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Supply, Demand, and Government Policies 1675
133.
Who bears the majority of a tax burden depends on whether the tax is placed on the buyers or
the sellers.
a.
True
b.
False
134.
Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer pays $4.
a.
True
b.
False
135.
Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer pays $6.
a.
True
b.
False
136.
Refer to Figure 6-36. If the government places a $2 tax in the market, the seller receives $6.
a.
True
b.
False
137.
Refer to Figure 6-36. If the government places a $2 tax in the market, the seller receives $4.
a.
True
b.
False
138.
Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer bears $2 of
the tax burden.
a.
True
b.
False
139.
Refer to Figure 6-36. If the government places a $2 tax in the market, the buyer bears $1 of
the tax burden.
a.
True
b.
False
140.
Refer to Figure 6-36. If the government places a $2 tax in the market, the seller bears $2 of
the tax burden.
a.
True
b.
False
141.
Refer to Figure 6-36. If the government places a $2 tax in the market, the seller bears $1 of
the tax burden.
a.
True
b.
False
142.
Most labor economists believe that the supply of labor is much more elastic than the demand.
a.
True
b.
False
143.
FICA is an example of a payroll tax, which is a tax on the wages that firms pay their workers.
a.
True
b.
False
144.
Since half of the FICA tax is paid by firms and the other half is paid by workers, the burden of
the tax must fall
equally on firms and workers.
a.
True
b.
False
145.
Workers, rather than firms, bear most of the burden of the payroll tax.
a.
True
b.
False
146.
Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.
a.
True
b.
False
147.
If the demand curve is very elastic and the supply curve is very inelastic in a market, then the
sellers will bear a
greater burden of a tax imposed on the market, even if the tax is imposed on
the buyers.
a.
True
b.
False
148.
If the demand curve is very inelastic and the supply curve is very elastic in a market, then the
sellers will bear a
greater burden of a tax imposed on the market, even if the tax is imposed on
the buyers.
a.
True
b.
False
149.
A tax burden falls more heavily on the side of the market that is less elastic.
a.
True
b.
False
150.
The tax burden falls more heavily on the side of the market that is more inelastic.
a.
True
b.
False
151.
A tax on a market with elastic demand and elastic supply will shrink the market more than a tax
on a market with
inelastic demand and inelastic supply will shrink the market.
a.
True
b.
False
152.
The true burden of a payroll tax has nothing to do with the percentage of the tax that employers
are required to
pay.
a.
True
b.
False
153.
Even though federal law mandates that workers and firms each pay half of the total FICA tax,
the tax burden may
not fall equally on workers and firms.
a.
True
b.
False
154.
Most of the burden of a luxury tax falls on the middle class workers who produce luxury goods
rather than on the
rich who buy them.
a.
True
b.
False
155.
The burden that results from a tax on yachts falls more heavily on the buyers of yachts than on
the sellers of
yachts.
a.
True
b.
False
156.
The burden of a luxury tax most likely falls more heavily on sellers because demand is more
elastic and supply is
more inelastic.
a.
True
b.
False
157.
Using a supply and demand diagram, show a labor market with a binding minimum wage. Use
the diagram to show
those who are helped by the minimum wage and those who are hurt by the
minimum wage.
Supply, Demand, and Government Policies 1685
158
a.
Using the graph shown, analyze the effect a $300 price ceiling would have on the
market for
ten-speed bicycles. Would this be a binding price ceiling?
b.
Using the graph shown, analyze the effect a $700 price floor would have on this
market for
ten-speed bicycles. Would this be a binding price floor?
c.
Why would policymakers choose to impose a price ceiling or price floor?
159.
Using the graph shown, answer the following questions.
a.
What was the equilibrium price in this market before the tax?
b.
What is the amount of the tax?
c.
How much of the tax will the buyers pay?
d.
How much of the tax will the sellers pay?
e.
How much will the buyer pay for the product after the tax is imposed?
f.
How much will the seller receive after the tax is imposed?
g.
As a result of the tax, what has happened to the level of market activity?
160.
Using the graph shown, answer the following questions.
a.
What was the equilibrium price in this market before the tax?
b.
What is the amount of the tax?
c.
How much of the tax will the buyers pay?
d.
How much of the tax will the sellers pay?
e.
How much will the buyer pay for the product after the tax is imposed?
f.
How much will the seller receive after the tax is imposed?
g.
As a result of the tax, what has happened to the level of market activity?
161.
Using the graph shown, in which the vertical distance between points A and B represents the
tax in the market,
answer the following questions.
a.
What was the equilibrium price and quantity in this market before the tax?
b.
What is the amount of the tax?
c.
How much of the tax will the buyers pay?
d.
How much of the tax will the sellers pay?
e.
How much will the buyer pay for the product after the tax is imposed?
f.
How much will the seller receive after the tax is imposed?
g.
As a result of the tax, what has happened to the level of market activity?
162.
How does elasticity affect the burden of a tax? Justify your answer using supply and demand
diagrams.
1690 Supply, Demand, and Government Policies
Problems
1.
Define a price ceiling.
2.
When a price ceiling is binding, is the price ceiling set above or below the market equilibrium price?
3.
Does a binding price ceiling result in a shortage or a surplus in the market?
4.
Define a price floor.
5.
When a price floor is binding, is the price floor set above or below the market equilibrium price?
6.
Will a binding price floor result in a shortage or a surplus in the market?
1692 Supply, Demand, and Government Policies
Figure 6-31
7.
Refer to Figure 6-31. If the government set a price ceiling at $9, would there be a shortage or
surplus, and how
large would be the shortage/surplus?
8.
Refer to Figure 6-31. If the government set a price ceiling at $15, would there be a shortage or
surplus, and how
large would be the shortage/surplus?
9.
Refer to Figure 6-31. If the government set a price ceiling at $8, would there be a shortage or
surplus, and how
large would be the shortage/surplus?
10.
Refer to Figure 6-31. If the government set a price floor at $15, would there be a shortage or
surplus, and how
large would be the shortage/surplus?
11.
Refer to Figure 6-31. If the government set a price floor at $9, would there be a shortage or
surplus, and how
large would be the shortage/surplus?
