Question

6- Consider the market for rubber bands. If this market has a very inelastic supply curve and a very elastic demand curve, who would bear most of the burden of a tax on rubber bands?

a) Consumers b) Producers c) They would bear the burden more or less equally. d) We can't know who will bear most of the burden.

7- If this market has a very elastic supply curve and a very inelastic demand curve, who would bear most of the burden of a tax on rubber bands?

a) Consumers b) Producers c) They would bear the burden more or less equally. d) We can't know who will bear most of the burden.

8-  Suppose the PA legislature imposes a per-unit tax on donuts. Fill in the following blanks with H (higher), L (lower), E (either higher or lower -- we can not be certain):

- Total revenue generated by the tax will be ..... in the short run than in the long run.

- Deadweight loss from the tax will be ..... in the short run than in the long run.

- An increase in the tax would make total tax revenue ..... than it was.

- An increase in the tax would make deadweight loss from the tax ..... than it was

9- Suppose I decide to quit my job and start my own business. Which of the following would contribute to my level of accounting profit? (Check all that apply)

a) Bonds cashed in to buy machinery.
b) Foregone interest on bonds cashed in to buy machinery.
c) The salary I would have earned had I not started my own business
d) Interest payments on a loan for a delivery truck.

10-  Suppose I decide to quit my job and start my own business. Which of the following would contribute to my level of economic profit? (Check all that apply)

a) Bonds cashed in to buy machinery.
b) Foregone interest on bonds cashed in to buy machinery.
c) The salary I would have earned had I not started my own business
d) Interest payments on a loan for a delivery truck.

Answer 1

6- The party in transaction bear most of the burden of a tax that faces a higher inelasticity. If demand is more inelastic, buyers bear a greater burden and if supply is more inelastic, sellers bear a greater burden. Here supply is inelastic so sellers bear a greater burden. b) Producers

7- The party in transaction bear most of the burden of a tax that faces a higher inelasticity. If demand is more inelastic, buyers bear a greater burden and if supply is more inelastic, sellers bear a greater burden. Here demand is inelastic so buyers bear a greater burden. a) Consumers

8-  - Total revenue generated by the tax will be higher in the short run than in the long run.

- Deadweight loss from the tax will be lower in the short run than in the long run.

- An increase in the tax would make total tax revenue higher than it was.

- An increase in the tax would make deadweight loss from the tax increase than it was

9- Accounting profit includes items under explicit cost and not implicit costs. Hence anything that is not earned but could have been earned would be excluded. Select a) and d)

10- Economic profit includes items under explicit cost and implicit costs. Hence anything that is not earned but could have been earned would now be included. Select all.