ECO2023 Calhoun Ch. 4

When a tax is imposed on a good, the actual incidence of the tax generally a. is the same as the statutory incidence. b. falls entirely on the seller. c. falls entirely on the buyer. Correctd. is shared between the buyer and seller.

d. is shared between the buyer and seller.

The actual benefit of a government subsidy is determined primarily by a. the elasticities of demand and supply. b. whether the subsidy is paid by cash or check. c. the number of exchanges that are made possible as a result of the subsidy. d. the legal (or statutory) assignment of the subsidy

the elasticities of demand and supply.

Suppose the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and as a result, the price to consumers of a pack of cigarettes went up by 40 cents. Which of the following will most likely happen? a. The actual burden of the tax would be shared equally by producers and consumers. b. The actual burden of this tax will fall mostly on consumers. c. The tax would clearly be a progressive tax. d. The actual burden of this tax will fall mostly on manufacturers.

The actual burden of this tax will fall mostly on consumers.

An increase in the demand for a product will cause which of the following to occur?a. The demand for and prices of the resources used to produce the product will increase. b. The demand for and prices of the resources used to produce the product will decrease. c. The demand for and prices of the resources used to produce the product will remain unchanged. d. The price of the product will decrease.

The demand for and prices of the resources used to produce the product will increase.

A tax on the buyers of coffee will result in which one of the following? a. An increase in the price of coffee paid by buyers, a decrease in the net price of coffee received by sellers, and a decrease in the equilibrium quantity of coffee. b. A decrease in the price of coffee paid by buyers, an increase in the net price of coffee received by sellers, and a decrease in the equilibrium quantity of coffee. c. An increase in the price of coffee paid by buyers, an increase in the net price of coffee received by sellers, and an increase in the equilibrium quantity of coffee. d. An increase in the price of coffee paid by buyers, a decrease in the net price of coffee received by sellers, and an increase in the equilibrium quantity of coffee.

a. An increase in the price of coffee paid by buyers, a decrease in the net price of coffee received by sellers, and a decrease in the equilibrium quantity of coffee.

Under rent control, tenants can expect a. lower rent and lower quality housing. b. lower rent and higher quality housing. c. higher rent and a shortage of rental housing. d. higher rent and a surplus of rental housing.

a. lower rent and lower quality housing.

The actual burden of a tax is determined primarily by a. the elasticities of demand and supply. b. the legal (or statutory) assignment of the tax. c. the number of exchanges that are eliminated from the market as a result of the tax. d. none of the above.

a. the elasticities of demand and supply.

The Laffer curve indicates that a. when tax rates are high, an increase in tax rates is likely to a decrease in tax revenues. b. when tax rates are low, a decrease in tax rates is likely to increase tax revenues. c. tax revenue will always decrease when tax rates are lowered. d. tax revenue will always increase when tax rates are increased.

a. when tax rates are high, an increase in tax rates is likely to a decrease in tax revenues.

The presence of price controls in a market usually indicates which of the following? a. The usual forces of supply and demand were not able to establish an equilibrium price in that market. b. Policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. c. An insufficient quantity of a good or service was being produced in that market to meet the public's need. d. Policymakers correctly believed that, in that market, price controls would generate no inequities of their own.

b. Policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

Which of the following characterizations about rent control is correct? a. Rent control and the minimum wage are both examples of price floors. b. Rent control is an example of a price ceiling and the minimum wage is an example of a price floor. c. Rent control and the minimum wage are both examples of price ceilings. d. Rent control is an example of a price floor and the minimum wage is an example of a price ceiling.

b. Rent control is an example of a price ceiling and the minimum wage is an example of a price floor.

How would an increase in the price of paper influence the market for college textbooks? a. The supply of textbooks would decrease causing the price of textbooks to fall. b. The supply of textbooks would increase causing the price of textbooks to fall. c. The supply of textbooks would decrease causing the price of textbooks to rise. d. The supply of textbooks would increase causing the price of textbooks to rise.

c. The supply of textbooks would decrease causing the price of textbooks to rise.

Suppose that the federal government levies a 50 cent excise tax on gasoline and that the demand for gasoline is highly inelastic while the supply is highly elastic. Under these circumstances, the burden of the tax a. cannot be determined because the burden of a tax is not influenced by the elasticities of supply and demand. b. will fall primarily on producers. c. will fall primarily on consumers. d. will be split equally between consumers and producers.

c. will fall primarily on consumers.

Which of the following will most likely occur when government price controls fix the price of a good above market equilibrium? a. The quality of the good will deteriorate. b. Waiting lines to buy the good will develop. c. Consumers will buy more than they would at the market equilibrium price. d. A surplus of the good will develop.

d. A surplus of the good will develop.

Why will price controls will tend to cause misallocation of resources? a. Producers no longer have incentive to be profitable. b. Consumers no longer have incentive to spend their income efficiently. c. People are unable to determine their preferences at the high or low price. d. Production (or opportunity) cost no longer corresponds to market price.

d. Production (or opportunity) cost no longer corresponds to market price.

Why does the imposition of a tax on a good create a deadweight? a. The tax induces the government to increase its expenditures. b. The tax imposes a loss on buyers that is greater than the loss to sellers. c. The tax causes a disequilibrium in the market. d. The tax reduces the quantity of exchanges between buyers and sellers.

d. The tax reduces the quantity of exchanges between buyers and sellers.