Suppose the market for grass seed can be expressed as Demand: QD = 100 – 2p Supply: QS = 3p Price elasticity of supply is constant at 1. If the demand curve is changed to Q = 10 – .2p, price elasticity of demand at any given price is the same as before. Yet, the […]
Date: September 9th, 2020
Suppose the market for grass seed is expressed as Demand: QD = 100 – 2p Supply: QS = 3p Price elasticity of supply is constant at 1. If the supply curve is changed to Q = 8p, price elasticity of supply is still constant at 1. Yet, with the new supply curve, consumers pay a […]
Date: September 9th, 2020
Government revenue from an excise tax of a given amount is greater when demand is relatively inelastic than when it is relatively elastic. Indicate whether the statement is true or false ANSWER True . The tax will result in larger quantity sold the more inelastic demand is. Since the tax is on a per […]
Date: September 9th, 2020
Who will bear the burden of a $0.50 tax placed on soda suppliers (consumer or seller) in a soda market where Qd = 225-10P and Qs = 50 + 15P? A) Consumers pay $0.30 of the tax, bearing the burden. B) Consumers pay $0.25 of the tax, bearing the burden. C) Sellers pay $0.25 of […]
Date: September 9th, 2020
If the supply curve is perfectly inelastic and the demand curve is a downward sloping straight line, what is the effect of a consumer ad valorem tax on equilibrium price and quantity? A) Price remains unchanged and quantity increases. B) Price decreases and quantity increases. C) Price decreases and quantity remains unchanged. D) Price and […]
Date: September 9th, 2020
Suppose that a specific tax of $3 is imposed on consumers of bread. The bread market supply is Qs = 10 + 0.5P and the bread market demand is Qd = 100-P. What is the consumers’ tax burden? A) Consumers’ tax burden is $1.30. B) Consumers’ tax burden is $1.00. C) Consumers’ tax burden is […]
Date: September 9th, 2020
In the case of a specific tax, tax incidence is independent of who pays A) only when supply and demand elasticities are not constant. B) only when the tax is collected from consumers. C) in most but not all cases. D) in all cases. ANSWER D
Date: September 9th, 2020
In the case of a specific tax the resulting price received by producers depends on A) who pays the tax. B) the price elasticity of supply. C) the price elasticity of demand. D) All of the above. ANSWER D
Date: September 9th, 2020
Explain why short-run demand for frozen fish sticks may be more price elastic in the short run than in the long run. What will be an ideal response? ANSWER Frozen fish sticks can be stored. If frozen fish sticks go on sale you can buy large quantities and store them in your freezer. Thus, […]
Date: September 9th, 2020
To prevent obesity, the government may establish a tax on high caloric foods, such as twinkies. A twinkie tax will have the smallest impact on quantity demanded when the demand curve for twinkies is A) perfectly elastic. B) perfectly inelastic. C) more elastic than the supply curve. D) both A and B. ANSWER B […]
Date: September 9th, 2020
