Question

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this​ product, A. buyers bear the entire burden of the tax. B. buyers share the burden of the tax with government. C. the tax burden will be shared equally between buyers and sellers. D. sellers bear the entire burden of the tax.

Explain how a​ downward-sloping demand curve results from consumers adjusting their consumption choices to changes in price. A. When the price of a good rises​, the budget constraint shifts​ outward, leading consumers to buy less of that good. B. When the price of a good rises​, the marginal rate of substitution​ changes, leading consumers to buy less of that good. C. When the price of a good​ rises, this causes a negative income effect that is larger in absolute value than a corresponding positive substitution​ effect, leading consumers to buy less of that good. D. When the price of a good declines​, the ratio of the marginal utility to price rises​, leading consumers to buy more of that good. E.

When the price of a good​ declines, this causes positive substitution and income​ effects, leading consumers to buy more of that good. What is the difference between technology and technological​ change? A. Technology is when a firm is able to produce the same output using fewer ​inputs, while technological change is the process of using inputs to make output. B. Technology is the development of new​ products, while technological change is when a firm is able to produce the same output with fewer inputs. C. Technology is the process of using inputs to make​ output, while technological change is when a firm is able to produce more output using more inputs. D. Technology is the process of using inputs to make​ output, while technological change is when a firm is able to produce the same output using fewer inputs. E. Technology is the development of new​ products, while technological change is when a firm is able to produce more output with the same inputs.

A country that imports a substantial amount of gasoline every year imposed a​ $1.2 per gallon excise tax on​ gasoline, to be paid by sellers. The equilibrium price of gasoline prior to the tax was​ $4 per gallon. Gasoline being a necessary​ good, its demand curve is steep and the consumers had to bear the bulk of the tax burden. The​ post-tax price of gasoline went up to​ $5 per​ gallon, causing the​ country's media to claim that it was unfair that people should have to pay so high a price for such an important consumption item. They further believed that such a high tax was inefficient and could not be justified. Which of the following inferences can be drawn from this​ information? A. The sellers bear 1.2 percent of the entire tax burden. B. The consumers are bearing the entire burden of the tax. C. The burden on consumers would reduce if the tax was imposed on​ them, rather than the sellers. D. The sellers of gasoline now receive 20 cents less than the​ pre-tax price. E.

The deadweight loss of the tax is very high. If total utility increases at a decreasing rate as a consumer consumes more​ coffee, then marginal utility must A. remains constant. B. be negative. C. increase also. D. decrease.

Answer 1

Answer 1. buyers bear the entire burden of the tax.

Reason. since buyers demamd is perfectly inelastic, they bear the complete burden of tax.

Answer 2. D. When the price of a good declines​, the ratio of the marginal utility to price rises​, leading consumers to buy more of that good.

Reason-

Demand curve is downward sloping, due to law of diminishing marginal utility. When price rises, MU/P falls . So demand falls.

Answer 3.

Technology is the process of using inputs to make output, while technological change is when a firm is able to produce the same output using fewer inputs

Reason- With technology, inputs are converted into output. With technological changes it happens more efficiently.

Answer 4. D. The sellers of gasoline now receive 20 cents less than the​ pre-tax price

Reason- Before tax price for sellers= $4

After tax price for sellers= $4-$0.2=$3.8

Tax burden on sellers=$0.20

Answer 5. Decrease

Reason Slope of total utility is marginal utility, so when Total utility falls, marginal utility decreases

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