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
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
Which of the following is an example of an ad valorem tax? A) 5% of price B) 5% of quantity sold C) $0.50 per unit sold D) Government regulation ANSWER A
Date: September 9th, 2020
Consumers will always pay the entire amount of a specific tax whenever A) demand is perfectly inelastic. B) supply is perfectly elastic. C) Both A and B above. D) Either A or B above but not at the same time. ANSWER C
Date: September 9th, 2020
If the government decides to levy an ad valorem tax on product with a perfectly inelastic supply. The consumers tax incidence will be A) 0 B) 1 C) .5 D) Cannot be determined. ANSWER A
Date: September 9th, 2020
A specific tax on sellers will A) shift the demand curve to the right. B) shift the demand curve to the left. C) shift the supply curve to the right. D) shift the supply curve to the left. ANSWER D
Date: September 9th, 2020
