Question

Price Controls and Taxes: Price Supply Pit------- - - - - E DE Demand - Quantity 23) In the figure shown above, if prices go from PI to P3, what could this be due to? a. There is a tax imposed on suppliers per unit sold. b. Demand for the good increases due to an increase in people's incom . c. There is a sales tax imposed on consumers. d a binding price floor is imposed e. Both c and d are correct 24) In the figure shown if the price is P3 because the reason that you gave above, what is the consumer's surplus?: a. A+B+D. b. A+B+C+D+E c. A+B+D+F+G d. A e none of the above. 25) We can expect a tax on heating oil in Alaska to cause the quantity of heating oil produced to change proportionally than a similar percentage tax on movie tickets will cause the quantity of tickets to decline. a. more b. less c. same d. no way to know. 26) Which of the following statements is NOT TRUE about taxes? a. the burden of the tax is shared by both consumers and producers, not matter who the tax is levied on. b. unless demand or supply are perfectly inelastic, taxes always cause decreases in quantities traded due to efficiencies lost in the economy as a result of taxation. c. the more inelastic demand and supply, the smaller the decrease in quantity. d. the party with the more inelastic behavior pays a lesser proportion of the tax. e. all of the above are correct.

Answer 1

23) c. There is a sales tax imposed on consumers.

24) a. A+B+D

25) b. Less

Because demand for heating oil is less elastic than demand for movie tickets.

26) D

The party with more inelastic behavior pays a higher proportion of tax.