MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
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Chapter 7.1, Problem 2Q
To determine
Demonstrate the welfare loss of a tax.
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The greater the elasticity of demand, the smaller the deadweight loss of a tax.
True
False
If supply is less elastic than demand when a market is in equilibrium, then taxing consumers for every unit of a good purchased will ultimately cause the tax burden to fall mostly on
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
Chapter 7 Solutions
MICROECONOMICS
Ch. 7.1 - Prob. 1QCh. 7.1 - Prob. 2QCh. 7.1 - Prob. 3QCh. 7.1 - Prob. 4QCh. 7.1 - Prob. 5QCh. 7.1 - Prob. 6QCh. 7.1 - Prob. 7QCh. 7.1 - Prob. 8QCh. 7.1 - Prob. 9QCh. 7.1 - Prob. 10Q
Ch. 7 - Prob. 1QECh. 7 - Prob. 2QECh. 7 - How is elasticity related to the revenue from a...Ch. 7 - Prob. 4QECh. 7 - Prob. 5QECh. 7 - Prob. 6QECh. 7 - Prob. 7QECh. 7 - Prob. 8QECh. 7 - Prob. 9QECh. 7 - Prob. 10QECh. 7 - Prob. 11QECh. 7 - Prob. 12QECh. 7 - Prob. 13QECh. 7 - Prob. 14QECh. 7 - Prob. 15QECh. 7 - Prob. 16QECh. 7 - Prob. 17QECh. 7 - Prob. 18QECh. 7 - Prob. 19QECh. 7 - Prob. 20QECh. 7 - Prob. 21QECh. 7 - Prob. 22QECh. 7 - Prob. 1QAPCh. 7 - Prob. 2QAPCh. 7 - Prob. 3QAPCh. 7 - Prob. 4QAPCh. 7 - Prob. 5QAPCh. 7 - Prob. 1IPCh. 7 - Prob. 2IPCh. 7 - Prob. 3IPCh. 7 - Prob. 4IPCh. 7 - Prob. 5IPCh. 7 - Prob. 6IP
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- The demand for beer is more elastic than the demand for milk. Would a tax on beer or a tax on milk have a larger deadweight loss? Why?arrow_forwardSuppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation.arrow_forwardBased on your knowledge of the price elasticity of demand, do you think the deadweight loss of a soda/junk-food tax would be relatively large or relatively small?arrow_forward
- If the demand for a product is inelastic but the supply is elastic, the ________ will bear the tax incidence. Question 43 options: a) the local government b) the producer c) the consumer d) the federal governmentarrow_forwardNeither the supply of nor the demand for a good is perfectly elastic or perfectly inelastic. Imposing a tax on the good results in a __________ in the price paid by buyers and _________ in the equilibrium quantity.arrow_forwardSuppose that the supply of oil is elastic and demand for oil is inelastic. If the government taxes oil, who will bear most of the tax burden?arrow_forward
- With a tax of Rs4/unit,the price of the good rises from Rs5/unit to Rs9/unit. Which of the following statements is true a. Price elasticity of demand is equal to price elasticity of supply b. Demand for the product is perfectly elastic c. Price elasticity of demand is equal to infinity d. Demand for the product is perfectly inelasticarrow_forwardHow do the relative elasticities of supply and demand determine tax or subsidy incidence?arrow_forwardSuppose an economist estimates the price elasticity of demand for sugary drinks is -4.2, while its price elasticity of supply is 1.2. If the government decides to impose a per-unit tax of $9 per can of sugary drinks sold, how would the market price of sugary drinks be affected? Show your calculationarrow_forward
- The reason which determines the elasticity of tax burden on buyers and sellers.arrow_forwardhow inelastic supply effect on taxarrow_forwardTRUE OR FALSE. If the price elasticity of demand is 2 while the price elasticity of supply is 2, the sellers can pass on to the consumers the 50% of the tax.arrow_forward
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