Econ 2000 SI 3/24

Which of the following diagrams shows a correct analysis of the impact of a $t per unit tax collected from sellers in a market?

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If the (absolute value of the) price elasticity of demand in Oyster Cove for slithy toves is much greater than their price elasticity of supply, we would expect that the economic burden of a tax on slithy toves to:

• Borne Equally on buyers and sellers

• Be borne by mostly sellers

• Be borne by mostly buyers

• Depend on whether it is collected from buyers or sellers

When the supply is more elastic than demand, the tax burden falls on the

• Consumer

• Producer

Suppose the government adopts a public policy to fight obesity using an excise tax. When considering elasticity, consumers would probably pay more of this tax on fast food than the producers if

• demand is inelastic and supply is elastic.

• demand is elastic and supply is inelastic.

• Both supply and demand are inelastic

(Figure: The Market for Yachts) Look at the figure The Market for Yachts. If the government imposes a $40,000 tax on yachts (collected from the producers), consumers will pay ________ of the tax and producers will pay ________. 

• $15,000

  $25,000

• $20,000

  $20,000

• $30,000

  $10,000

• $25,000

  $15,000

(Figure: The Gasoline Market) Look at the figure The Gasoline Market. An excise tax has been levied on each gallon of gasoline supplied by producers, shifting the supply curve upward. What is the tax rate?

• $3.00

• $1.75

• $2.25

• $4.00

 Look at the figure The Market for Lattes. If the government assesses a tax of $1.50 on each latte, the price the consumer pays for a latte after the tax will:

•  C) increase from $2 to $2.25. 

•  A) increase from $2 to $2.75. 

• change, but we cannot determine by how much.

•  A) increase from $2 to $2.50. 

A tax leads to ________ in consumer surplus and ________ in producer surplus.

• C) a decrease; an increase 

• an increase; an increase 

• a decrease; a decrease

• B) an increase; a decrease 

 (Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government wants to limit shrimp sales to 250 pounds, it can impose a ________ excise tax on sellers, and the total tax revenue generated will be ________.

• $10, $2500

• B) $7.50; $7,500 

•  A) $5; $2,500 

• D) The answer cannot be determined from the information provided.

If the Oklahoma government wants to strongly discourage people from eating junk food, when will it need to set a higher tax rate: When junk food demand is elastic or when it is inelastic? *

• Elastic

• Inelastic