48
6) Refer to Figure 5.7. The amount customers will pay per pumpkin after the imposition of the tax is
A) $1.75.
B) $3.00.
C) $4.25.
D) $7.25.
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
7) Refer to Figure 5.7. The total revenue the government will receive from the imposition of this tax is
A) $875.
B) $1,225.
C) $2,100.
D) $3,600.
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
8) Refer to Figure 5.7. Using the midpoint formula, the price elasticity of demand for pumpkins from the
equilibrium point before the imposition of the tax to the equilibrium point after the imposition of the tax
is
A) –0.02.
B) –0.47.
C) –2.11.
D) –4.43.
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
9) Refer to Figure 5.7. The demand for pumpkins from the equilibrium point before the imposition of the
tax to the equilibrium point after the imposition of the tax is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
49
10) Refer to Figure 5.7. Had the demand for pumpkins been perfectly inelastic at Point A, the amount
store owners would have received per pumpkin after the imposition and payment of this tax would have
been
A) $3.00.
B) $5.50.
C) $7.25.
D) $8.50.
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
11) Refer to Figure 5.7. Had the demand for pumpkins been perfectly inelastic at Point A, the amount
customers would have paid per pumpkin after the imposition of this tax would have been
A) $0.
B) $5.50.
C) $7.25.
D) $8.50.
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
12) Refer to Figure 5.7. Had the demand for pumpkins been perfectly inelastic at Point A, the total
revenue the government would have received from the imposition of this tax would have been
A) $875.
B) $1,225.
C) $2,100.
D) $3,600.
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
50
13) Refer to Figure 5.7. Had the demand for pumpkins been perfectly inelastic at Point A, the price
elasticity of demand for pumpkins from the equilibrium point before the imposition of the tax to the
equilibrium point after the imposition of the tax would be
A) 0.
B) 1.
C) –1.
D) infinity.
Topic: Elasticity and Taxes
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
14) Which of the following, if true, would most effectively undermine the argument that raising cigarette
taxes reduces the number of people who smoke cigarettes?
A) The demand for cigarettes is relatively inelastic.
B) The demand for cigarettes is relatively elastic.
C) The supply for cigarettes is relatively inelastic.
D) The supply for cigarettes is relatively elastic.
Topic: The Determinants of Demand Elasticity: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
15) Which of the following, if true, would most effectively back the argument that raising cigarette taxes
reduces the number of people who smoke cigarettes?
A) The demand for cigarettes is relatively inelastic.
B) The demand for cigarettes is relatively elastic.
C) The supply for cigarettes is relatively inelastic.
D) The supply for cigarettes is relatively elastic.
Topic: Determinants of Demand Elasticity: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
51
16) If the demand for cigarettes is more ________ for underage smokers as compared to that of adult
smokers, then compared to adults, a tax on cigarettes would have ________ impact on the demand for
cigarettes for teenagers.
A) elastic; more
B) elastic; less
C) inelastic; more
D) inelastic; an equal
Topic: Determinants of Demand Elasticity: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
17) A government is considering levying an alcohol tax to raise revenue to finance health care benefits.
People for the tax argue that alcohol demand is price inelastic. Which of the following statements is true?
A) The alcohol tax may not raise as much revenue as anticipated in the years to come because alcohol
demand is more elastic the longer the period of time consumers have to adjust.
B) This is a very good way to raise revenue both in the short term and in the long term because there are
no close substitutes for alcohol.
C) This tax will not raise much revenue either in the short term or the long term because demand is price
inelastic.
D) No tax revenue can be raised in this way because alcohol sellers will just lower their price by the
amount of the tax, and therefore the consumer price of alcohol will not change.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
18) In order to discourage consumers from eating unhealthy fast food, the government is considering
placing a tax on all fast food sales. Which of the following statements is true?
A) Given the numerous alternatives, consumers’ demand for fast food is relatively inelastic and the tax
will not likely work to discourage fast food consumption.
B) The tax on fast food will likely raise considerable revenue but will be unlikely to reduce the
consumption of fast food by consumers.
C) The tax on fast food will likely increase the demand for home cooked meals.
D) A tax on fast food will only be effective if demand is perfectly inelastic.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
52
19) The more ________ the demand is for a product, the ________ tax revenue that will be raised by taxing
the product.
A) elastic; more
B) inelastic; more
C) inelastic; less
D) Tax revenues are unrelated to a product’s price elasticity of demand.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
20) In order to discourage consumers from consuming sugary soft drinks, the government is considering
placing a tax on sugary soft drink sales. Which of the following statements is true?
A) Given the numerous alternatives, consumers’ demand for sugary soft drinks is relatively elastic and
the tax will likely work to discourage sugary soft drink consumption.
B) The tax on sugary soft drinks will likely raise considerable revenue, but will be unlikely to reduce the
consumption of sugary soft drinks by consumers.
C) The tax on sugary soft drinks will likely decrease the demand for sugar–free soft drinks.
D) Taxes do not discourage consumers from consuming products.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
21) A tax on a good whose demand is price elastic will be effective in discouraging consumption of that
good.
Topic: Calculating Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
22) If government officials are mainly interested in generating tax revenue, then they should tax goods for
which demand is price elastic.
Topic: Calculating Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
53
23) A tax on a good whose demand is perfectly price inelastic will be effective in discouraging
consumption of that good.
Topic: Calculating Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
24) If government officials are mainly interested in generating tax revenue, then they should tax goods for
which demand is price inelastic.
Topic: Calculating Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6