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c.
(i) and (iii) only
d.
(i) and (iv) only
173. Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the
a.
demand is more inelastic than the supply.
b.
supply is more inelastic than the demand.
c.
government has required that buyers remit the tax payments.
d.
government has required that sellers remit the tax payments.
174. Suppose that in a particular market, the demand curve is highly elastic, and the supply curve is highly inelastic. If a
tax is imposed in this market, then the
a.
buyers will bear a greater burden of the tax than the sellers.
b.
sellers will bear a greater burden of the tax than the buyers.
c.
buyers and sellers are likely to share the burden of the tax equally.
d.
buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater
burden of the tax without more information.
175. If a tax is imposed on a market with inelastic supply and elastic demand, then
a.
buyers will bear most of the burden of the tax.
b.
sellers will bear most of the burden of the tax.
c.
the burden of the tax will be shared equally between buyers and sellers.
d.
it is impossible to determine how the burden of the tax will be shared.
176. Suppose that the demand for light bulbs is inelastic, and the supply of light bulbs is elastic. A tax of $2 per bulb
levied on light bulbs will increase the price paid by buyers of light bulbs by
a.
less than $1.
b.
$1.
c.
between $1 and $2.
d.
$2.
177. Suppose that the demand for digital cameras is elastic, and the supply of digital cameras is inelastic. A tax of $20 per
camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by
a.
less than $10.
b.
$10.
c.
between $10 and $20.
d.
$20.
178. The tax burden will fall most heavily on sellers of the good when the demand curve
a.
is relatively steep, and the supply curve is relatively flat.
b.
is relatively flat, and the supply curve is relatively steep.
c.
and the supply curve are both relatively flat.
d.
and the supply curve are both relatively steep.
179. Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the
(i)
supply is more elastic than the demand.
(ii)
demand in more elastic than the supply.
(iii)
tax is placed on the sellers of the product.
(iv)
tax is placed on the buyers of the product.
a.
(i) only
b.
(ii) only
c.
(i) and (iv) only
d.
(ii) and (iii) only
180. Suppose that a tax is placed on books. If the sellers pay the majority of the tax, then we know that the
a.
demand is more inelastic than the supply.
b.
supply is more inelastic than the demand.
c.
government has required that buyers remit the tax payments.
d.
government has required that sellers remit the tax payments.
181. The demand for salt is inelastic, and the supply of salt is elastic. The demand for caviar is elastic, and the supply of
caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt, and a tax of $1 per pound is levied on
the buyers of caviar. We would expect that most of the burden of these taxes will fall on
a.
sellers of salt and the buyers of caviar.
b.
sellers of salt and the sellers of caviar.
c.
buyers of salt and the sellers of caviar.
d.
buyers of salt and the buyers of caviar.
182. Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic,
and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect
that the burden of
a.
both taxes would fall more heavily on the buyers than on the sellers.
b.
the macaroni tax would fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax
would fall more heavily on the buyers than on the sellers.
c.
the macaroni tax would fall more heavily on the buyers than on the sellers, and the burden of the cigarette tax
would fall more heavily on the sellers than on the buyers.
d.
both taxes would fall more heavily on the sellers than on the buyers.
183. Which of the following is correct? A tax burden
a.
falls more heavily on the side of the market that is more elastic.
b.
falls more heavily on the side of the market that is less elastic.
c.
falls more heavily on the side of the market that is closest to unit elastic.
d.
is distributed independently of the relative elasticities of supply and demand.
184. A tax burden falls more heavily on the side of the market that
a.
has a fewer number of participants.
b.
is more inelastic.
c.
is closer to unit elastic.
d.
is less inelastic.
185. Which of the following statements is correct?
a.
A tax levied on buyers will never be partially paid by sellers.
b.
Who actually pays a tax depends on the price elasticities of supply and demand.
c.
Government can decide who actually pays a tax.
d.
A tax levied on sellers always will be passed on completely to buyers.
186. Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When
cigarettes are taxed, we would expect
a.
most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of
cigarettes are required to pay the tax to the government.
b.
most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of
cigarettes are required to pay the tax to the government.
c.
the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or
sellers of cigarettes are required to pay the tax to the government.
d.
a large percentage of smokers to quit smoking in response to the tax.
Figure 6-29
Suppose the government imposes a $2 on this market.
187. Refer to Figure 6-29. The buyers will bear a higher share of the tax burden than sellers if the demand is
a.
D1, and the supply is S1.
b.
D2, and the supply is S1.
c.
D1, and the supply is S2.
d.
D2, and the supply is S2.
188. Refer to Figure 6-29. The buyers and sellers will bear an equal share of the tax burden if the demand is
a.
D1, and the supply is S1.
b.
D2, and the supply is S1.
c.
D1, and the supply is S2.
d.
D2, and the supply is S2.
189. Refer to Figure 6-29. Suppose D1 represents the demand curve for paperback novels, D2 represents the demand
curve for gasoline, and S1 represents the supply curve for paperback novels and gasoline. After the imposition of the $2
on paperback novels and on gasoline, the
a.
buyers of gasoline bear a higher burden of the $2 tax than buyers of paperback novels.
b.
sellers of gasoline bear a higher burden of the $2 tax than sellers of paperback novels.
c.
buyers of gasoline bear an equal burden of the $2 tax as buyers of paperback novels.
d.
Both a) and b) are correct.
190. Refer to Figure 6-29. Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1
represents the supply curve for gasoline in the short run, and S2 represents the supply curve for gasoline in the long run.
After the imposition of the $2, the price paid by buyers will be
a.
higher in the long run than in the short run.
b.
higher in the short run than in the long run.
c.
equivalent in the short run and the long run.
d.
unable to be determined without additional information.
191. Refer to Figure 6-29. Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1
represents the supply curve for gasoline in the short run, and S2 represents the supply curve for gasoline in the long run.
After the imposition of the $2,
a.
buyers bear a higher burden of the tax in the short run than in the long run.
b.
sellers bear a higher burden of the tax in the short run than in the long run.
c.
buyers and sellers bear an equal burden of the tax in both the short run and long run.
d.
buyers and sellers bear an equal burden of the tax in the short run, but buyers bear a higher burden of the tax in
the long run.
Figure 6-30
Panel (a)
Panel (b)
Panel (c)
192. Refer to Figure 6-30. In which market will the majority of the tax burden fall on buyers?
a.
the market shown in panel (a).
b.
the market shown in panel (b).
c.
the market shown in panel (c).
d.
All of the above are correct.
193. Refer to Figure 6-30. In which market will the majority of the tax burden fall on sellers?
a.
the market shown in panel (a).
b.
the market shown in panel (b).
c.
the market shown in panel (c).
d.
All of the above are correct.
194. Refer to Figure 6-30. In which market will the tax burden be most equally divided between buyers and sellers?
a.
the market shown in panel (a).
b.
the market shown in panel (b).
c.
the market shown in panel (c).
d.
All of the above are correct.
195. In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive
cars. The goal of the tax was to
a.
raise revenue from the wealthy.
b.
prevent wealthy people from buying luxuries.
c.
force producers of luxury goods to reduce employment.
d.
limit exports of luxury goods to other countries.
196. Which of the following was not a result of the luxury tax imposed by Congress in 1990?
a.
The larger part of the tax burden fell on sellers.
b.
A larger part of the tax burden fell on the middle class than on the rich.
c.
Even the wealthy demanded fewer luxury goods.
d.
The tax was never repealed or even modified.
197. The burden of a luxury tax falls
a.
more on the rich than on the middle class.
b.
more on the poor than on the rich.
c.
more on the middle class than on the rich.
d.
equally on the rich, the middle class, and the poor.
198. When a tax is imposed in a market, it will
a.
alter the behavior of buyers.
b.
alter the behavior of sellers.
c.
have no effect on the behavior or either buyers or sellers.
d.
affect the behavior of both buyers and sellers.
199. The incidence of a tax is
a.
always determined by the demand side of the market.
b.
always determined by the supply side of the market.
c.
always determined by the interaction of the demand and supply side of the market..
d.
always determined by which side of the market the government imposes the tax on.
200. Suppose that a $4 per unit tax is imposed on the sellers of DVDs. The effect of the tax will be to
a.
shift the supply curve up by exactly $4 and the price paid by buyers will remain unchanged.
b.
shift the supply curve up by exactly $4 and the price paid by buyers will rise by less than $4.
c.
shift the supply curve up by exactly $4 and the price received by sellers will rise by exactly $4.
d.
shift the demand curve down by exactly $4 and the price paid by buyers will fall by exactly $4.
Figure 6-33
The diagram shows the effect of a tax as measured by the distance between J and K.
201. Refer to Figure 6-33. Based upon the diagram,
a.
the incidence of the tax falls more heavily on buyers.
b.
the incidence of the tax falls more heavily on sellers.
c.
the incidence of the tax is shared equally by both buyers and sellers.
d.
the incidence of the tax cannot be determined based upon the information in the diagram.
202. Refer to Figure 6-33. Based upon the diagram,
a.
more of the incidence of the tax is on buyers, since the demand curve is more elastic than the supply curve.
b.
more of the incidence of the tax is on sellers, since the demand curve is less elastic than is the supply curve .
c.
more of the incidence of the tax is on sellers, since supply is more inelastic than demand.
d.
more of the incidence of the tax is on buyers, since supply is more inelastic than demand.
