HW 7 Excise Taxes

If the government's purpose in implementing a tax was to raise tax revenue (as opposed to decreasing the quantity consumed) and minimize deadweight loss, then it should tax which of the following goods? - restaurant meals - luxury yachts - alcohol - diet mountain dew in 12 oz cans

alcohol

When a tax is places on sellers of tea,

both sellers and buyers of tea are made worse off

Suppose there was a $2 per six-pack tax on the beer market, and that demand was relatively inelastic and supply was relatively elastic. How was the burden of tax be divided between buyers and sellers? GRAPH

buyers would bear a greater burden of the tax

When a tax is imposed on sellers in a market,

consumer surplus decreases, producer surplus decreases, government tax revenue increases and deadweight loss increases

A tax on the sellers of coffee

decreases the size of the coffee market

Use the above graph (Figure 1 in Chapter 8) to help you answer this question: If the government levies a $1000 tax per boat on sellers of boats, then the price by buyers of boats would GRAPH

increase by less than $1000

A tax places on the sellers of yachts

increases sellers' cost, reduces profits, and shifts the supply curve left

A tax imposed on the sellers of a good will raise the

price paid by buyers and lower the equilibrium quantity

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

sellers will bear most of the burden of the tax

According to the Laffer Curve, as the tax on a good increase from $1 per unit to $2 per unit to $3 per unit and so on, the

tax revenue increases at first, but it eventually peaks and then decreases

Suppose sellers of liquor are required to send $1.00 to the government for every bottle of liquor they sell. Further, suppose this tax causes the price paid by buyers of liquor to rise by $0.80 per bottle. Which of the following statements is correct? - this tax causes the supply curve for liquor to shift left by $0.80 at each quantity of liquor. - the effective price received by sellers is $0.20 per bottle less than it was before the tax. - twenty percent of the burden of the tax falls on buyers. - the tax burden is equally shared between buyers and sellers

the effective price received by sellers is $0.20 per bottle less then it was before the tax

Suppose sellers of liquor are required to send $1.00 to the government for every bottle of liquor they sell. Further, suppose this tax causes the price paid by buyers of liquor to rise by $0.80 per bottle. Which of the following statements is correct? - the price elasticity of demand is relatively more inelastic than the price elasticity of supply - the sellers bear a greater burden of the tax as the tax was placed on sellers - the burden of the tax will always be equally shared between the buyers and the sellers - the price elasticity of demand is relatively more elastic then the price elasticity of supply

the price elasticity of demand is relatively more inelastic than the price elasticity of supply

When a tax is placed on the sellers of cell phones,

the size of the cell phone market decreases, but the price paid by buyers increases

Taxes on labor (i.e. wages) encourage all of the following EXCEPT - older workers to take early retirement from the labor force - workers to work more - people to be paid "under the table" - mothers to stay at home rather then work in the labor force

workers to work more