Prices, Wages & Taxes MCQs

Free 19+ Prices, Wages & Taxes MCQs for PPSC, FPSC, NTS, and Pakistan government job tests. Practise below with answers and explanations.

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Prices, Wages & Taxes

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1.Which statement accurately describes how the tax burden is allocated?

When a tax is imposed on a product considered essential by consumers, the sellers bear the largest share of the tax burden.The tax burden is always borne by the group (buyers or sellers) who are legally responsible for paying the tax.The way a tax burden is divided depends on the relative price elasticities of supply and demand, not on legal rules.The tax burden primarily falls on the market participants (buyers or sellers) who are most likely to exit the market if prices change unfavorably.

2.When a tax is imposed on an essential product, who is most likely to bear the majority of the tax burden?

Sellers will carry most of the tax cost.Sellers will bear the full tax burden.Buyers will shoulder the larger portion of the tax.The tax burden will be shared equally between buyers and sellers.None of the above.

3.If a tax is imposed on buyers in a market, what is the effect on the distribution of the tax burden?

Buyers end up shouldering the majority of the tax cost.The entire tax responsibility is carried by the buyers.Sellers are the ones who ultimately pay the tax.The division of the tax burden between buyers and sellers is identical to that of a tax imposed on sellers.Only sellers experience any impact from the tax.

4.In the supply and demand framework, when a tax is imposed on sellers of a product, which curve shifts and in what direction?

The demand curve shifts downward by the amount of the tax per unit.The supply curve shifts downward by the tax amount per unit.The demand curve shifts upward by the tax amount per unit.The supply curve shifts upward by the tax amount per unit.None of the above.

5.Which type of employee is most likely to face greater challenges in securing employment following an increase in the minimum wage?

A young worker with limited skills and qualifications.An experienced manual laborer with over a decade of work history.A professional holding a university degree.All workers are equally likely to experience difficulty finding a job.

6.Which of the following illustrates a price floor in economic terms?

The established minimum wageLimits placed on rental pricesSetting petrol prices at Rs100 per litre when the market equilibrium is Rs150 per litreEvery option listed represents a price floor

7.Who is more inclined to advocate for the implementation of a price floor in the market?

The consumersNeither consumers nor producers support a price floor.The producersBoth consumers and producers favor a price floor.

8.What does a price floor represent in market regulation?

It always fixes the exact price at which a product must be sold.It imposes a legal cap on the price of a product.It is ineffective if established above the market equilibrium price.It establishes a legal minimum price that a product can be sold for.

9.What is the result of implementing a binding price ceiling in a market?

Either a surplus or shortage depending on the ceiling's position relative to equilibrium priceAn excess supply situationA shortage of the good or serviceMarket equilibrium is maintainedNo effect on supply or demand

10.On which of the following goods is the tax incidence most likely to be borne primarily by the sellers?

11.When does the tax burden primarily fall on consumers in a market?

When both supply and demand are unresponsive to price changesWhen demand is sensitive to price, but supply is notWhen both supply and demand respond strongly to price variationsWhen demand shows little sensitivity to price, and supply is highly responsiveWhen supply is inelastic and demand is elastic

12.In which scenario do sellers bear a greater portion of the tax burden in a market?

When both supply and demand respond strongly to price changesWhen both supply and demand show little sensitivity to price variationsWhen demand is unresponsive but supply is highly responsive to price shiftsWhen demand is sensitive to price changes while supply is notNone of the above

13.What happens to the market when a tax is imposed on a product?

Buyers pay less, sellers receive more, and the quantity traded declines.Buyers pay more, sellers receive less, and the quantity sold rises.Buyers pay less, sellers get more, and the amount sold increases.Buyers pay a higher price, sellers get a lower price, and the quantity sold falls.

14.In the supply and demand framework, when a tax is imposed on buyers of a product, which curve experiences a downward shift equal to the tax amount per unit?

The supply curve shifts downward by the tax amount per unit.The supply curve moves upward by the tax amount per unit.The demand curve shifts upward by the tax amount per unit.The demand curve shifts downward by the tax amount per unit.None of the above.

15.If the government sets a price ceiling of Rs150 per litre on petrol while the market equilibrium price is Rs100 per litre, which of the following statements is accurate?

A large rise in petrol demand might make the price ceiling effective as a binding limit.A substantial increase in petrol supply could make the price ceiling a binding restriction.Petrol will be in short supply.There will be an excess supply of petrol.

16.Under which condition will a binding price floor generate the largest surplus?

When demand is unresponsive and supply is highly responsiveWhen supply is unresponsive and demand is highly responsiveWhen both supply and demand are highly responsiveWhen both supply and demand are unresponsive

17.Which of the following accurately describes the effect of a binding price ceiling over time?

The shortage caused by the price ceiling is more severe in the short term than in the long term.The excess supply resulting from the price ceiling is larger in the short term compared to the long term.The excess supply caused by the price ceiling increases more in the long term than in the short term.The shortage resulting from the price ceiling becomes more pronounced in the long term than in the short term.

18.If the market equilibrium rent for apartments is Rs500 per month, but the government sets a rent ceiling at Rs250, which of the following outcomes is least likely to happen?

There could be long queues of tenants waiting to rent apartmentsLandlords might choose tenants based on personal preferencesLandlords may receive unofficial payments to lease apartmentsThere will be an accumulation of vacant housing unitsThe overall condition and upkeep of apartments will get better

19.When does a government-imposed price ceiling effectively restrict the market?

If it is set higher than the market equilibrium priceIf it is established below the market equilibrium priceIf it matches the market equilibrium price exactlyIf it is applied at any price, since all price ceilings limit the marketIf it is set above the highest price consumers are willing to pay

Prices, Wages &amp; Taxes MCQs