Question

Suppose the government has imposed a price floor on the market for soybeans. Which of the following events could transform the price floor from one that is binding into one that is not binding?
(x) The number of farmers growing and selling soybeans increases.
(y) A change in consumer tastes and preferences increases the number of consumers buying soybeans.
(z) A natural disaster occurs in the soybean-growing states.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (z) only

Which of the following statements is (are) correct?
(x) the term tax incidence refers to the division of the tax burden between buyers and sellers.
(y) It is possible for the seller to bear the whole burden of the tax if the demand curve is perfectly elastic.
(z) If the demand curve is perfectly inelastic, then the seller bears the entire burden of the tax
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

A tax on the sellers of gasoline will cause the price the buyers pay
A. and the effective price the sellers receive to remain the same.
B. and the effective price the sellers receive to rise.
C. and the effective price the sellers receive to fall.
D. to rise, and the effective price the sellers receive to fall.
E. to fall, and the effective price the sellers receive to rise.

Answer 1

Q1. Option B. A binding price floor below equilibrium price would change when both supply and demand increases

Q2. Option B. A perfectly elastic demand curve would have many alternatives and hence seller bears the cost

Q3. Option A. As sellers shifts the burden of tax to consumers, as gasoline does not have substitutes