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Exam 8: Supply, Demand and Government Policies

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Question 21

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The ultimate burden of a tax falls most heavily on the side of the market that is less elastic.

A) True
B) False

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Question 22

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Using the graph below, answer the following questions: a. What was the equilibrium price in this market before the tax? b. What is the amount of the tax? c. How much of the tax will the buyers pay? d. How much of the tax will the sellers pay? e. How much will the buyer pay for the product after the tax is imposed? f. How much will the seller receive after the tax is imposed? g. As a result of the tax, what has happened to the level of market activity?

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a. R6
b. R4
c. R1
d. R3
e. R7
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Question 23

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A tax collected from buyers has an equivalent impact to a same size tax collected from sellers.

The government is thinking about increasing the tax on petrol to raise additional revenue rather than to promote conservation. The tax will result in the greatest amount of tax revenue if the price elasticity of demand for petrol equals:

Which of the following statements about a binding price ceiling is true?

If the government imposes a binding price floor on sugar, it may also have to

Within the supply and demand model, a tax collected from the buyers of a good shifts the

A price floor

Using the graph shown ( below), analyze the effect a $ 300 price ceiling would have on the market for ten - speed bicycles. Would this be a binding price ceiling ?

A tax of R1.00 per litre on petrol

Which side of the market is more likely to lobby government for a price floor?

A subsidy given to suppliers has the effect of shifting the demand curve outwards.

For which of the following products would the burden of a tax likely fall more heavily on the sellers?

Using the graph below, in which the vertical distance between points A and B represents the tax in the market, answer the following questions: a. What was the equilibrium price and quantity in this market before the tax? b. What is the amount of the tax? c. How much of the tax will the buyers pay? d. How much of the tax will the sellers pay? e. How much will the buyer pay for the product after the tax is imposed? f. How much will the seller receive after the tax is imposed? g. As a result of the tax, what has happened to the level of market activity?

Suppose the equilibrium price for apartments is R5 000 per month and the government imposes rent controls of R2 500. Which of the following is unlikely to occur as a result of the rent controls?

The government is thinking about increasing the tax on petrol to promote conservation. The tax will discourage the consumption of petrol most when the price elasticity of demand equals:

A R10 tax on football boots will always raise the price that the buyers pay for football boots by R10.

Using the graph below, answer the following questions: a. What was the equilibrium price in this market before the tax? b. What is the amount of the tax? c. How much of the tax will the buyers pay? d. How much of the tax will the sellers pay? e. R7 f. R3 g. As a result of the tax, the level of market activity has fallen, from 60 units bought and sold to only 50 units bought and sold.

The burden of a tax falls more heavily on the sellers in a market when

$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Price Per } \\\text { Pair }\end{array} & \begin{array} { c } \text { Quantity } \\\text { Demanded }\end{array} & \begin{array} { c } \text { Quantity } \\\text { Supplied }\end{array} \\\hline \text { R20 } & 18 & 3 \\\hline \text { R40 } & 14 & 4 \\\hline \text { R60 } & 10 & 5 \\\hline \text { R80 } & 6 & 6 \\\hline \text { R100 } & 2 & 8 \\\hline\end{array}$ -Refer to the table above. In the supply and demand schedules for socks shown here, if a price ceiling of R60 is imposed by the government, the quantity of socks actually purchased will be