Question 1

Reference: Ref 6-1 (Figure: Tax on Sellers)  If a $3 tax per unit purchased was placed on buyers instead of sellers, buyers would pay ________ and sellers would receive ________.

Accepted Answer

A)   $3; $6
B)   $6; $3
C)   $4; $6
D)   $4; $3E) A) and B)
F) B) and D)

Question 2

Accepted Answer

The answer of ...

Question 3

A subsidy is:

Accepted Answer

A)   similar to a reverse tax.
B)   calculated as the price received by sellers minus the price paid by buyers.
C)   paid for by taxpayers.
D)   All of the answer choices are correct.E) C) and D)
F) B) and C)

Question 4

(Figure: Tax on Consumers of Gadgets)  According to the figure, what is the amount of the tax that has been imposed on gadgets? Figure: Tax on Consumers of Gadgets

Accepted Answer

A)   $ 4
B)   $ 2
C)   $ 8
D)   $ 12E) A) and D)
F) None of the above

Question 5

Reference: Ref 6-1 (Figure: Tax on Sellers)  Refer to the figure. Suppose the imposition of a per-unit tax on sellers shifts the supply curve from S0 to S1. The equilibrium quantity sold under the tax is:

Accepted Answer

A)   4.
B)   12.
C)   16.
D)   10.E) A) and C)
F) C) and D)

Question 6

Subsidies lead to existence of non-beneficial trades.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is TRUE? I. A $0.50 tax on each fishing lure sold raises the price per lure by $0.50. II. A tax on sellers is equivalent to a tax on buyers. III. A tax on buyers is analyzed by shifting the demand curve up by the amount of the tax.

Accepted Answer

A)   I and II only
B)   II and III only
C)   II only
D)   I, II, and IIIE) C) and D)
F) None of the above

Question 8

A wage subsidy will:

Accepted Answer

A)   reduce the wages received by workers.
B)   reduce the number of workers employed.
C)   increase the number of workers employed.
D)   increase the unemployment rate, especially among low-skilled workers.E) A) and B)
F) A) and C)

Question 9

Which of the following statements is correct?

Accepted Answer

A)   If the elasticity of demand is greater than the elasticity of supply, sellers will receive more of the subsidy.
B)   If the elasticity of demand is greater than the elasticity of supply, sellers will receive less of the subsidy.
C)   If the elasticity of demand is less than the elasticity of supply, sellers will receive more of the subsidy.
D)   If the elasticity of demand is greater than the elasticity of supply, buyers will receive more of the subsidy.E) A) and B)
F) A) and C)

Question 10

Which one of the following statements about subsidies is NOT correct?

Accepted Answer

A)   Subsidies cause deadweight losses.
B)   Who actually receives the subsidy does not depend on who gets the check from the government.
C)   Subsidies always increase the gains from trade for producers.
D)   Who benefits from the subsidy depends on the relative elasticities of demand and supply.E) None of the above
F) A) and B)

Question 11

When demand is more elastic than supply, buyers bear more of the tax burden.

Accepted Answer

A) True 
 B)False

Question 12

If a tax is imposed on sellers of a product the demand curve will:

Accepted Answer

A)   shift upward.
B)   shift downward.
C)   not shift.
D)   shift upward or downward depending on elasticity of demand.E) A) and B)
F) None of the above

Question 13

A market is described by the equations Qd = 100 - P, and Qs = P. A tax of $10 is placed on the buyer of the product such that the new demand equation becomes Qd = 100 - (P + T), where T is the tax is dollars. Does the buyer pay the whole $10 of the tax burden? How much does the buyer pay? How much does the seller pay? Why do they split the burden in this way?

Accepted Answer

The answer of A market is described by the equations...

Question 14

Which of the following is the correct answer to the question: Why do smokers pay almost all the taxes assessed on cigarettes? I. Because they are addictive, the demand for cigarettes is relatively elastic when compared to the supply curve of cigarettes. II. Because they are addictive, the demand for cigarettes is relatively inelastic when compared to the supply of cigarettes. III. Cigarette manufacturers can very easily escape a state tax by selling in a different state.

Accepted Answer

A)   I only
B)   II only
C)   I and III only
D)   II and III onlyE) None of the above
F) B) and D)

Question 15

Reference: Ref 6-4 (Figure: Tax on Supply and Demand)  According to the figure, if the tax is placed on buyers, the equilibrium is at Point:

Accepted Answer

A)   B, and the equilibrium price and quantity are P3 and Q2.
B)   C, and the equilibrium price and quantity are P3 and Q2.
C)   C, and the equilibrium price and quantity are P1 and Q2.
D)   D, and the equilibrium price and quantity are P2 and Q1.E) None of the above
F) A) and B)

Question 16

Figure: Wage Subsidy  Reference: Ref 6-11 (Figure: Wage Subsidy)  Refer to the figure. If a minimum wage of $8 had been implemented instead of a wage subsidy, how many workers would have been unemployed?

Accepted Answer

A)   60
B)   30
C)   180
D)   120E) A) and B)
F) A) and C)

Question 17

Reference: Ref 6-8 (Figure: Tax on Consumers of Gadgets)  Refer to the figure. What is the amount of the deadweight loss caused by the imposition of the tax on gadgets?

Accepted Answer

A)   $800
B)   $3,200
C)   $400
D)   $200E) A) and B)
F) None of the above

Question 18

Not only do both wage subsidies and minimum wages increase wages, but:

Accepted Answer

A)   they also increase employment.
B)   they also reduce employment.
C)   subsidies increase employment, whereas minimum wages reduce it.
D)   subsidies reduce employment, whereas minimum wages increase it.E) All of the above
F) B) and D)

Question 19

If the elasticity of supply is 1, and the elasticity of demand is 3 (in absolute value) , then for a tax of $1 buyers will pay:

Accepted Answer

A)   an extra 25 cents and sellers will receive 75 cents less.
B)   an extra 75 cents and sellers will receive 25 cents less.
C)   an extra 50 cents and sellers will receive 50 cents less.
D)   nothing extra since this is the special case where demand is unit elastic.E) A) and B)
F) A) and C)

Question 20

Reference: Ref 6-9 (Figure: Supply and Demand with Subsidy)  Refer to the figure. With a $2-per-unit subsidy, the price received by sellers is ________ and the price paid by consumers is ________.

Accepted Answer

A)   $3; $2
B)   $2; $4
C)   $4; $2
D)   $3; $4E) All of the above
F) A) and D)

Exam 6: Taxes and Subsidies

If the elasticity of supply is 1, and the elasticity of demand is 3 (in absolute value) , then for a tax of $1 buyers will pay:

Correct Answer
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A subsidy is:

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A wage subsidy will:

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Which one of the following statements about subsidies is NOT correct?

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Subsidies lead to existence of non-beneficial trades.

Correct Answer
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(Figure: Tax on Consumers of Gadgets) According to the figure, what is the amount of the tax that has been imposed on gadgets? Figure: Tax on Consumers of Gadgets

Correct Answer
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Reference: Ref 6-1 (Figure: Tax on Sellers) If a $3 tax per unit purchased was placed on buyers instead of sellers, buyers would pay and sellers would receive .

Correct Answer
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When demand is more elastic than supply, buyers bear more of the tax burden.

Correct Answer
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Reference: Ref 6-8 (Figure: Tax on Consumers of Gadgets) Refer to the figure. What is the amount of the deadweight loss caused by the imposition of the tax on gadgets?

Correct Answer
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Which of the following statements is TRUE? I. A $0.50 tax on each fishing lure sold raises the price per lure by $0.50. II. A tax on sellers is equivalent to a tax on buyers. III. A tax on buyers is analyzed by shifting the demand curve up by the amount of the tax.

Correct Answer
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Correct Answer
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Not only do both wage subsidies and minimum wages increase wages, but:

Correct Answer
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Reference: Ref 6-9 (Figure: Supply and Demand with Subsidy) Refer to the figure. With a $2-per-unit subsidy, the price received by sellers is and the price paid by consumers is .

Correct Answer
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Reference: Ref 6-1 (Figure: Tax on Sellers) Refer to the figure. Suppose the imposition of a per-unit tax on sellers shifts the supply curve from S0 to S1. The equilibrium quantity sold under the tax is:

Correct Answer
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If a tax is imposed on sellers of a product the demand curve will:

Correct Answer
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Reference: Ref 6-4 (Figure: Tax on Supply and Demand) According to the figure, if the tax is placed on buyers, the equilibrium is at Point:

Correct Answer
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Figure: Wage Subsidy Reference: Ref 6-11 (Figure: Wage Subsidy) Refer to the figure. If a minimum wage of $8 had been implemented instead of a wage subsidy, how many workers would have been unemployed?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Exam 6: Taxes and Subsidies

If the elasticity of supply is 1, and the elasticity of demand is 3 (in absolute value) , then for a tax of $1 buyers will pay:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A subsidy is:

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A wage subsidy will:

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Which one of the following statements about subsidies is NOT correct?

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Subsidies lead to existence of non-beneficial trades.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(Figure: Tax on Consumers of Gadgets) According to the figure, what is the amount of the tax that has been imposed on gadgets? Figure: Tax on Consumers of Gadgets

Correct AnswerverifiedShow Answer

Reference: Ref 6-1 (Figure: Tax on Sellers) If a $3 tax per unit purchased was placed on buyers instead of sellers, buyers would pay ________ and sellers would receive ________.

Correct AnswerverifiedShow Answer

When demand is more elastic than supply, buyers bear more of the tax burden.

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Reference: Ref 6-8 (Figure: Tax on Consumers of Gadgets) Refer to the figure. What is the amount of the deadweight loss caused by the imposition of the tax on gadgets?

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE? I. A $0.50 tax on each fishing lure sold raises the price per lure by $0.50. II. A tax on sellers is equivalent to a tax on buyers. III. A tax on buyers is analyzed by shifting the demand curve up by the amount of the tax.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Not only do both wage subsidies and minimum wages increase wages, but:

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Reference: Ref 6-9 (Figure: Supply and Demand with Subsidy) Refer to the figure. With a $2-per-unit subsidy, the price received by sellers is ________ and the price paid by consumers is ________.

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Reference: Ref 6-1 (Figure: Tax on Sellers) Refer to the figure. Suppose the imposition of a per-unit tax on sellers shifts the supply curve from S0 to S1. The equilibrium quantity sold under the tax is:

Correct AnswerverifiedShow Answer

If a tax is imposed on sellers of a product the demand curve will:

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Reference: Ref 6-4 (Figure: Tax on Supply and Demand) According to the figure, if the tax is placed on buyers, the equilibrium is at Point:

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Figure: Wage Subsidy Reference: Ref 6-11 (Figure: Wage Subsidy) Refer to the figure. If a minimum wage of $8 had been implemented instead of a wage subsidy, how many workers would have been unemployed?

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Which of the following statements is correct?

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Reference: Ref 6-1 (Figure: Tax on Sellers) If a $3 tax per unit purchased was placed on buyers instead of sellers, buyers would pay and sellers would receive .

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Reference: Ref 6-9 (Figure: Supply and Demand with Subsidy) Refer to the figure. With a $2-per-unit subsidy, the price received by sellers is and the price paid by consumers is .

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