Reading 15: Markets in Action LOS c习题精选 2010, statements, incidence, following

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LOS c: Explain the impact of taxes on supply, demand, and market equilibrium, and describe tax incidence and its relation to demand and supply elasticity.

Which of the following statements is most accurate with respect to the effects of taxes imposed on goods and services?

A) The actual incidence will fall more heavily on the seller if the supply is less elastic relative to demand.

B) The actual incidence will fall more heavily on the buyer if the demand is more elastic relative to supply.

C) The statutory incidence will fall more heavily on the buyer if the supply is less elastic relative to demand.

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When supply is relatively inelastic, changes in quantity are small for a given change in price, and a larger share of the tax burden—the tax incidence—will fall on the sellers.

 

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Arthur Hampton is reviewing the transcript of a lawmaking session during which a legislator made the following two statements:

Statement 1: The impact of a tax on the equilibrium price and quantity of a good or service will be the same whether the tax is legally imposed on the buyers or sellers.

Statement 2: The impact on the equilibrium price and quantity of a good or service of making trade in it illegal will be the same whether the penalty is imposed on the buyers or sellers.

With respect to these statements:

A) both are correct.

B) only statement 2 is correct.

C) only statement 1 is correct.

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Hampton should agree with Statement 1 but disagree with Statement 2. In the trade of illegal goods, the effects of the prohibition depend on whether the penalties are imposed on the buyers or sellers. A penalty imposed on the buyers will shift the demand curve down by the value of the penalty buyers expect to bear. A penalty imposed on the sellers will shift the supply curve up by the value of the penalty sellers expect to bear. Other things equal, a penalty on buyers will result in a lower equilibrium price and a penalty on sellers will result in a higher equilibrium price. In either case the equilibrium quantity decreases.

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The decrease in production and trade as a result of a tax is called:

A) total tax incidence.

B) deadweight loss.

C) statutory incidence.

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When the equilibrium quantity for a product or service is reduced as the result of a tax, this is called the deadweight loss. This represents the loss, in terms of production and trade, that results from the presence of the tax.

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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 deadweight loss.

B) Consumer surplus.

C) The incidence of a tax.

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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.

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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.

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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.

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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 proportion of the tax burden borne by buyers and sellers.

C) the party legally responsible for paying the tax.

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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

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Which of the following statements about a tax imposed on buyers or suppliers is most accurate?

A) If demand is less elastic than supply, consumers will bear a lower proportion of the tax than suppliers.

B) If demand is less elastic than supply, consumers will bear a higher proportion of the tax than suppliers.

C) The proportion of the tax is borne equally by consumers and suppliers, regardless of supply and demand elasticity.

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If demand is less elastic than supply, consumers will bear a higher proportion of the tax than suppliers. If supply is less elastic than demand, suppliers will bear a higher proportion of the tax than consumers.