Question 1

Giving in to the demand of protestors,suppose the French government reduces the tax on gasoline by 15 percent.Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.As a result of the tax cut,the price for a gallon of gasoline paid by buyers

Accepted Answer

The reduction in tax on gasoline by 15% will lead to a decrease in the cost of production for gasoline suppliers which will lead to an increase in supply. The increase in supply will drive down the price of gasoline, but not by the full 15%, as the demand for gasoline is not perfectly elastic. Hence, the price paid by buyers will fall by less than 15%.

Question 2

To calculate the revenue government receives when a tax is imposed on a good,multiply the

Accepted Answer

The revenue the government receives from a tax on a good is calculated by multiplying the amount of the tax by the quantity of the good sold after the tax is imposed. This is because the government's revenue from the tax directly depends on how many units of the good are sold at the new, higher price that includes the tax.

Question 3

Tax incidence is the

Accepted Answer

Tax incidence refers to the distribution of the burden of a tax between buyers and sellers. It is determined by the relative elasticity of supply and demand for the taxed good. If demand is relatively inelastic, buyers will bear more of the burden. If supply is relatively inelastic, sellers will bear more of the burden. Therefore, tax incidence is the division of the burden of a tax between the buyer and the seller.

Question 4

Neither the demand nor the supply of automobiles is perfectly elastic or inelastic.If the government imposes a $1,000 tax on automobiles,then the price of an automobile buyers pay

Accepted Answer

The price increase will be less than $1,000 because neither demand nor supply of automobiles is perfectly inelastic. This means that there will be some decrease in the quantity demanded due to the increase in price, which will limit the extent of the price increase.

Question 5

Tax incidence is the

Accepted Answer

Tax incidence refers to the division of the tax burden between the buyer and seller, or between different groups in the economy. It is not related to the dollar amount of the tax, the revenue collected, or the deadweight loss. It may be expressed as a percentage or dollar amount per unit, but these are not definitive characteristics of tax incidence.

Question 6

The demand curve for pizza is downward sloping and the supply curve is upward sloping.If the government imposes a $2 tax on a pizza,________ the tax.

Accepted Answer

When the government imposes a tax on a product, the supply curve shifts upward, leading to an increase in the price of the product. Since the demand curve is downward sloping, consumers will reduce their quantity demanded in response to the increase in price. Producers will also reduce their quantity supplied as they face higher costs due to the tax. Therefore, both producers and consumers pay part of the tax.

Question 7

Sales taxes are usually collected from sellers,who view the tax as

Accepted Answer

Sales taxes are an additional cost of selling the good for the seller. Sellers collect sales tax from the buyers and then remit the tax amount to the government.

Question 8

The imposition of a tax on a good enables the government to

Accepted Answer

When a tax is imposed on a good, the price paid by buyers will increase and the price received by the seller will decrease. Therefore, part of the consumer and producer surplus is lost due to the tax. The government is able to collect this lost surplus as tax revenue, resulting in a decrease in consumer and producer surplus and an increase in tax revenue for the government.

Question 9

-In the figure above,suppose that the government imposes a tax of $4 per pizza.Then,the

Accepted Answer

The shaded area represents the deadweight loss from the tax, which is the loss of consumer and producer surplus that results from the imposition of the tax. The incidence of the tax is shared equally by buyers and sellers, as the tax causes the equilibrium price to rise by $2, which is half of the tax amount.

Question 10

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

Accepted Answer

When the tax is imposed, the entire burden of the tax falls on the buyer as there is an increase in price. This is because with the increase in the price by $10, the sellers have adjusted their price by the same amount to cover the tax, without incurring any additional loss. Hence, the entire incidence of the tax has been shifted to the buyers, resulting in the price increase.

Question 11

The incidence of a tax refers to

Accepted Answer

The incidence of a tax refers to how the burden of the tax is divided between buyers and sellers, and how much each party is affected by the tax.

Question 12

Neither the demand nor the supply of sugar is perfectly elastic or inelastic.If the government imposes a 5 percent tax on sugar,the

Accepted Answer

Since both demand and supply of sugar are inelastic, the tax burden will be shared by both the buyers and the sellers. Therefore, the price increase for buyers will be less than the full 5 percent tax. The extent of the price increase will depend on the specific shapes of the demand and supply curves.

Question 13

Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.If the federal government eliminated the 18.4 cents per gallon gasoline tax,the price paid by buyers would

Accepted Answer

The elimination of the gasoline tax would lead to a decrease in the cost of production for sellers, allowing them to potentially lower their prices to buyers. However, the decrease in price paid by buyers would be less than 18.4 cents because the demand for gasoline is not perfectly elastic, meaning consumers will not substantially increase their purchases in response to a small price decrease. Additionally, the supply of gasoline is not perfectly inelastic, allowing sellers to potentially increase their prices if they feel it is in their best interest. Therefore, the price decrease for buyers would be less than 18.4 cents, but it would still be a decrease.

Question 14

Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline.As a result,the

Accepted Answer

Imposing a tax on sellers of gasoline increases their cost of production, resulting in a decrease in the quantity supplied. Thus, the supply curve shifts leftward.

Question 15

A sales tax imposed on sellers of a good

Accepted Answer

A sales tax imposed on sellers increases the cost of producing and selling a good, which reduces profit margins for sellers. Therefore, suppliers are less likely to produce as much quantity of the good, leading to a decrease in supply and a leftward shift of the supply curve. This results in an increase in the price of the good for buyers, which may reduce overall demand. However, the decrease in demand is typically less than the decrease in supply, so the net effect is a decrease in equilibrium quantity.

Question 16

Imposing a sales tax on sellers of a product has an effect that is similar to which of the following?

Accepted Answer

Imposing a sales tax on sellers of a product increases the costs of production for those sellers as they need to pay the tax. This ultimately leads to a decrease in supply and an upward shift in the supply curve, effectively increasing the price of the product. The other choices listed do not have an effect similar to this.

Question 17

-The above figure shows the market for gourmet ice cream.In effort to reduce obesity,government places a $2 tax per gallon on suppliers in this market,shifting the supply curve from S? to S?.The quantity of ice cream consumed before the tax is ________ gallons and the quantity consumed after the tax is ________ gallons.

Accepted Answer

The correct answer is C) 250,000; 200,000. This is because the imposition of a tax on suppliers would shift the supply curve to the left, indicating a decrease in the quantity supplied at every price level due to the increased cost of production. This results in a new equilibrium with a lower quantity of ice cream consumed.

Question 18

-In the figure above,suppose that the government imposes a tax of $4 per pizza.Then,the tax revenue collected by the government equals

Accepted Answer

The tax revenue collected by the government is calculated by multiplying the tax per unit by the quantity sold. If the tax is $4 per pizza and the quantity sold is 60 pizzas (as inferred from the revenue of $240), then the tax revenue is $4 * 60 = $240.

Question 19

Neither the demand nor the supply of gasoline is perfectly elastic or inelastic.When the government increases the federal tax on gasoline,the effect on buyers is that the price they pay

Accepted Answer

When the government increases the federal tax on gasoline, the immediate effect is that the cost of supplying gasoline increases. This additional cost is typically passed on to the buyers in the form of higher prices, leading to an increase in the price they pay.

Question 20

If a good has a tax levied on it,sellers respond to the price that excludes the tax and not the price with the tax because

Accepted Answer

When a tax is levied on a good, the price paid by buyers increases and creates a discrepancy between the price received by sellers and the price paid by buyers. Sellers respond to the price that excludes the tax because they do not get to keep the tax revenue. So, they adjust their prices to maximize their profits based on the net price they receive for the good after paying the tax.

Quiz 8: Taxes

Giving in to the demand of protestors,suppose the French government reduces the tax on gasoline by 15 percent.Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.As a result of the tax cut,the price for a gallon of gasoline paid by buyers

To calculate the revenue government receives when a tax is imposed on a good,multiply the

Tax incidence is the

Neither the demand nor the supply of automobiles is perfectly elastic or inelastic.If the government imposes a $1,000 tax on automobiles,then the price of an automobile buyers pay

Tax incidence is the

The demand curve for pizza is downward sloping and the supply curve is upward sloping.If the government imposes a $2 tax on a pizza,________ the tax.

Sales taxes are usually collected from sellers,who view the tax as

The imposition of a tax on a good enables the government to

-In the figure above,suppose that the government imposes a tax of $4 per pizza.Then,the

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

The incidence of a tax refers to

Neither the demand nor the supply of sugar is perfectly elastic or inelastic.If the government imposes a 5 percent tax on sugar,the

Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.If the federal government eliminated the 18.4 cents per gallon gasoline tax,the price paid by buyers would

Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline.As a result,the

A sales tax imposed on sellers of a good

Imposing a sales tax on sellers of a product has an effect that is similar to which of the following?

-In the figure above,suppose that the government imposes a tax of $4 per pizza.Then,the tax revenue collected by the government equals

Neither the demand nor the supply of gasoline is perfectly elastic or inelastic.When the government increases the federal tax on gasoline,the effect on buyers is that the price they pay

If a good has a tax levied on it,sellers respond to the price that excludes the tax and not the price with the tax because