micro ch 6

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Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the (i)supply is more elastic than the demand. (ii)demand in more elastic than the supply. (iii)tax is placed on the sellers of the product. (iv)tax is placed on the buyers of the product.

(ii) only

Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage depresses teenage employment by about

1 to 3 percent.

A price ceiling is

A legal maximum on the price at which a good can be sold

A price floor will be binding only if it is set

above the equilibrium price, causing a surplus.

Long lines

are an inefficient rationing mechanism because they waste buyers' time, and discrimination according to seller bias is an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it most highly.

If a tax is imposed on a market with inelastic demand and elastic supply, then

buyers will bear most of the burden of the tax.

A $3 tax levied on the buyers of shoes will cause the

demand curve for shoes to shift down by $3.

Tax incidence

depends on the elasticities of supply and demand

Which of the following is correct? A tax burden

falls more heavily on the side of the market that is less elastic.

tax incidence

is the manner in which the burden of a tax is shared among participants in a market.

An example of a price floor is

minimum wage

The minimum wage is an example of a

price floor

A tax on sellers will shift the

supply curve upward by the amount of the tax

If a price floor is not binding, then

there will be no effect on the market price or quantity sold.

A $2.00 tax levied on the sellers of birdhouses will shift the supply curve

upward by exactly $2.00.


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