Question 1

Suppose the government imposes a $40 excise tax per hotel room, as shown in the first image. What happens to the supply curve and equilibrium quantity as a result of this tax?

Accepted Answer

The supply curve shifts upward by $40 and the equilibrium quantity decreases.

Question 2

If a tax is imposed on sellers, which of the following best describes the effect on the market?

Accepted Answer

The supply curve shifts to the left, decreasing equilibrium quantity.

Question 3

What is the tax wedge in a market with a tax, and how is it calculated?

Accepted Answer

The tax wedge is the difference between the price the buyer pays and the price the seller receives, calculated as $$Tax\ Wedge = P_b - P_s = Tax.$$

Question 4

Which of the following statements about tax incidence is correct?

Accepted Answer

The burden of a tax depends on the relative elasticities of supply and demand.

Question 5

If demand is perfectly inelastic, who bears the entire burden of a tax?

Accepted Answer

The buyer bears 100% of the tax.

Question 6

If supply is perfectly elastic, who bears the entire burden of a tax?

Accepted Answer

The buyer bears 100% of the tax.

Question 7

A tax causes deadweight loss (DWL) in a market. Which formula correctly represents deadweight loss?

Accepted Answer

$$DWL = 12bh$$

Question 8

After a tax is imposed, what happens to consumer surplus (CS) and producer surplus (PS)?

Accepted Answer

Both CS and PS decrease.

Question 9

Suppose the government imposes a $200 tax on a good, as shown in the fourth image. What area represents the tax revenue collected by the government?

Accepted Answer

The rectangle formed by the tax amount and the quantity sold after tax.

Question 10

If demand is elastic and supply is inelastic, who bears a larger share of the tax burden?

Accepted Answer

The seller bears a larger share.

Question 11

Which of the following best describes the effect of a tax on market efficiency?

Accepted Answer

A tax causes underproduction and creates deadweight loss.

Question 12

Given the formula for tax revenue, $$Tax\ Revenue = Tax 	imes QSold$$, what happens to tax revenue if the tax increases but quantity sold decreases significantly?

Accepted Answer

Tax revenue may increase or decrease depending on the elasticity of demand and supply.

Question 13

If the government wants buyers to bear most of the tax burden, which type of demand and supply should the market have?

Accepted Answer

Inelastic demand and elastic supply.

Question 14

Which scenario results in the seller paying the entire tax?

Accepted Answer

Perfectly elastic demand.

Question 15

A tax is imposed on buyers. What happens to the demand curve?

Accepted Answer

It shifts to the left.

Question 16

If a market has unit elastic demand and unit elastic supply, how is the tax burden shared?

Accepted Answer

The tax is split equally between buyer and seller.

Question 17

Which formula correctly represents consumer surplus (CS) and producer surplus (PS) after a tax?

Accepted Answer

$$CS = 12bh$$ and $$PS = 12bh$$

Question 18

Which of the following is NOT a consequence of imposing a tax on a market?

Accepted Answer

Marginal social benefit equals marginal social cost.

Question 19

If supply is inelastic and demand is elastic, who bears a larger share of the tax burden?

Accepted Answer

The seller bears a larger share.

Question 20

Which of the following best explains why deadweight loss occurs when a tax is imposed?

Accepted Answer

Because marginal social benefit exceeds marginal social cost, resulting in underproduction.

Tax Incidence and Elasticity: Microeconomics Study Notes

Guida di studio - Domande di pratica

Study guide - Flashcard