Explain why a tax increase on cigarettes in one state might not lead to a substantial price increase for all consumers in that state. What will be an ideal response? ANSWER Smuggling of non-taxed cigarettes and on-line buying where taxes don’t apply by some consumers may prevent a price increase for these consumers.
Date: September 9th, 2020
Suppose that an ad valorem tax of 10% is imposed on consumers of butter. The bread market supply is Qs = 10 + P and the bread market demand is Qd = 220-P. What is the consumers’ tax burden? A) Consumers’ tax burden is $3. B) Consumers’ tax burden is $10 C) Consumers’ tax burden […]
Date: September 9th, 2020
Suppose that an ad valorem tax of 10% is imposed on producers of butter. The bread market supply is Qs = 10 + P and the bread market demand is Qd = 220-P. What is the producers’ tax burden? A) Producers’ tax burden is $8. B) Producers’ tax burden is $10 C) Producers’ tax burden […]
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
The tax incidence of a specific tax or ad valorem tax is influenced by A) who pays the tax. B) the amount of the tax. C) the price elasticities of supply and demand. D) All of the above. ANSWER C
Date: September 9th, 2020
