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WorksheetsIndirect Tax and Subsidy
Total questions: 10
Worksheet time: 13mins
The diagram shows a tax on a good rising supply from S1 to S2.
The price to the consumer rises from $4 to $5. What is the amount of tax?
$2
$3
$4
$5
The diagram shows that when a tax of $2 on a good raises the supply curve from S1 to S2, the price to the consumer rises from $4 to $5.
What is the total tax yield to the government?
$75
$150
$200
$375
The diagram shows that when a tax of $2 on a good raises the supply curve from S1 to S2, the price to the consumer rises from $4 to $5.
What is the total of tax paid by the consumer?
$75
$100
$150
$175
Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the government reduced the sales tax (VAT) (an Indirect Tax on Goods).
How would these events be shown on a demand and supply diagram for summer clothes?
demand curve move to the left
supply curve move to the right
demand curve move to the left
supply curve no change
demand curve move to the right
supply curve move to the left
demand curve no change
supply curve move to the right
Which change would make the supply of a product more price elastic?
an increase in the number of close substitutes for the product
an increase in the proportion of firms working at full capacity
a reduction in the time taken to make the product
a reduction in the time that the product can be stored
The following is a headline from the newspaper.
Car drivers to pay higher taxes
What will result from an increased tax on cars?
increased employment in the car industry
increased petrol (gas) sales
reduced external costs of car use
reduced number of bus journeys
The government of a country with a rapidly increasing population decides to switch resources
from investment to increased subsidies to farmers.
What is the opportunity cost of this decision?
the profit earned by farmers
the rent of the land on which food is grown
the reduction in investment
the wages of the farm workers
In a country where the demand for petrol (gas) is price-inelastic, the incidence of any increase in
petrol tax will be mainly on
the company that refines the oil.
the motorist who buys the petrol.
the petrol station that sells the petrol.
the wholesale company that stores the petrol.
What is a likely reason why many countries’ governments subsidise scientific research?
Private sector firms may overestimate the external benefits and ignore the private benefits of
scientific research.
Private sector firms may overestimate the external costs and ignore the private costs of
scientific research.
Private sector firms may underestimate the private benefits and ignore the external benefits
of scientific research.
Private sector firms may underestimate the private costs and ignore the external costs of
scientific research.
The diagram shows demand and supply curves for a product at its equilibrium price P.
How would the introduction of a subsidy be shown?
Demand would shift to D1.
Demand would shift to D2.
Supply would shift to S1.
Supply would shift to S2.
