Taxes

Which of the following statements about the economic incidence of taxation is TRUE? I. If demand is elastic, producers will bear a greater burden of the tax than consumers. II. If supply is perfectly inelastic, producers will bear all the burden of the tax. III. If the supply curve is perfectly elastic, consumers will bear none of the burden of the tax. A. II only. B. I and II only. C. II and III only. D. I, II and III.

A. II only.

Which of the following statements about price ceilings is TRUE? (Assume the price ceiling is set below the equilibrium price.) A. Price ceilings make sellers worse off. B. Price ceilings make buyers better off. C. Both a) and b) are true. D. Neither a) nor b is true).

A. Price ceilings make sellers worse off.

If a price ceiling (set below the initial equilibrium price) is introduced in a market, then: A. Producer surplus definitely decreases. B. Consumer surplus definitely increases. C. Neither a) nor b) are true. D. Both a) and b) are true.

A. Producer surplus definitely decreases.

Which of the following statements about tax incidence and relative elasticities is TRUE? I. If demand is relatively inelastic and supply is relatively elastic, then consumers bear more of the burden of a tax. II. If supply is perfectly inelastic, then producers bear none of the burden of a tax. III. If the relative elasticities of demand and supply are the same, the tax burden is shared equally across consumers and producers. A. II only. B. I and III only. C. I, II, and III. D. III only.

B. I and III only.

Which of the following statements about the deadweight loss of taxation is TRUE? A. If there is a deadweight loss, then the revenue raised by the tax is greater than the losses to consumer and producers. B. If there is no deadweight loss, then revenue raised by the government is exactly equal to the losses to consumers and producers. C. Both a) and b). D. Neither a) nor b).

B. If there is no deadweight loss, then revenue raised by the government is exactly equal to the losses to consumers and producers.

Which of the following statements about minimum wages is true? A. Minimum wage laws may make some workers better off and others worse off. B. Minimum wage laws increase unemployment among low-skill, inexperienced workers C. Both a) and b) are true. D. None of the above are true.

C. Both a) and b) are true.

Suppose the equilibrium price of oranges is $3 per pound. If there is a $2 tax imposed on the sale of oranges, and the new price of oranges rises to $3.50. How much of the tax is paid by consumers ___? How much of the tax is paid by producers ____? A. $2 paid by consumers, $0 paid by producers B. $0 paid by consumers, $2 paid by producers C. $1 paid by consumers, $1 paid by producers D. 50 cents paid by consumers, $1.50 paid by producers E. $1.50 paid by consumers, 50 cents paid by producers

D. 50 cents paid by consumers, $1.50 paid by producers

Which of the following CANNOT reduce the equilibrium quantity sold in a market? A. A price ceiling. B. A price floor. C. A tax. D. All of the above can decrease equilibrium quantity sold.

D. All of the above can decrease equilibrium quantity sold.

Which of the following correctly describes the equilibrium effects of a per-unit tax? A. Consumer and producer surplus increase but social surplus decreases. B. Consumer and producer surplus decrease but social surplus increases. C. Consumer surplus, producer surplus, and social surplus all increase. D. Consumer surplus, producer surplus, and social surplus all decrease

D. Consumer surplus, producer surplus, and social surplus all decrease

Which of the following correctly describes the equilibrium effects of a per-unit tax? A. Consumer and producer surplus increase but social surplus decreases. B. Consumer and producer surplus decrease but social surplus increases. C. Consumer surplus, producer surplus, and social surplus all increase. D. Consumer surplus, producer surplus, and social surplus all decrease.

D. Consumer surplus, producer surplus, and social surplus all decrease.

Suppose a tax is levied in a market in which demand is downward sloping and supply is perfectly elastic. Which of the following statements is/are TRUE? I. Producer surplus decreases. II. The deadweight loss is zero. III. Consumers bear all the burden of the tax. A. II only. B. I and II only. C. I, II, and III. D. III only.

D. III only.

In Canada, the prices of most medical services are regulated by the Provinces (that is, they are subject to price ceilings). This type of regulation is likely to result in which of the following (relative to an unregulated market)? A. An increase in the quantity of medical services provided. B. Higher prices for medical services (compared to equilibrium prices) C. Lower prices for medical services (compared to equilibrium prices) D. A decrease in the quantity of medical services provided E. Both C and D will occur

E. Both C and D will occur