Question 1

1 to S2, tax revenue is: A) $3,600. B) $2,700. C) $1,800. D) $1,000. " class="answers-bank-image d-inline" rel="preload" > (Figure: Commodity Tax on Suppliers)  Refer to the figure. If atax shifts the supply curve from S1 to S2, tax revenue is:

Accepted Answer

A)  $3,600.
B)  $2,700.
C)  $1,800.
D)  $1,000.E) All of the above
F) A) and B)

Question 2

Most labor economists believe that the supply of labor is ______elastic than firms' demand for labor, and therefore ______ bearmost of the burden of a payroll tax.

Accepted Answer

A)  more; workers
B)  less; workers
C)  less; firms
D)  more; firmsE) All of the above
F) C) and D)

Question 3

With a subsidy, the price paid by the buyers exceeds the pricereceived by sellers.

Accepted Answer

A) True 
 B)False

Question 4

(Figure: Tax on Sellers of Gadgets)  According to the figure,what is the amount of the tax that has been imposed on the saleof gadgets?

Accepted Answer

A)  $0.50
B)  $1.00
C)  $1.50
D)  $5.50E) C) and D)
F) All of the above

Question 5

3 and Q2. B) A, and the equilibrium price and quantity are P4 and Q3. C) B, and the equilibrium price and quantity are P3 and Q2. D) C, and the equilibrium price and quantity are P1 and Q2 " class="answers-bank-image d-inline" rel="preload" > (Figure: Tax on Supply and Demand)  According to the figure,if the tax is placed on sellers, the equilibrium is at Point:

Accepted Answer

A)  A, and the equilibrium price and quantity are P3 and Q2.
B)  A, and the equilibrium price and quantity are P4 and Q3.
C)  B, and the equilibrium price and quantity are P3 and Q2.
D)  C, and the equilibrium price and quantity are P1 and Q2E) B) and D)
F) None of the above

Question 6

Martin's maximum willingness to pay for an electric boatmotor is $250. Because of a tax, the price of the motor increasesfrom $230 to $280. The deadweight loss of the tax attributableto Martin is:

Accepted Answer

A)  $20.
B)  $250.
C)  $50.
D)  $30.E) A) and D)
F) A) and C)

Question 7

If the elasticity of supply is 1, and the elasticity of demand is 3(in absolute value) , then for a tax of $1 buyers will pay:

Accepted Answer

A)  an extra 25 cents and sellers will receive 75 cents less.(True Answer ) Correct
B)  an extra 75 cents and sellers will receive 25 cents less.
C)  an extra 50 cents and sellers will receive 50 cents less.
D)  nothing extra since this is the special case where demand is unit elastic.E) None of the above
F) C) and D)

Question 8

Subsidies lead to existence of non-beneficial trades.

Accepted Answer

A) True 
 B)False

Question 9

Figure: Demand and Supply with Subsidy  (Figure: Supply and Demand with Subsidy)  Refer to the figure.What is the deadweight loss caused by the subsidy?

Accepted Answer

A)  $100
B)  $200
C)  $3,200
D)  $800E) A) and B)
F) B) and C)

Question 10

When a payroll tax is enacted or a mandate requires firms toprovide health insurance the wage paid to workers ______ andthe wage paid by firms ______.

Accepted Answer

A)  rises; rises
B)  rises; falls
C)  falls; falls
D)  falls; risesE) All of the above
F) A) and C)

Question 11

If a tax is levied on the buyers of a product, the tax burden willfall entirely on the buyers.

Accepted Answer

A) True 
 B)False

Question 12

If the demand curve for a good is perfectly inelastic, anycommodity tax that is imposed on that market will be entirelypaid by the consumer.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is NOT true for a case inwhich the demand for labor is more elastic than the supply oflabor?

Accepted Answer

A)  Firms can substitute capital for labor if the health insurance on labor gets too costly.
B)  Most workers would continue to work even if their wages were lower because of the cost of health insurance.
C)  Firms cannot escape the cost of health insurance for labor by employing fewer workers.
D)  Firms can move overseas if the tax on labor gets too high.E) None of the above
F) All of the above

Question 14

If a tax is imposed on a market with inelastic demand andelastic supply:

Accepted Answer

A)  buyers will bear most of the burden of the tax.(True Answer ) Correct
B)  sellers will bear most of the burden of the tax.
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.E) A) and C)
F) B) and C)

Question 15

A ________ creates a situation in which the price received bysellers ________ the price paid by buyers.

Accepted Answer

A)  tax; exceeds
B)  tax; equals
C)  subsidy; is less than
D)  subsidy; exceedsE) A) and B)
F) A) and C)

Question 16

(Figure: Tax on Consumers of Gadgets)  According to thefigure, what is the amount of the tax that has been imposed ongadgets?
Figure: Tax on Consumers of Gadgets

Accepted Answer

A)  $ 4
B)  $ 2
C)  $ 8
D)  $ 12E) A) and B)
F) A) and C)

Question 17

Figure: Tax on Sellers 1. With the tax, buyers pay ________ and sellersreceive ________. A) $6; $3 B) $6; $6 C) $3; $6 D) $3; $4 " class="answers-bank-image d-inline" rel="preload" > (Figure: Tax on Sellers)  Refer to the figure. Suppose theimposition of a per-unit tax on sellers shifts the supply curvefrom S0 to S1. With the tax, buyers pay ________ and sellersreceive ________.

Accepted Answer

A)  $6; $3
B)  $6; $6
C)  $3; $6
D)  $3; $4E) All of the above
F) A) and C)

Question 18

Suppose there is a tax of $50 on bicycles. The supply curve forbicycles slopes upward. The demand curve for bicycles slopesdownward. Sellers are required by law to pay the tax. If the taxis reduced from $50 to $10 per bicycle, then the:

Accepted Answer

A)  supply curve will shift downward by $40.(True Answer ) Correct
B)  demand curve will shift downward by $40.
C)  demand curve will shift upward by $40.
D)  supply curve will shift upward by $40.E) A) and B)
F) A) and C)

Question 19

Which of the following statements is TRUE regarding cigarettetaxes?

Accepted Answer

A)  Cigarette manufacturers bear almost all of the cigarette taxes.
B)  Cigarette manufacturers tend to ship their product from low- tax states to high-tax states.
C)  The elasticity of cigarette supply in all states is very small so cigarette manufacturers receive higher after-tax prices inHigher-tax states.
D)  After-tax prices received by cigarette manufacturers are about the same in all states.E) A) and B)
F) A) and C)

Question 20

Which of the following is correct concerning the burden of a taximposed on coffee mugs?

Accepted Answer

A)  Buyers and sellers share the burden of the tax.(True Answer ) Correct
B)  Buyers bear the entire burden of the tax.
C)  Sellers bear the entire burden of the tax.
D)  It depends on whether the buyers or the sellers are required to pay the tax.E) A) and B)
F) A) and C)

Exam 6: Consumer Choices

With a subsidy, the price paid by the buyers exceeds the pricereceived by sellers.

Correct AnswerverifiedShow Answer

(Figure: Tax on Supply and Demand) According to the figure,if the tax is placed on sellers, the equilibrium is at Point:

Correct AnswerverifiedShow Answer

Suppose there is a tax of $50 on bicycles. The supply curve forbicycles slopes upward. The demand curve for bicycles slopesdownward. Sellers are required by law to pay the tax. If the taxis reduced from $50 to $10 per bicycle, then the:

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE regarding cigarettetaxes?

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If the demand curve for a good is perfectly inelastic, anycommodity tax that is imposed on that market will be entirelypaid by the consumer.

Correct AnswerverifiedShow Answer

When a payroll tax is enacted or a mandate requires firms toprovide health insurance the wage paid to workers ______ andthe wage paid by firms ______.

Correct AnswerverifiedShow Answer

Figure: Tax on Sellers (Figure: Tax on Sellers) Refer to the figure. Suppose theimposition of a per-unit tax on sellers shifts the supply curvefrom S0 to S1. With the tax, buyers pay ________ and sellersreceive ________.

Correct AnswerverifiedShow Answer

Martin's maximum willingness to pay for an electric boatmotor is $250. Because of a tax, the price of the motor increasesfrom $230 to $280. The deadweight loss of the tax attributableto Martin is:

Correct AnswerverifiedShow Answer

(Figure: Commodity Tax on Suppliers) Refer to the figure. If atax shifts the supply curve from S1 to S2, tax revenue is:

Correct AnswerverifiedShow Answer

If a tax is imposed on a market with inelastic demand andelastic supply:

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(Figure: Tax on Consumers of Gadgets) According to thefigure, what is the amount of the tax that has been imposed ongadgets? Figure: Tax on Consumers of Gadgets

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If the elasticity of supply is 1, and the elasticity of demand is 3(in absolute value) , then for a tax of $1 buyers will pay:

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If a tax is levied on the buyers of a product, the tax burden willfall entirely on the buyers.

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A ________ creates a situation in which the price received bysellers ________ the price paid by buyers.

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Figure: Demand and Supply with Subsidy (Figure: Supply and Demand with Subsidy) Refer to the figure.What is the deadweight loss caused by the subsidy?

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Which of the following statements is NOT true for a case inwhich the demand for labor is more elastic than the supply oflabor?

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(Figure: Tax on Sellers of Gadgets) According to the figure,what is the amount of the tax that has been imposed on the saleof gadgets?

Correct AnswerverifiedShow Answer

Most labor economists believe that the supply of labor is ______elastic than firms' demand for labor, and therefore ______ bearmost of the burden of a payroll tax.

Correct AnswerverifiedShow Answer

Which of the following is correct concerning the burden of a taximposed on coffee mugs?

Correct AnswerverifiedShow Answer

Subsidies lead to existence of non-beneficial trades.

Correct AnswerverifiedShow Answer

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When a payroll tax is enacted or a mandate requires firms toprovide health insurance the wage paid to workers andthe wage paid by firms .

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Figure: Tax on Sellers (Figure: Tax on Sellers) Refer to the figure. Suppose theimposition of a per-unit tax on sellers shifts the supply curvefrom S0 to S₁. With the tax, buyers pay and sellersreceive .

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(Figure: Commodity Tax on Suppliers) Refer to the figure. If atax shifts the supply curve from S₁ to S₂, tax revenue is:

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A creates a situation in which the price received bysellers the price paid by buyers.

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Most labor economists believe that the supply of labor is elastic than firms' demand for labor, and therefore bearmost of the burden of a payroll tax.

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