How a tax burden is divided between consumers and producers is called tax incidence. Consumers bear most of the tax burden when: Group of answer choices Demand is more elastic than supply The firm decides to pass none of the tax on to the consumer via a higher price. Supply is more elastic than demand. Cross elasticity of demand is .35

How a tax burden is divided between consumers and producers is called tax incidence. Consumers bear most of the tax burden when: Group of answer choices Demand is more elastic than supply The firm decides to pass none of the tax on to the consumer via a higher price. Supply is more elastic than demand. Cross elasticity of demand is .35

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7. Effect of a tax on buyers and sellers The following graph shows the daily market for jeans. Suppose the government institutes a tax of $46.40 per pair. This places a wedge between the price buyers pay and the price sellers receive. (?) 200 180 160 Supply 140 120 Tax Wedge 100 80 60 40 20 Demand 50 100 150 200 250 300 350 400 450 500 QUANTITY (Pairs of jeans) PRICE (Dollars per pair)
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Doyle and Samphantharak (2008) find that when a 5% gas tax is implemented, prices consumers pay for gas increase by about 4%. What role does demand elasticity play in determining the size of this price change? That is, under what demand elasticity cases would the price change be closer to 5%, or closer to 0%? Illustrate and explain using supply-and-demand graph(s)..
The elasticity of demand for chocolate chip cookies is 0.6 and the elasticity of supply for these cookies is 1.9. If a tax is imposed on purchases of chocolate chip cookies, then the consumers would pay more of the tax. consumers would pay the entire tax because their demand is less elastic than the producers' supply. tax would be equally shared by the consumers and the producers. producers would pay more of the tax.
Which of the following statements about dead weight loss is false: A)If supply is price elastic, increasing the tax will increase DWL B)If demand is price elastic, increasing the tax will increase DWL C)Increasing taxes will cause DWL to increase at a decreasing rate D)DWL will increase as the size of a market increases, all else held constant E)More than one of the statements above is false ( Give proper explanation )
Suppose the government applies a specific tax to a good where the demand elasticity, E, is -1.4, and the supply elasticity, n, is 1.2. This good would not be an ideal good for the government to tax since demand is: A. inelastic and would raise much revenue B. elastic and would raise much revenue C. inelastic and would not raise much revenue D. elastic and would not raise much revenue what is the tax incidence on consumers? $?
Suppose in the market for cigarettes, the price elasticity of supply is 2.4 and the price elasticity of demand is −0.8. If an excise tax is imposed on sellers of cigarettes, then _____. a buyers and sellers will pay equal shares of the tax b buyers will pay a greater share of the tax than sellers will c buyers will pay the whole tax d sellers will pay a greater share of the tax than buyers will e sellers will pay the whole tax
Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay Price Sellers Receive (Bottles of wine) (Dollars per bottle) (Dollars per bottle) Before Tax After Tax Using the data you entered in the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden Elasticity (Dollars per bottle) Buyers Sellers The burden of the tax falls more heavily on the __elastic side of the market.
If the purpose of a tax is to decrease the amount of a harmful activity, then the taxwould be most effective when the supply is ________ and the demand is ________A) elastic; elasticB) inelastic; inelasticC) elastic; inelasticD) inelastic; elastic
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