1556 Supply, Demand, and Government Policies
59. If the government removes a $2 tax on buyers of cigars and imposes the same $2 tax on sellers
of cigars, then the price paid by buyers will
a. not change, and the price received by sellers will not change.
b. not change, and the price received by sellers will decrease.
c. decrease, and the price received by sellers will not change.
d. decrease, and the price received by sellers will decrease.
60. If the government wants to reduce smoking, it should impose a tax on
a. buyers of cigarettes.
b. sellers of cigarettes.
c. either buyers or sellers of cigarettes.
d. whichever side of the market is less elastic.
Supply, Demand, and Government Policies 1557
61. If the government wants to reduce the burning of fossil fuels, it should impose a tax on
a. buyers of gasoline.
b. sellers of gasoline.
c. either buyers or sellers of gasoline.
d. whichever side of the market is less elastic.
62. The term tax incidence refers to
a. whether buyers or sellers of a good are required to send tax payments to the government.
b. whether the demand curve or the supply curve shifts when the tax is imposed.
c. the distribution of the tax burden between buyers and sellers.
d. widespread view that taxes (and death) are the only certainties in life.
1558 Supply, Demand, and Government Policies
63. When a tax is placed on the buyers of lemonade, the
a. sellers bear the entire burden of the tax.
b. buyers bear the entire burden of the tax.
c. burden of the tax will be always be equally divided between the buyers and the sellers.
d. burden of the tax will be shared by the buyers and the sellers, but the division of the
burden is not always equal.
64. Which of the following statements is correct concerning the burden of a tax imposed on take-out
food?
a. Buyers bear the entire burden of the tax.
b. Sellers bear the entire burden of the tax.
c. Buyers and sellers share the burden of the tax.
d. We have to know whether it is the buyers or the sellers that are required to pay the tax to the
government in order to make this determination.
Supply, Demand, and Government Policies 1559
65. The tax incidence
a. is the manner in which the burden of a tax is shared among participants in a market.
b. can be shifted to the buyer by imposing the tax on the buyers of a product in a market.
c. can be shifted to the seller by imposing the tax on the sellers of a product in a market.
d. All of the above are correct.
66. How is the burden of a tax divided?
(i) When the tax is levied on the sellers, the sellers bear a higher proportion of
the tax burden.
(ii) When the tax is levied on the buyers, the buyers bear a higher proportion of
the tax burden.
(iii) Regardless of whether the tax is levied on the buyers or the sellers, the
buyers and sellers bear an equal proportion of the tax burden.
(iv) Regardless of whether the tax is levied on the buyers or the sellers, the
buyers and sellers bear some proportion of the tax burden.
a. (i) and (ii) only
b. (iv) only
c. (i), (ii), and (iii) only
d. (i), (ii), and (iv) only
1560 Supply, Demand, and Government Policies
67. When a tax is placed on the sellers of energy drinks, the
a. sellers bear the entire burden of the tax.
b. buyers bear the entire burden of the tax.
c. burden of the tax will be always be equally divided between the buyers and the sellers.
d. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is
not always equal.
68. If a tax is levied on the sellers of flour, then
a. buyers will bear the entire burden of the tax.
b. sellers will bear the entire burden of the tax.
c. buyers and sellers will share the burden of the tax.
d. the government will bear the entire burden of the tax.
Supply, Demand, and Government Policies 1561
69. Suppose the government imposes a 20–cent tax on the sellers of artificially-sweetened
beverages. The tax would shift
a. demand, raising both the equilibrium price and quantity in the market for artificially–sweetened
beverages.
b. demand, lowering the equilibrium price and raising the equilibrium quantity in the
market for artificially- sweetened beverages.
c. supply, raising the equilibrium price and lowering the equilibrium quantity in the
market for artificially- sweetened beverages.
d. supply, lowering the equilibrium price and raising the equilibrium quantity in the
market for artificially- sweetened beverages.
70. Suppose the government imposes a 30–cent tax on the sellers of soft drinks. Which of the
following is not correct? The tax would
a. shift the supply curve upward by 30 cents.
b. raise the equilibrium price by 30 cents.
c. reduce the equilibrium quantity.
d. discourage market activity.
1562 Supply, Demand, and Government Policies
71. Suppose the government imposes a 50–cent tax on the sellers of packets of chewing gum. The tax
would
a. shift the supply curve upward by less than 50 cents.
b. raise the equilibrium price by 50 cents.
c. create a 50-cent tax burden each for buyers and sellers.
d. discourage market activity.
72. Suppose the government imposes a 25–cent tax on the buyers of incandescent light bulbs. Which
of the following is not correct? The tax would
a. shift the demand curve downward by 25 cents.
b. lower the equilibrium price by 25 cents.
c. reduce the equilibrium quantity.
d. discourage market activity.
Supply, Demand, and Government Policies 1563
Figure 6-18
The vertical distance between points A and B represents the tax in the market.
73. Refer to Figure 6-18. The price that buyers pay after the tax is imposed is
a. $8.
b. $10.
c. $16.
d. $24.
1564 Supply, Demand, and Government Policies
74. Refer to Figure 6-18. The effective price that sellers receive after the tax is imposed is
a. $6.
b. $10.
c. $16.
d. $24.
75. Refer to Figure 6-18. The amount of the tax per unit is
a. $6.
b. $8.
c. $14.
d. $18.
Supply, Demand, and Government Policies 1565
76. Refer to Figure 6-18. The per-unit burden of the tax on buyers is
a. $6.
b. $8.
c. $14.
d. $24.
77. Refer to Figure 6-18. The per-unit burden of the tax on sellers is
a. $6.
b. $8.
c. $10.
d. $14.
1566 Supply, Demand, and Government Policies
Figure 6-19
78. Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. What will be
the new equilibrium quantity in this market?
a. less than 50 units
b. 50 units
c. between 50 units and 100 units
d. greater than 100 units
Supply, Demand, and Government Policies 1567
79. Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will
sellers receive per unit after the tax is imposed?
a. $3
b. between $3 and $5
c. between $5 and $7
d. $7
80. Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will
buyers pay per unit after the tax is imposed?
a. $3
b. between $3 and $5
c. between $5 and $7
d. $7
1568 Supply, Demand, and Government Policies
81. Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. Which of the
following is correct?
a. One-fourth of the burden of the tax will fall on buyers, and three-fourths of the burden of
the tax will fall on sellers.
b. One-third of the burden of the tax will fall on buyers, and two-thirds of the burden of
the tax will fall on sellers.
c. One-half of the burden of the tax will fall on buyers, and one-half of the burden of the tax will
fall on sellers.
d. Two-thirds of the burden of the tax will fall on buyers, and one–third of the burden of
the tax will fall on sellers.
Figure 6-20
Supply, Demand, and Government Policies 1569
82. Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. What will be
the new equilibrium quantity in this market?
a. less than 25 units
b. 25 units
c. between 25 units and 50 units
d. greater than 50 units
83. Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will
sellers receive per unit after the tax is imposed?
a. $5
b. between $5 and $10
c. between $10 and $14
d. d. $14
1570 Supply, Demand, and Government Policies
84. Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will
buyers pay per unit after the tax is imposed?
a. $5
b. between $5 and $10
c. between $10 and $14
d. $14
85. Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. Which of the
following is correct?
a. Buyers and sellers will share the burden of the tax equally.
b. Buyers will bear more of the burden of the tax than sellers will.
c. Sellers will bear more of the burden of the tax than buyers will.
d. Any of the above is possible.
Supply, Demand, and Government Policies 1571
Figure 6-21
86. Refer to Figure 6-21. What is the amount of the tax per unit?
a. $1
b. $2
c. $3
d. $4
1572 Supply, Demand, and Government Policies
87. Refer to Figure 6-21. The price that buyers pay after the tax is imposed is
a. $8.00.
b. $9.00.
c. $10.50.
d. $12.00.
88. Refer to Figure 6–21. Acme, Inc. is a seller of the good. Acme sells a unit of the good to a
buyer and then pays the tax on that unit to the government. Acme is left with how much money?
a. $8.00
b. $9.00
c. $10.50
d. $12.00
Supply, Demand, and Government Policies 1573
89. Refer to Figure 6-21. How is the burden of the tax shared between buyers and sellers? Buyers
bear
a. three-fourths of the burden, and sellers bear one-fourth of the burden.
b. two-thirds of the burden, and sellers bear one–third of the burden.
c. one–half of the burden, and sellers bear one-half of the burden.
d. one-fourth of the burden, and sellers bear three-fourths of the burden.
90. Refer to Figure 6-21. In the after-tax equilibrium, how much revenue does the government
collect from the tax on this good?
a. $210
b. $345
c. $420
d. $480
1574 Supply, Demand, and Government Policies
91. Refer to Figure 6–21. Suppose buyers, rather than sellers, were required to pay this tax (in the
same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers
would result in
a. buyers bearing a larger share of the tax burden.
b. sellers bearing a smaller share of the tax burden.
c. the same amount of tax revenue for the government.
d. Both a) and b) are correct.
Figure 6-22
Supply, Demand, and Government Policies 1575
92. Refer to Figure 6-22. The equilibrium price in the market before the tax is
imposed is a. $3.50.
b. $5.00.
c. $2.00.
d. $1.50.
93. Refer to Figure 6-22. As the figure is drawn, who sends the tax payment to the government?
a. The buyers send the tax payment.
b. The sellers send the tax payment.
c. A portion of the tax payment is sent by the buyers, and the remaining portion is sent by the
sellers.
d. The question of who sends the tax payment cannot be determined from the graph.