31 May Question 51. When a tax is placed on the buyers of lemonade,
Question
51. When a tax is placed on the buyers of lemonade,
| a. | the sellers bear the entire burden of the tax. |
| b. | the buyers bear the entire burden of the tax. |
| c. | the burden of the tax will be always be equally divided between the buyers and the sellers. |
| d. | the burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal. |
52. If a tax is levied on the buyers of sugar, then
| a. | buyers will bear the entire burden of the tax. |
| b. | sellers will bear the entire burden of the tax. |
| c. | buyers and sellers will share the burden of the tax. |
| d. | the government will bear the entire burden of the tax. |
53. If the government passes a law requiring buyers of motorcycles to send $500 to the government for every motorcycle they buy, then
| a. | the demand curve for motorcycles shifts downward by $500. |
| b. | buyers of motorcycles pay $500 more per motorcycle than they were paying before the tax. |
| c. | sellers of motorcycles are unaffected by the tax. |
| d. | All of the above are correct. |
54. Suppose buyers of liquor are required to send $1.00 to the government for every bottle of liquor they buy. Further, suppose this tax causes the effective price received by sellers of liquor to fall by $0.80 per bottle. Which of the following statements is correct?
| a. | This tax causes the demand curve for liquor to shift downward by $1.00 at each quantity of liquor. |
| b. | The price paid by buyers is $0.20 per bottle more than it was before the tax. |
| c. | Eighty percent of the burden of the tax falls on sellers. |
| d. | All of the above are correct. |
55. Suppose buyers of liquor are required to send $1.00 to the government for every bottle of liquor they buy. Further, suppose this tax causes the effective price received by sellers of liquor to fall by $0.60 per bottle. Which of the following statements is correct?
| a. | This tax causes the supply curve for liquor to shift upward by $1.00 at each quantity of liquor. |
| b. | The price paid by buyers is $0.40 per bottle more than it was before the tax. |
| c. | Sixty percent of the burden of the tax falls on buyers. |
| d. | All of the above are correct. |
56. Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then
| a. | the demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20. |
| b. | the demand curve will shift upward by $20, and the price paid by buyers will decrease by $20. |
| c. | the supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20. |
| d. | the supply curve will shift downward by $20, and the effective price received by sellers will increase by $20. |
57. Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then
| a. | the demand curve will shift upward by $20, and the effective price received by sellers will increase by $20. |
| b. | the demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20. |
| c. | the supply curve will shift downward by $20, and the price paid by buyers will decrease by $20. |
| d. | the supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20. |
58. When a tax is levied on buyers of tea,
| a. | buyers of tea and sellers of tea both are made worse off. |
| b. | buyers of tea are made worse off and the well-being of sellers is unaffected. |
| c. | buyers of tea are made worse off and sellers of tea are made better off. |
| d. | the well-being of both buyers of tea and sellers of tea is unaffected. |
59. Which of the following statements is correct concerning the burden of a tax imposed on candles?
| a. | Buyers bear the entire burden of the tax. |
| b. | Sellers bear the entire burden of the tax. |
| c. | Buyers and sellers share the burden of the tax. |
| d. | We have to know whether it is the buyers or the sellers that are required to pay the tax to the government in order to make this determination. |
60. Which of the following is not correct?
| a. | Taxes levied on sellers and taxes levied on buyers are not equivalent. |
| b. | A tax places a wedge between the price that buyers pay and the price that sellers receive. |
| c. | The wedge between the buyers’ price and the sellers’ price is the same, regardless of whether the tax is levied on buyers or sellers. |
| d. | In the new after-tax equilibrium, buyers and sellers share the burden of the tax. |
61. If the government removes a tax on sellers of a good and imposes the same tax on buyers of the good, then the price paid by buyers will
| a. | increase and the price received by sellers will increase. |
| b. | increase and the price received by sellers will not change. |
| c. | not change and the price received by sellers will increase. |
| d. | not change and the price received by sellers will not change. |
62. If the government removes a tax on buyers of a good and imposes the same tax on sellers of the good, then the price paid by buyers will
| a. | not change and the price received by sellers will not change. |
| b. | not change and the price received by sellers will decrease. |
| c. | decrease and the price received by sellers will not change. |
| d. | decrease and the price received by sellers will decrease. |
63. In the final analysis, tax incidence
| a. | depends on the legislated burden. |
| b. | is entirely random. |
| c. | depends on the forces of supply and demand. |
| d. | falls entirely on buyers or entirely on sellers. |
64. If the government removes a tax on a good, then the quantity of the good sold will
| a. | increase. |
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