Question

1- If the seller is legally responsible for paying the tax, then

A.the supply curve is shifted to show the imposition of the tax.

B.the demand curve is shifted to show the imposition of the tax.

C.the after-tax price to the seller(PS )equals the original price minus the tax.

D.the after-tax price to the buyer (PB ) equals the original price plus the tax.

2- The smaller the elasticity of supply, the ______ is the decrease in the equilibrium quantity, the ______ is the deadweight loss, and the ______ is the tax revenue.

A.greater; greater; smaller

B.smaller; greater; smaller

C.smaller; smaller; greater

D.greater; greater; smaller

3- If the demand curve is more elastic than the supply curve, then

A.the actual burden will be higher for the buyer than for the seller.

B.the actual burden will be higher for the seller than for the buyer.

C.the statutory burden will be higher for the buyer than for the seller.

D.the statutory burden will be higher for the seller than for the buyer.

4-When an effective production quota is applied, the quantity produced ______ and the price ______. On the last unit, the marginal benefit ______ marginal cost.

A.decreases; rises; exceeds

B.increases; falls; is less than

C.decreases; falls; is less than

D.increases; rises; exceeds

5-A tax on a good _________________ the price that sellers effectively receive, _________________ the price that buyers effectively pay, and _________________ the quantity exchanged.

A.raises; lowers; raises

B.raises; raises; lowers

C.lowers; lowers; raises

D.lowers; raises; lowers

6-Suppose the government decides to tax tennis shoe producers for every pair sold. Before the tax, 100 pairs of tennis shoes are sold every year at a price of 300 dirhams per pair. After the tax is imposed, 80 pairs are sold yearly; consumers pay 320 per pair and producers get to keep 290 per pair.

-The statutory burden of the tax is

A.split evenly between consumers and producers.

B.on consumers.

C.on producers.

D.split between consumers and producers with consumers paying a larger share.

-The actual burden of the tax is

A.split evenly between consumers and producers.

B.split between consumers and producers with consumers paying a larger share.

C.on consumers.

D.on producers.

-The amount of the tax is

A.10 dirhams.

B.320 dirhams.

C.20 dirhams.

D.30 dirhams.

-The burden of the tax on consumers is

A.30 dirhams.

B.20 dirhams.

C.320 dirhams.

D.10 dirhams.

-The burden of the tax on producers is

A.320 dirhams.

B.10 dirhams.

C.20 dirhams.

D.30 dirhams.

-The amount of tax revenue collected is

A.2,400 dirhams.

B.3,000 dirhams.

C.32,000 dirhams.

D.25,600 dirhams.

-The deadweight loss is:

A.the loss of total surplus on 100 pairs of shoes.

B.the loss of total surplus due to the higher price the buyers have to pay and the lower price the sellers get to keep.

C.the loss of consumer and producer surplus on 80 pairs of shoes.

D.the loss of consumer and producer surplus on the 81st to 100th pairs of shoes.

Answer 1

1. Tax on sellers reduces the price they receive by tax amount so their supply curve shifts to the left. The tax burden is shared by both buyers and sellers according to elasticity. Demand curve does not change when the tax is imposed on sellers. Therefore the option A is correct.

2. When supply is less elastic, suppliers will not respond much to price change so quantity will not be changed much. In this case, the deadweight loss is small and as supply is less elastic, and quantity does not change much so the tax revenue is more. Therefore the option C is correct

3. The tax burden is imposed more whose elasticity is less. If the demand curve is more elastic then tax burden will not be imposed more on the buyers. Therefore the option B is correct

4. The quota is imposed to decrease import. When world price is less than market equilibrium then country wants to import. Quota means a limit on the number of import. So the price is increased and quantity produced increases. There will be under production in the market and result in a deadweight loss, so MB>MC. Therefore the option D is correct.