Question 1

A sales tax imposed on sellers shifts the supply curve leftward for the taxed good because the

Accepted Answer

A sales tax is considered a cost of production for the seller, so it will shift the supply curve leftward. This is because the seller will have to produce the same amount of the good at a higher cost due to the tax, which will result in a decrease in the quantity supplied.

Question 2

-In the above figure, a sales tax of $1 per unit imposed on sellers shifts the

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The answer of 
-In the above figure, a sales tax...

Question 3

-In the above figure, a price ceiling of $4 would

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The answer of 
-In the above figure, a price ceiling...

Question 4

-In the above figure, if the minimum wage is set at $8 per hour, the level of unemployment is ________ hours per week is

Accepted Answer

The answer of 
-In the above figure, if the minimum...

Question 5

-In the above figure, a price floor of $4

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The answer of 
-In the above figure, a price floor...

Question 6

-In the above figure, a sales tax of $1 per unit imposed on sellers ________ the price buyers pay and ________ the price that suppliers keep for themselves.

Accepted Answer

The answer of 
-In the above figure, a sales tax...

Question 7

As long as the supply curve for a good is upward sloping and the demand curve is downward sloping, a sales tax imposed on sellers shifts the supply curve

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The answer of As long as the supply curve for...

Question 8

-The above figure illustrates the labor market for fast food restaurants in a small city in Peru. What would be the effects of a minimum wage imposed at $4 per hour?

Accepted Answer

The answer of 
-The above figure illustrates the labor market...

Question 9

A sales tax is imposed on the sellers of gasoline. This tax shifts

Accepted Answer

A sales tax imposed on the sellers of gasoline increases the cost of producing gasoline, which results in a decrease in supply. This shift is shown by a leftward shift in the supply curve. Therefore, choice A is correct. B is incorrect because a sales tax would not increase the supply of gasoline. C and D are incorrect because a sales tax would not affect the demand for gasoline.

Question 10

When a sales tax is imposed on sellers, the supply curve shifts so that the vertical distance between the old and the new supply curve equals the

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The answer of When a sales tax is imposed on...

Question 11

-In the above figure, a black market emerges with a

Accepted Answer

The answer of 
-In the above figure, a black market...

Question 12

The government raises the sales tax on shirts. The tax is imposed on sellers. As a result, the ________.

Accepted Answer

When the government increases the sales tax on shirts, it increases the cost of production for sellers. As a result, the supply curve of shirts shifts leftward, indicating that fewer shirts will be supplied at each price level. This is because the higher tax means that sellers will need to raise prices to maintain profit margins, which will reduce demand for shirts.

Question 13

-In the above figure, a price ceiling of $2 would

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The answer of 
-In the above figure, a price ceiling...

Question 14

-In the above figure, the price paid by the buyer before the tax is ________ per compact disc, and the price paid by the buyer after the tax is ________ per compact disc.

Accepted Answer

The price paid by the buyer before the tax is $20 per compact disc, and the price paid by the buyer after the tax is $30 per compact disc.

Question 15

Suppose the demand for wine is elastic and that initially 5 million bottles of wine are produced and consumed in the United States. If the government imposes a tax of $2 per bottle of wine, the government will collect

Accepted Answer

The answer of Suppose the demand for wine is elastic...

Question 16

How a sales tax is divided between buyers and sellers is determined by

Accepted Answer

The division of a sales tax between buyers and sellers is determined by the elasticities of supply and demand. The more elastic side will bear a smaller portion of the tax burden, while the less elastic side will bear a larger portion. This is because a tax will affect the price paid by buyers and the price received by sellers, and the extent to which each can adjust those prices will depend on their respective elasticities.

Question 17

-In the above figure, if the minimum wage is set at $6 per hour, the level of unemployment is ________ hours per week is

Accepted Answer

The answer of 
-In the above figure, if the minimum...

Question 18

When a tax is imposed on a good or service, buyers respond only to the price that ________ the tax, and sellers respond to the price that ________ the tax.

Accepted Answer

When a tax is imposed on a good or service, the buyers pay a higher price which includes the tax, and sellers receive a lower price which excludes the tax. Therefore, buyers respond to the price that includes the tax, and sellers respond to the price that excludes the tax.

Question 19

A tax is imposed on the sale of a product. As long as neither the supply nor the demand is perfectly elastic or inelastic

Accepted Answer

When a tax is imposed on a product, the price paid by the consumers increases. However, the amount of the increase in price depends on the price elasticity of supply and demand. If either supply or demand is perfectly elastic, the burden of the tax falls entirely on the other side and the price paid by consumers does not change. If either supply or demand is perfectly inelastic, the burden of the tax falls entirely on the side that is not perfectly inelastic and the price paid by consumers increases by the full amount of the tax. However, if neither supply nor demand is perfectly elastic or inelastic, the burden of the tax is shared between the producers and consumers, and the price paid by consumers increases by less than the amount of the tax.

Question 20

The demand and the supply for a good are each neither perfectly elastic nor perfectly inelastic. If a sales tax on sellers of the good is imposed, the tax is paid by

Accepted Answer

When a sales tax is imposed, the supply curve shifts upwards by the amount of the tax. This leads to a decrease in the quantity supplied and an increase in the equilibrium price. Both buyers and sellers share the burden of the tax as buyers end up paying a higher price while sellers receive a lower price than before. The degree to which they share the burden depends on the elasticity of demand and supply. If the demand is more elastic than supply, buyers will bear a greater proportion of the tax burden. If supply is more elastic than demand, sellers will bear a greater proportion of the tax burden.

Quiz 6: Government Actions in Markets