The tax incidence and its elasticity.

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Chapter 20, Problem 9DQ

To determine

The tax incidence and its elasticity.

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Refer to Figure 8-2. The per-unit burden of the tax on sellers is a. $3. b. $5. c. $2. d. $4. The vertical distance between points A and B represents a tax in the market. PRICE 12 11 10 9 8 07 (O 5 4 Figure 8-2 3 2 1 A B Supply Demand 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 QUANTITY

6. Which of the following best describes the effects of a per unit purchased tax on producers when the demand curve and the supply curve are both neither perfectly elastic nor perfectly inelastic? a) Price to consumers increases; price received by producers increases; quantity bought and sold increases b) Price to consumers increases; price received by producers decreases; quantity bought and sold increases c) Price to consumers decreases; price received by producers increases; quantity bought and sold increases d) Price to consumers increases; price received by producers decreases; quantity bought and sold decreases 7. Which of the following best describes the effects of a per unit purchased subsidy to producers when the demand curve and the supply curve are both neither perfectly elastic nor perfectly inelastic? a) Price to consumers increases; price received by producers increases; quantity bought and sold increases b) Price to consumers increases; price received by producers…

Question 5: Combined state and federal taxes on gasoline average around 50 cents per gallon, and these taxes are statutorily levied on gasoline sellers. Because the demand for gasoline is relatively inelastic compared to the supply of gasoline: buyers likely do not bear much of the actual burden because it is statutorily levied on sellers who must submit the tax payments. sellers likely bear most of the actual burden of the tax through lower gasoline prices. O the net price received by sellers after they pay taxes likely falls by almost the full amount of the tax. O buyers likely bear most of the actual burden of the tax through higher gasoline prices.