MRU6.2: Who Pays the Tax?

Q5: When looking at a demand and supply diagram, how do you determine the size of the burden on buyers caused by a tax? - Look to see how much the price paid by buyers has risen as a result of the tax. - Look to see how much the quantity demanded has risen as a result of the tax. - Look to see how much the quantity demanded has fallen as a result of the tax. - Look to see how much the price paid by buyers has fallen as a result of the tax.

A: Look to see how much the price paid by buyers has risen as a result of the tax.

Q7: If one were to place a tax on the sellers of a good with elastic supply, which of the following would likely occur? - The equilibrium quantity of this good would fall only slightly, leading to little deadweight loss. - The price received by those sellers would fall considerably, leading to falling profits. - The land, labor, and capital used to produce that good would move to the production of a different good. - The buyers of this good will simply choose instead to purchase one of its many untaxed substitutes.

A: The land, labor, and capital used to produce that good would move to the production of a different good.

Q1: Which side of the market bears more of the burden of a tax? - Buyers - The less elastic side of the market - Sellers - The more elastic side of the market

A: The less elastic side of the market

Q9: Who bears more of the burden of Social Security taxes? - Employers do, because the demand for labor is more elastic than the supply. - Workers do, because the supply of labor is more elastic than the demand. - Workers do, because the supply of labor is less elastic than the demand. - Employers do, because the demand for labor is less elastic than the supply.

A: Workers do, because the supply of labor is less elastic than the demand.

Q6: The intuitive way to remember which side of the market bears the burden of a tax is to remember that: - elastic is in the market. - inelastic is in the market. - elasticity equals escape. - elasticity means no escape.

A: elasticity equals escape.

Q2: The more elastic side of the market is going to bear _______ of a tax. - less of the legal incidence - more of the legal incidence - more of the economic incidence - less of the economic incidence

A: less of the economic incidence

Q4: If the demand for a good is inelastic and the supply of a good is elastic, then: - all of the tax will be paid by buyers in this market. - more of the tax will be paid by buyers in this market. - more of the tax will be paid by sellers in this market. - all of the tax will be paid by sellers in this market.

A: more of the tax will be paid by buyers in this market.

Q8: Tax burden is determined by _______ elasticity, because _______. - demand; supply in the short run is vertical - absolute; the size of the tax is fixed - supply; technology is exogenous - relative; someone must pay the tax

A: relative; someone must pay the tax

Q10: All else being equal, taxing a good _______ will put more of a burden on buyers than would taxing a good _______. - that has many substitutes; that has few substitutes. - that has few substitutes; that is a necessity - that is a luxury; that has many substitutes - that is a necessity; that is a luxury

A: that is a necessity; that is a luxury

Q3: If a tax is placed on a market with a steep supply curve and a flat demand curve: - the price paid by buyers will rise only a little, and the price received by sellers will fall a lot. - the price paid by buyers will fall only a little, and the price received by sellers will rise a lot. - the price paid by buyers will fall a lot, and the price received by sellers will rise only a little. - the price paid by buyers will rise a lot, and the price received by sellers will fall only a little.

A: the price paid by buyers will rise only a little, and the price received by sellers will fall a lot.