TFQuiz3

# TFQuiz3 - from sellers as it would be if a \$10 per unit...

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April 25, 2001 Quiz 3 Economics 1 True-False Questions: Fill in Bubble A for True, Bubble B for False. True 1. If the demand curve slopes downwards and the supply curve slopes upwards, the total reduction in profits and consumers' surplus caused by a sales tax of \$20 per unit will exceed the amount of revenue collected by the tax. Note: That's what excess burden is all about. See pp 68-69 of text True 2. The supply curve for a good is as follows. At prices below \$10, none will be supplied. At any price above \$10, exactly 10,000 units will be supplied. With no sales tax, the competitive equilibrium price of the good is \$50. If a sales tax of \$25 per unit is collected from buyers of this good, in the competitive equilibrium with the sales tax, demanders' profits will be the same as they were without the sales tax. Note: See Problem 3.7 of homework False 3. The number of units of a good that would be sold in competitive equilibrium is the same if a \$10 per unit sales tax is collected
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Unformatted text preview: from sellers as it would be if a \$10 per unit subsidy were paid to buyers of this good. Note: See the discussion of subsidies and exercise on p 75 False 4. The government introduces a tax of \$1 per gallon on orange juice, which it collects from orange juice consumers. At the same time, the government introduces a subsidy of \$1 per gallon on orange juice sold, which it pays to orange juice sellers. In equilibrium, the net effects of the two programs is to increase the profits of orange juice suppliers, but might either increase or decrease the consumers' surplus of orange juice buyers. See the discussion of subsidies and exercise on pp 75-76 False 5. If the supply curve for a good is perfectly inelastic, then the excess burden associated with the tax is at least as large as the tax revenue collected by the tax. See homework problem 3.7...
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