Question

7)

Suppose a $2/unit tax is placed on a good. If the original equilibrium is (P = $13, Q = 500) and the new equilibrium is (P = $14.50, Q = 300), what is the producer tax burden?

Group of answer choices

a $1000

b $150

c $450

d $600

8)

Which of the following is consistent with a demand curve that shows a larger percent change in price than its percent change in quantity?

Group of answer choices

a Price Elasticity = 0.8, Inelastic demand

b Price Elasticity = 1.2, Inelastic demand

c Price Elasticity = 1.2, Elastic demand

d Price Elasticity = 0.8, Elastic demand

Answer #1

**7) b. $150**

**Reason**- The new quantity supplied after imposing
tax is 300 units. Tax per unit is $2. Therefore, the supply curve
will shift upwards by 2 units.

Here, the shaded portion is the tax burder that falls on the producers.

**8) a. Price elasticity= 0.8, Inelastic
Demand**

**Reason**- When the the percentage change in price is
more than the percentage change in quantity demanded, the
demoninator will be more than the numerator, as a result of which
the price elasticity will be less than zero, which is inelastic.
The demand is inelastic because only a large change in price
effects the quantity supplied.

3) Suppose a $4/unit tax is placed on a good. If the original
equilibrium is (P = $20, Q = 1000) and the new equilibrium is (P =
$21, Q = 800), what is the consumer tax burden?
Group of answer choices
a $2400
b $1000
c $3200
d $800
4)
Suppose the demand curve for cigarettes is extremely inelastic
(relatively steep). If the government decides to increase its
revenue by taxing cigarette sales, will consumers or producers pay
a...

Assume the price elasticity of demand for a good is –1.23. The
demand for this good is _______ which means the percentage change
in quantity demanded (in absolute value) is _______ the percentage
change in price (in absolute value).
Group of answer choices
elastic, larger than
elastic, smaller than
inelastic, smaller than
inelastic, larger than

The supply curve for pianos is given by the following: Qs =
p-6000. Further, the demand curve for pianos is given by Qd = 18000
– 2p. Let ed be the own price elasticity of demand and
es the own price elasticity of supply. In the market
equilibrium for pianos:
Group of answer choices
ed is elastic and es is inelastic
ed is inelastic and es is elastic
ed is elastic and es is elastic
ed is inelastic and es...

Demand in the market for some good is given by the following
equation:
P=4
Suppose Q=5
Price elasticity of demand in this market is:
A) relatively inelastic
B) perfectly inelastic
C) relatively elastic
D) perfectly elastic

(A)
Suppose there are a rash of pesticide poisonings that make it
clear that the chemicals get through the porous skin, while at the
same time a banana blight means that the entire crop of regular
bananas meant to ship to the U.S. is destroyed for the foreseeable
future. As a result, what will happen in the U.S. market for
banana?
Group of answer choices
The demand will rise, and the supply will increase too
The equilibrium market price is...

3) For a certain good we have q = f ( p ) = 200 e −
0.4 p.
a) Find the elasticity of demand at price p = $50.
b) At p = $50, is the demand elastic, inelastic, or
does it have unit elasticity? Explain what this means for this
product.
c) Find the elasticity of demand at price p = $20.
d) At p = $20, is the demand elastic, inelastic, or
does it have unit elasticity? Explain...

A market in perfect competition is in equilibrium. Let the
demand's price elasticity be -1.25 and the price elasticity of the
offer is 0.25. If a tax of $ 10 per unit is introduced, who will
then carry the largest part of the tax burden?
A. Consumers, since demand is relatively more elastic than the
supply
B. Consumers, then demand. is relatively more inelastic than the
supply
C. Manufacturers, as the supply is relatively more elastic than
demand.
D. The...

For the demand curve Q=50−P, what is the own-price elasticity of
demand when P=16 2/3 (that is, 50/3)? Is demand elastic, inelastic,
or unit elastic at that point?
a) -0.5, inelastic
b) -1, unit elastic
c) -0.5, elastic
d) 33.3, inelastic
e) 33.3, elastic

Suppose price elasticity of demand is relatively inelastic for
good X. If the price elasticity of supply for good X is elastic and
an excise tax is imposed on good X, who will bear the greater
burden of the tax?
A. producers
B. both consumers and producers equally
C. government
D. consumers

Suppose that the demand equation: P = 6 – Q and supply equation:
P = Q.
a. Calculate the price elasticity of demand at
equilibrium.
b. Calculate the equilibrium price and quantity, and consumer
surplus and producer surplus.
c. Suppose government imposes a unit tax of $1 on producers. Derive
the new supply curve and also calculate the new equilibrium price
and quantity.
d. Calculate tax revenue and the deadweight loss of this tax.

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