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Economics: Microeconomic Analysis - Reading 15: Markets in A

Q4. When a tax is imposed on the consumption of a good, which of the following terms refers to who bears the burden of the tax?

A)   The incidence of a tax.

B)   The deadweight loss.

C)   Consumer surplus.

Q5. When a tax on a good or service is imposed on the producers of the good or service, the:

A)   supply will decrease, but the incidence of the tax falls on both buyers and sellers.

B)   supply will decrease, but the incidence of the tax falls on the sellers only.

C)   demand will decrease, but the incidence of the tax falls on both buyers and sellers.

Q6. The actual incidence of a tax imposed on buyers or sellers is most accurately defined as:

A)   the amount of tax times the equilibrium quantity.

B)   the party legally responsible for paying the tax.

C)   the proportion of the tax burden borne by buyers and sellers.

答案和详解如下:

Q4. When a tax is imposed on the consumption of a good, which of the following terms refers to who bears the burden of the tax?

A)   The incidence of a tax.

B)   The deadweight loss.

C)   Consumer surplus.

Correct answer is A)

The incidence of a tax refers to how the burden of a tax is actually shared between buyers and sellers. The deadweight loss is the loss of the gains from trade from the lower equilibrium quantity that results from the tax. Consumer surplus is the gains from trade that consumers accrue from the existence of the market.

Q5. When a tax on a good or service is imposed on the producers of the good or service, the:

A)   supply will decrease, but the incidence of the tax falls on both buyers and sellers.

B)   supply will decrease, but the incidence of the tax falls on the sellers only.

C)   demand will decrease, but the incidence of the tax falls on both buyers and sellers.

Correct answer is A)

When a tax is imposed on the producers of a good or service, they will reduce supply at any given level or market price, because they receive the market price minus the tax. However, the incidence of the tax, meaning how its cost is shared, falls on both the buyers and the sellers, depending upon the relative elasticities of supply and demand.

Q6. The actual incidence of a tax imposed on buyers or sellers is most accurately defined as:

A)   the amount of tax times the equilibrium quantity.

B)   the party legally responsible for paying the tax.

C)   the proportion of the tax burden borne by buyers and sellers.

Correct answer is C)

Tax revenue is the amount of a tax times the equilibrium quantity. Statutory tax incidence refers to who is legally responsible for paying a tax. Actual tax incidence represents the extent to which buyers bear the cost of the tax through a higher price paid and sellers bear the cost through a lower price received.

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