Question

The term tax wedge describes:

a.

The change in the elasticity of demand after the tax is in place

b.

The difference between the market price with a tax and the market price without a tax

c.

The gap between the what buyers pay and sellers receive after a tax is in place

d.

The difference between quantity supplied and quantity demand with a new tax

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Question 8

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Suppose a good has a very inelastic demand and a very elastic supply. Who will bear the bigger burden if an excise tax was placed on this good?

a.

The buyer

b.

The seller

c.

Not enough information to determine the answer.

d.

Neither, the burden will be the equal

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Question 9

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What is a market failure

a.

When the market system is unable to generate enough tax revenue to sustain itself.

b.

When people working in their own self-interest arrive at an outcome that is not in the social interest, and resources are used inefficiently

c.

When prices are so high it prices people out of the market

d.

When firms cannot make a profit and have to fire workers

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Question 10

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When it comes to taxes, the tax incidence (consumer burden and producer burden) is determined by:

a.

Non-price competition

b.

The law makers that designed the tax

c.

The relative elasticities of supply and demand

d.

External costs

Answer 1

7) tax wedge refers to difference market price after tax and market price before tax.

So option B is correct

8) because demand is inelastic,so charging high price by seller have little effect on demand,so as a result consumer will bear higher burden.

9) Market failure refers to when people working in their own self-interest arrive at an outcome that is not in the social interest, and resources are used inefficiently

10)Tax burden determined by relative elasticity of demand and supply.

Relatively inelastic side bears higher burden of tax.