Question 1

A tax on the seller of a product:

Accepted Answer

A) causes the seller's take-home price to rise above that paid by the buyer. 
B) causes the demand curve for the product to shift to the right. 
C) causes the supply curve for the product to shift to the left. 
D) always causes the equilibrium quantity traded in the market to increase. 
A) causes the seller's take-home price to rise above that paid by the buyer. 
B) causes the demand curve for the product to shift to the right. 
C) causes the supply curve for the product to shift to the left. 
D) always causes the equilibrium quantity traded in the market to increase. C

Question 2

Which of the following is a correct statement about taxburdens?

Accepted Answer

A) A tax burden is distributed independently of relative elasticities of supply and demand. 
B) A tax burden falls most heavily on the side of the market that is closer to unit elastic. 
C) A tax burden falls most heavily on the side of the market that is less elastic. 
D) A tax burden falls most heavily on the side of the market that is more elastic. 
A) A tax burden is distributed independently of relative elasticities of supply and demand. 
B) A tax burden falls most heavily on the side of the market that is closer to unit elastic. 
C) A tax burden falls most heavily on the side of the market that is less elastic. 
D) A tax burden falls most heavily on the side of the market that is more elastic. C

Question 3

(Figure: Imposition of a Tax) Refer to the figure. After theimposition of a $4 tax, the government collects revenues of:

Accepted Answer

A) $75. 
B) $100. 
C) $210. 
D) $50. 
A) $75. 
B) $100. 
C) $210. 
D) $50. B

Question 4

Whether a buyer or a seller pays more of a commodity taxdepends on:

Accepted Answer

A) their relative price elasticities. 
B) the decisions made by Congress. 
C) whether the demand curve is negatively or positively sloped. 
D) whether the supply curve is negatively or positively sloped. 
A) their relative price elasticities. 
B) the decisions made by Congress. 
C) whether the demand curve is negatively or positively sloped. 
D) whether the supply curve is negatively or positively sloped.

Question 5

(Figure: Tax on Consumers of Gadgets) Refer to the figure.What is the amount of the deadweight loss caused by theimposition of the tax on gadgets?

Accepted Answer

A) $800 
B) $3,200 
C) $400 
D) $200 
A) $800 
B) $3,200 
C) $400 
D) $200

Question 6

(Figure: Consumer and Producer Surplus) According to thefigure, what would happen to the deadweight loss if the taxincreased to $2 per basket of apples?

Accepted Answer

A) The new tax would minimize deadweight loss. 
B) Deadweight loss does not change due to a change in the tax. 
C) There is no way to tell what will happen to deadweight loss. 
D) Deadweight loss will increase. 
A) The new tax would minimize deadweight loss. 
B) Deadweight loss does not change due to a change in the tax. 
C) There is no way to tell what will happen to deadweight loss. 
D) Deadweight loss will increase.

Question 7

Suppose that there is a tax of $1 per unit, and the elasticity ofsupply is 3 and the elasticity of demand is 2 (in absolute value).How much of the $1 tax is paid by sellers?

Accepted Answer

A) $0.60 
B) $0.40 
C) $0.75 
D) $0.67 
A) $0.60 
B) $0.40 
C) $0.75 
D) $0.67

Question 8

(Figure: Tax Imposed on Sellers) According to the figure, theprice that buyers pay AFTER the tax is imposed is:

Accepted Answer

A) $5. 
B) $4.40. 
C) $4. 
D) $3.40. 
A) $5. 
B) $4.40. 
C) $4. 
D) $3.40.

Question 9

Which of the following statements is TRUE?
I. A $0.50 tax on each fishing lure sold raises the price per lureby $0.50
II.A tax on sellers is equivalent to a tax on buyers
III. A tax on buyers is analyzed by shifting the demand curveup by the amount of the tax.

Accepted Answer

A) I and II only 
B) II and III only 
C) II only 
D) I, II, and III 
A) I and II only 
B) II and III only 
C) II only 
D) I, II, and III

Question 10

(Figure: Supply and Demand with Subsidy) Refer to the figure.With a $2-per-unit subsidy, the price received by sellers is________ and the price paid by consumers is ________.

Accepted Answer

A) $3; $2 
B) $2; $4 
C) $4; $2 
D) $3; $4 
A) $3; $2 
B) $2; $4 
C) $4; $2 
D) $3; $4

Question 11

(Figure: Commodity Tax with Elastic Demand) According tothe figure, who bears the greater burden of a commodity tax?
Figure: Commodity Tax with Elastic Demand

Accepted Answer

A) The buyer will bear the greater burden of the tax. 
B) The seller will bear the greater burden of the tax.(True Answer )Correct 
C) The buyer and the seller will split the tax burden equally. 
D) The government will bear the full burden of the tax. 
A) The buyer will bear the greater burden of the tax. 
B) The seller will bear the greater burden of the tax.(True Answer )Correct 
C) The buyer and the seller will split the tax burden equally. 
D) The government will bear the full burden of the tax.

Question 12

Why has the Earned Income Tax Credit (EITC) increasedemployment among single mothers?

Accepted Answer

A) It provides a certain amount of tax relief for single men. 
B) It provides a certain amount of tax relief for childless married couples. 
C) It provides a certain amount of tax relief for families with children. 
D) It provides a certain amount of tax relief for all low income workers. 
A) It provides a certain amount of tax relief for single men. 
B) It provides a certain amount of tax relief for childless married couples. 
C) It provides a certain amount of tax relief for families with children. 
D) It provides a certain amount of tax relief for all low income workers.

Question 13

(Figure: Imposition of a Tax) Refer to the figure. With a $4 tax,the deadweight loss is:

Accepted Answer

A) $10. 
B) $35. 
C) $20. 
D) $40. 
A) $10. 
B) $35. 
C) $20. 
D) $40.

Question 14

When demand is more elastic than supply, buyers bear more ofthe tax burden.

Accepted Answer

A) True 
 B)False

Question 15

The question of who pays the greater amount of a commoditytax is determined by:

Accepted Answer

A) Congress. 
B) the President of the United States. 
C) the relative elasticities of demand and supply.(True Answer )Correct 
D) the individual who writes the check for the tax. 
A) Congress. 
B) the President of the United States. 
C) the relative elasticities of demand and supply.(True Answer )Correct 
D) the individual who writes the check for the tax.

Question 16

(Figure: Tax on Consumers of Gadgets) Refer to the figure.What is the tax revenue that the government collects from thetax on gadgets?

Accepted Answer

A) $800 
B) $3,200 
C) $400 
D) $200 
A) $800 
B) $3,200 
C) $400 
D) $200

Question 17

Without taxes, the market price per bag of apples is $5. With a$2 tax per bag of apples, buyers now pay $5.75 per bag. What isthe final price per bag of apples received by sellers?

Accepted Answer

A) $5.00 
B) $7.75 
C) $3.00 
D) $3.75 
A) $5.00 
B) $7.75 
C) $3.00 
D) $3.75

Question 18

If a tax is imposed on a market with elastic demand andinelastic supply:

Accepted Answer

A) buyers will bear most of the burden of the tax. 
B) sellers will bear most of the burden of the tax.(True Answer )Correct 
C) the burden of the tax will be shared equally between buyers and sellers. 
D) there is no way to determine how the burden of the tax will be shared. 
A) buyers will bear most of the burden of the tax. 
B) sellers will bear most of the burden of the tax.(True Answer )Correct 
C) the burden of the tax will be shared equally between buyers and sellers. 
D) there is no way to determine how the burden of the tax will be shared.

Question 19

In the market for Good X-a necessity good without any goodsubstitutes-the workers and capital in the industry can easilyfind work producing other goods. The burden of the tax islikely to fall:

Accepted Answer

A) more heavily on buyers, given that demand is more inelastic than supply. 
B) evenly between buyers and sellers. 
C) more heavily on sellers, given that supply is more inelastic than demand. 
D) more heavily on buyers, given that demand is more elastic than supply. 
A) more heavily on buyers, given that demand is more inelastic than supply. 
B) evenly between buyers and sellers. 
C) more heavily on sellers, given that supply is more inelastic than demand. 
D) more heavily on buyers, given that demand is more elastic than supply.

Question 20

(Figure: Tax Imposed on Sellers) According to the figure, theprice that sellers receive AFTER the tax is imposed is:

Accepted Answer

A) $5. 
B) $4.40. 
C) $4. 
D) $3.40. 
A) $5. 
B) $4.40. 
C) $4. 
D) $3.40.

Exam 6: Consumer Choices

A tax on the seller of a product:

Which of the following is a correct statement about taxburdens?

(Figure: Imposition of a Tax) Refer to the figure. After theimposition of a $4 tax, the government collects revenues of:

Whether a buyer or a seller pays more of a commodity taxdepends on:

(Figure: Tax on Consumers of Gadgets) Refer to the figure.What is the amount of the deadweight loss caused by theimposition of the tax on gadgets?

(Figure: Consumer and Producer Surplus) According to thefigure, what would happen to the deadweight loss if the taxincreased to $2 per basket of apples?

Suppose that there is a tax of $1 per unit, and the elasticity ofsupply is 3 and the elasticity of demand is 2 (in absolute value).How much of the $1 tax is paid by sellers?

(Figure: Tax Imposed on Sellers) According to the figure, theprice that buyers pay AFTER the tax is imposed is:

Which of the following statements is TRUE? I. A $0.50 tax on each fishing lure sold raises the price per lureby $0.50 II.A tax on sellers is equivalent to a tax on buyers III. A tax on buyers is analyzed by shifting the demand curveup by the amount of the tax.

(Figure: Supply and Demand with Subsidy) Refer to the figure.With a $2-per-unit subsidy, the price received by sellers is________ and the price paid by consumers is ________.

(Figure: Commodity Tax with Elastic Demand) According tothe figure, who bears the greater burden of a commodity tax? Figure: Commodity Tax with Elastic Demand

Why has the Earned Income Tax Credit (EITC) increasedemployment among single mothers?

(Figure: Imposition of a Tax) Refer to the figure. With a $4 tax,the deadweight loss is:

When demand is more elastic than supply, buyers bear more ofthe tax burden.

The question of who pays the greater amount of a commoditytax is determined by:

(Figure: Tax on Consumers of Gadgets) Refer to the figure.What is the tax revenue that the government collects from thetax on gadgets?

Without taxes, the market price per bag of apples is $5. With a$2 tax per bag of apples, buyers now pay $5.75 per bag. What isthe final price per bag of apples received by sellers?

If a tax is imposed on a market with elastic demand andinelastic supply:

In the market for Good X-a necessity good without any goodsubstitutes-the workers and capital in the industry can easilyfind work producing other goods. The burden of the tax islikely to fall:

(Figure: Tax Imposed on Sellers) According to the figure, theprice that sellers receive AFTER the tax is imposed is:

Welcome to Economics

Choice in a World of Scarcity

Demand and Supply

Labor and Financial Markets

Elasticity

Production, Costs, and Industry Structure

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Monopoly and Antitrust Policy

Environmental Protection and Negative Externalities

Positive Externalities and Public Goods

Labor Markets and Income

Poverty and Economic Inequality

Information, Risk, and Insurance

Financial Markets

Public Economy

International Trade

Globalization and Protectionism

Consumer Utility and Optimization

Filters

(Figure: Supply and Demand with Subsidy) Refer to the figure.With a $2-per-unit subsidy, the price received by sellers is and the price paid by consumers is .