Econ 5.6

The actual division of a tax between buyers and sellers in a market is the excess burden of the tax.

False

The incidence of a tax depends on whether the government collects the tax from buyers or sellers.

False

The person or firm that pays a tax bears the burden of the tax.

False

For a given supply curve, how does the elasticity of demand affect the burden of a tax imposed on a product?

The excess burden of the tax will be greater when the demand is more elastic than when it is less elastic.

Suppose the government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers. Who pays for the tax in this situation? (Assume that the demand curve is downward sloping and that the supply curve is upward sloping.)

The tax will be borne partly by consumers and partly by sellers.

When the demand for a product is less elastic than the supply, consumers pay the majority of the tax on the product.

True

The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the

demand curve for imported champagne is vertical.

The demand curve for pizza in Foodieland is vertical. If a tax is imposed on each pizza bought, ________.

the burden of the tax will fall entirely on the buyers

The incidence of a per-unit tax on a good is identical for buyers and sellers of the good if:

the buyers and sellers of the good are equally sensitive to price changes.

The deadweight loss of taxation on a good is higher if ________.

the demand or the supply of the good is relatively price elastic