Question

4.

If Supply and Demand have the normal shapes (not perfectly elastic or inelastic), a "tax on sellers" (as defined by Mankiw) will shift demand upward by less than the amount of the tax, and equlibrium posted price will increase by the same amound as the tax.  

True or False?

6.

If Supply and Demand have the normal shapes (not perfectly elastic or inelastic), a "tax on sellers" (as defined by Mankiw) will shift demand upward by the amount of the tax, and equlibrium posted price will increase by less than the tax.

Ture or False?

7.A unit elastic demand curve must be a straight line.

True or False

8. To be "binding" or "effective" a price ceiling in a competitive free market must be below the competitive equilibrium price.

True or False?

10.

Tax incidence is the manner in which the burden of a tax is shared among participants in a market.

True or False?

Answer 1

4.

False

Price will increase, but less than the tax increase applied.

6.

True

Demand will move upward as stated, but increase in price will be less than the increase in tax.

7.

False

It is not a necessary criteria for a unit elastic demand curve.

8.

True

When price ceiling is less than market cleaning price, then sellers are forced to obey it and it becomes binding price control.

10.

True

It is the concept of tax incidence that explains who takes how much burden of the tax.