Module 7 Microeconomics

Which of the following statements is correct concerning the burden of a tax imposed on take-out food?

Buyers and sellers share the burden of the tax.

Taxes

he amount of money the government requires from buyers or sellers on each unit bought or sold.

Tax Incidence

how the burden of a tax is shared among market participants.

When a tax is placed on the sellers of a good

supply for that good decreases.

Payroll tax

tax on the wages that firms pay their workers.

If a tax is levied on the sellers of flour, then

buyers and sellers will share the burden of the tax.

Where supply is more elastic than demand,

buyers bear most of the burden of the tax

When a tax is levied on buyers of tea,

buyers of tea and sellers of tea both are made worse off

In Singapore the government places a $5,000 tax on the buyers of new automobiles. After the purchase of a new car, a buyer must pay the government $5,000. How would the imposition of the tax on buyers be illustrated in a graph?

The tax will shift the demand curve down by $5,000

Ad Valorem Tax

based on a percentage of a good's price

When a tax is placed on the buyers of a good

demand for that good decreases

If a tax is levied on the buyers of a product, then there will be a(n)

downward shift of the demand curve

Excise Tax

is a tax on a specific good (such as gasoline, cigarettes, or alcohol) and is an example of a per-unit tax.

If demand is more elastic than supply,

it is easier for buyers than sellers to leave the market.

The tax burden always falls more heavily on the side of the market that is

less elastic

When a tax is placed on the sellers of a product, buyers pay

more, and sellers receive less than they did before the tax.

Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect

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.

A tax imposed on the buyers of a good will raise the

price paid by buyers and lower equilibrium quantity

who actually pays a tax depends on

the price elasticities of supply and demand

Why do policy makers use taxes?

to raise revenue for public purposes and to influence market outcomes