ECON 2000 Homework 5

Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the

demand is more inelastic than the supply.

Refer to Figure 6-2. The price ceiling causes quantity

demanded to exceed quantity supplied by 90 units.

Refer to Figure 6-14. Suppose D1represents the demand curve for gasoline in both the short run and long run, S1represents the supply curve for gasoline in the short run, and S2represents the supply curve for gasoline in the long run. After the imposition of the $2 tax, the price paid by buyers will be

higher in the long run than in the short run.

If the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase.

The deadweight loss from a tax per unit of good will be smallest in a market with

inelastic supply and inelastic demand.

Refer to Figure 8-2. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

$1.50

Refer to Figure 6-10. The per-unit burden of the tax on buyers is

$14 - incorrect, $8

Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

$2

Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is

$2.50

Refer to Figure 8-2. The loss of producer surplus as a result of the tax is

$3

Refer to Figure 6-13.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. After paying the tax, Acme receives how much?

$8.00

Refer to Figure 6-11.Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

Between 60 units and 100 units

Which of the following causes a shortage of a good?

Binding price ceiling

Refer to Figure 8-1.Suppose the government imposes a tax of P'-P'''. Total surplus after the tax is measured by the area

I + J + K + L + M + Y. - incorecct, J+K+l+m

Kate is a personal trainer whose client William pays $80 per hour-long session. William values this service at $100 per hour, while the opportunity cost of Kate's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. After the tax, what is likely to happen in the market for personal training?

Kate and William will agree to a new price somewhere between $85 and $100.

Consider the U.S. market for chocolate, a market in which the government has imposed a nonbinding price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling?

South American cocoa bean producers refuse to ship to chocolate producers in the United States.

Which of the following causes the price paid by buyers to be different than the price received by sellers?

Tax on the good

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

The effective price received by sellers is $0.40 per bottle less than it was before the tax.

Refer to Figure 6-15. In which market will the majority of the tax burden fall on buyers?

The market shown in graph (b)

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling is established,

a smaller quantity of the good is bought and sold.

If a binding price floor is imposed on the video game market, then

a surplus of video games will develop.

Refer to Figure 6-5.A government-imposed price of $12 in this market is an example of a

binding price floor that creates a surplus.

Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to

decrease by $2.

Refer to Figure 8-2. The imposition of the tax causes the quantity sold to

decrease by 1 unit.

A tax levied on the sellers of a good shifts the

supply curve upward by the size of the tax.

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20.

Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift

supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages.

Refer to Figure 6-9.In this market, a minimum wage of $7.00 creates a labor

surplus of 2,000 worker hours. -incorrect, surplus of 4,000 worker hours.