Quiz%207 - Quiz 7 ECON 210 _ Name: 1. Suppose the...

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Quiz 7 – ECON 210 Name: _________________________________ 1. Suppose the government imposes a $0.75/unit tax on producers of cigarettes. Further suppose supply for cigarettes is perfectly elastic, while the price elasticity of demand for cigarettes is 0.2. Which of the following statements would then be true ? a. The excise tax will reduce the marginal cost of producing cigarettes b. The tax burden will be fully borne by the producers of cigarettes c. The tax burden will be fully borne by consumers of cigarettes d. The tax burden will be shared equally by both consumers and producers of cigarettes 2. Suppose the government imposes a $0.50/unit tax on producers of gasoline. Further, suppose demand for gasoline is perfectly inelastic, while the price elasticity of supply for gasoline is 6. Which of the following statements would then be true ? a. The tax will reduce the marginal cost of producing gasoline b. The tax burden will be fully borne by the producers of gasoline c. The tax burden will be fully borne by consumers of gasoline d. The tax burden will be shared equally by both consumers and producers of gasoline 3.
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This note was uploaded on 02/26/2012 for the course ECON 210 taught by Professor Staff during the Fall '08 term at Purdue.

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Quiz%207 - Quiz 7 ECON 210 _ Name: 1. Suppose the...

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