MRU6.1: Commodity Taxes

Q9: Which of the following is the same regardless of whether a tax is levied on buyers or on sellers? - The total price paid by buyers after the tax - The equilibrium quantity after the tax - All of these choices are correct. - The total price received by sellers after the tax

A: All of these choices are correct.

Q4: What does a tax placed on suppliers do? - It decreases their reservation price. - It decreases the value. - It increases their quantity supplied. - It increases their costs.

A: It increases their costs.

Q7: What does a tax placed on buyers do? - It increases the minimum prices they are willing to pay the suppliers. - It reduces the maximum prices they are willing to pay the suppliers. - It increases their costs. - It increases their quantity demanded.

A: It reduces the maximum prices they are willing to pay the suppliers.

Q2: Which of the following is NOT one of the three important points about commodity taxes that Professor Cowen makes in the video? - Taxes raise revenue but also create deadweight loss. - Who pays the tax does not depend on who writes the check to the government. - Who pays the tax depends on the elasticities of supply and demand. - Taxes increase the equilibrium quantity, leading to wasteful trades.

A: Taxes increase the equilibrium quantity, leading to wasteful trades.

Q8: How do we show a tax on buyers in the supply and demand diagram? - We shift the supply curve down by exactly the amount of the tax. - We shift the demand curve up by exactly the amount of the tax. - We shift the demand curve down by exactly the amount of the tax. - We shift the supply curve up by exactly the amount of the tax.

A: We shift the demand curve down by exactly the amount of the tax.

Q5: How do we show a tax on sellers in the supply and demand diagram? - We shift the supply curve up by exactly the amount of the tax. - We shift the supply curve down by exactly the amount of the tax. - We shift the demand curve up by exactly the amount of the tax. - We shift the demand curve down by exactly the amount of the tax.

A: We shift the supply curve up by exactly the amount of the tax.

Q10: Since it doesn't matter whether a tax shifts the demand curve or the supply curve, we can more easily draw a tax as: - a wedge driven between the demand curve and the supply curve to the left of the original market equilibrium. - a line connecting the lowest point on the demand curve with the highest point on the supply curve. - a wedge driven between the demand curve and the supply curve to the right of the original market equilibrium. - a line connecting the highest point on the demand curve with the lowest point on the supply curve.

A: a wedge driven between the demand curve and the supply curve to the left of the original market equilibrium.

Q3: The economic incidence of a tax tells us who _______ and it _______ the legal incidence of a tax. - actually pays the tax; does not depend on - actually pays the tax; depends on - actually benefits from the tax; depends on - actually benefits from the tax; does not depend on

A: actually pays the tax; does not depend on

Q6: After a tax: - buyers pay less than before, sellers receive more than before, and the equilibrium quantity falls. - buyers pay more than before, sellers receive less than before, and the equilibrium quantity rises. - buyers pay less than before, sellers receive more than before, and the equilibrium quantity rises. - buyers pay more than before, sellers receive less than before, and the equilibrium quantity falls.

A: buyers pay more than before, sellers receive less than before, and the equilibrium quantity falls.

Q1: "Commodity" taxes are: - taxes on income. - usually covered in macroeconomics. - taxes on specific goods. - also called commodity subsidies.

A: taxes on specific goods.