026 · Prof. Kessler Fictional sample

Course: Principles of Microeconomics (ECON 1) · Silver Oak University (fictional sample) · Prof. Kessler
Objective 4 · 10 questions · 10 points · closed to AI · one attempt
Auto-graded (Classic QTI): see F-quiz-week-07-qti.xml for the Canvas import. Every numeric answer is pre-computed and independently verified.

Market reference for Q2–Q7: Demand P = 18 − 0.5Q, Supply P = 2 + 0.5Q → equilibrium Q = 16, P = 10.
(Pre-computed: 18 − 0.5Q = 2 + 0.5Q → Q = 16; P = 10. ✓)

The questions (human-readable; answer key below)

Q1. A price CEILING set at $6 is imposed on a market where the equilibrium price is $10. This ceiling is —
A) Non-binding, because $6 is below equilibrium B) Binding, because $6 is below equilibrium C) Binding, because $6 is above equilibrium D) Non-binding, because it creates a surplus

Q2. A binding price ceiling at P = 6 is imposed on the reference market (eq. P = 10). The resulting shortage equals —
A) 8 units B) 12 units C) 16 units D) 24 units

(Calc: Qd at P=6: (18−6)/0.5 = 24; Qs at P=6: (6−2)/0.5 = 8; shortage = 24 − 8 = 16. ✓)

Q3. A price floor at P = 14 is imposed on the reference market (eq. P = 10). The resulting surplus equals —
A) 4 units B) 8 units C) 16 units D) 24 units

(Calc: Qs at P=14: (14−2)/0.5 = 24; Qd at P=14: (18−14)/0.5 = 8; surplus = 24 − 8 = 16. ✓)

Q4. A $6/unit tax is levied on sellers (supply shifts to P = 8 + 0.5Q). The new equilibrium quantity is —
A) 10 units B) 12 units C) 13 units D) 16 units

(Calc: 18 − 0.5Q = 8 + 0.5Q → Q = 10. ✓)

Q5. With the $6 tax and Q = 10, the buyer price (Pb) and seller price (Ps) are —
A) Pb = 12, Ps = 8 B) Pb = 13, Ps = 7 C) Pb = 14, Ps = 8 D) Pb = 16, Ps = 10

(Calc: Pb = 18 − 0.5(10) = 13; Ps = 13 − 6 = 7. Check: 2 + 0.5(10) = 7. ✓)

Q6. With the $6 tax, Q = 10. Tax revenue collected by the government equals —
A) $36 B) $48 C) $60 D) $96

(Calc: 6 × 10 = 60. ✓)

Q7. The deadweight loss (DWL) of the $6 tax (Q falls from 16 to 10) is —
A) $18 B) $36 C) $60 D) $8

(Calc: DWL = ½ × 6 × (16 − 10) = ½ × 6 × 6 = 18. ✓)

Q8. (Select all that apply.) Which statements about tax incidence are CORRECT?
☐ A) Incidence depends on who legally writes the check to the government ☑ B) The more inelastic side of the market bears the larger share of the tax ☑ C) If demand and supply have equal slopes, the tax is split 50/50 ☑ D) A tax levied on sellers can still be partially borne by buyers ☐ E) If demand is perfectly elastic, buyers bear the entire tax

Q9. (True/False) A price floor set BELOW the equilibrium price is binding and creates a surplus. → False

Q10. (Matching) Binding price ceiling → Shortage (Qd > Qs); Binding price floor → Surplus (Qs > Qd); Per-unit tax on sellers → Supply curve shifts up; Pb rises, Ps falls; Subsidy to producers → Supply curve shifts down; Pb falls, Ps rises. (Distractor: "No effect on equilibrium quantity or price.")

Answer key & feedback (instructor)

Q	Type	Answer	Feedback (the idea)
1	MC	B	A ceiling binds only if it is BELOW equilibrium — it prevents the market from clearing upward.
2	MC	C	Shortage = Qd − Qs at the ceiling price: 24 − 8 = 16. The classic rent-control outcome.
3	MC	C	Surplus = Qs − Qd at the floor price: 24 − 8 = 16. The basic minimum-wage story in a simple competitive model.
4	MC	A	New supply P = 8 + 0.5Q meets demand at Q = 10. Tax shrinks the market.
5	MC	B	Pb = 13, Ps = 7; buyer burden = 3, seller burden = 3 — 50/50 with equal slopes on this market.
6	MC	C	Revenue = t × Q = 6 × 10 = 60.
7	MC	A	DWL = ½ × 6 × 6 = 18. The missing triangle of surplus from the 6 lost transactions.
8	MA	B, C, D	A: wrong — incidence depends on elasticities, not who remits the check. E: wrong — if demand is perfectly elastic, sellers bear the entire tax (they can't pass it forward).
9	TF	False	A floor below equilibrium is NON-BINDING — it constrains nothing. Only a floor ABOVE equilibrium is binding.
10	Match	as above	Distractor "No effect on equilibrium quantity or price" = the non-binding case.

Quality gate (self-checked): Q2 (24−8=16), Q3 (24−8=16), Q4 (Q=10), Q5 (Pb=13, Ps=7), Q6 (6×10=60), Q7 (½×6×6=18) all re-computed in Python ✓. Incidence principles (Q8) verified against discipline reference ✓. Non-binding floor (Q9 = False) confirmed ✓. No free numeric entry.

This is the human-readable quiz with its vetted answer key and rationale. The import-ready Classic-QTI version (F-quiz-week-07-qti.xml) ships inside the course's .imscc package — it lands in the Canvas gradebook on import.

~ Prof. Kessler's edition · Fall 2026 · built with thecoursemaker.com