Exam 6: Taxes and Subsidies

Use the following to answer questions: Figure: Soda Market -(Figure: Soda Market) After the imposition of a per-unit tax on production, consumers pay $5.00 per unit and producers receive $4.30 per unit. What is the value of the per unit tax?

Most labor economists believe that the supply of labor is ______ elastic than firms' demand for labor, and therefore ______ bear most of the burden of a payroll tax.

If the elasticity of supply is 1, and the elasticity of demand is 3 (in absolute value), then for a tax of $1 buyers will pay:

Figure: Tax on Buyers 1 In the diagram, the demand curve that incorporates a $2 tax per unit is:

Which of the following statements is TRUE? I. Subsidizing buyers is no different than subsidizing sellers. II. Unlike taxes, subsidies do not create deadweight losses. III. Subsidies are payments the government makes to either producers or consumers. IV. Taxpayers pay for subsidies.

Use the following to answer questions: Figure: Demand and Supply with Subsidy -(Figure: Supply and Demand with Subsidy) Refer to the figure. What is the deadweight loss caused by the subsidy?

The more elastic side of the market can escape more of the tax burden.

Use the following to answer questions: Figure: Wage Subsidy -(Figure: Wage Subsidy) Consider the use of wage subsidies versus the minimum wage. Employment with a wage subsidy is: ________, versus employment with an $8 minimum wage is: ________.

A tax on sellers of popcorn will:

Use the following to answer questions: Figure: Tax on Sellers -(Figure: Tax on Sellers) In the diagram, sellers receive _____ without the tax and _____ with the tax.

To be efficient, the revenue from taxation must provide goods that have benefits that ________ the deadweight loss caused by the taxation itself.

If the government imposes a per-cigarette tax on smoking, which of the following is most likely to occur?

If sellers pay more of a commodity tax than consumers, sellers would receive more of a subsidy than consumers.

A subsidy is:

According to Nobel Laureate Edmund Phelps, minimum wages cause higher unemployment, but wage subsidies cause higher employment.

A Senator stated that, "It is time to put people before profits; that is why I am sponsoring legislation that requires all businesses to purchase health insurance for their workers." Given that the demand for labor is more elastic than the supply of labor, what will be the result of this proposed legislation?

Which of the following is the correct answer to the question: Why do smokers pay almost all the taxes assessed on cigarettes? I. Because cigarettes are addictive, the demand for them is relatively elastic when compared to the supply curve of cigarettes. II. Because cigarettes are addictive, the demand for them is relatively inelastic when compared to the supply of cigarettes. III. Cigarette manufacturers can very easily escape a state tax by selling in a different state.

A tax on sellers of apples:

A mandate that requires employers to provide health insurance will cause the price of physical capital to:

Use the following to answer questions: Figure: Demand Tax -(Figure: Demand Tax) The figure illustrates a market for gasoline with a $1 tax imposed on the buyers. What price do sellers receive for a gallon of gasoline in this market?