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Multiple Choices
1.
A)
B)
C)
D)
E)
2. Taxes
A) are mandatory payments.
B) are necessary for financing government expenditures.
C) do not directly relate to the benefit of government goods and services
received.
D) are all of the above.
3.
A)
B)
C)
D)
E)
4.
A)
B)
C)
D)
5.
A)
B)
C)
D)
E)
6.
A)
B)
C)
D)
E)
7.
A)
B)
C)
D)
An ad valorem tax is
given as a proportion of the price.
Latin for buyer beware.
identical to a unit tax.
computed using the inverse taxation rule.
8.
A)
B)
C)
D)
9. The tax-induced difference between the price paid by consumers and the
price received by producers is
A) the tax difference.
B) the tax wedge.
C) the statutory incidence.
D) the supply side effect.
E) the substitution effect.
10. Partial equilibrium is
A) exactly like general equilibrium.
B) studying only the supply side of the market.
C) studying individual markets.
D) examining the demand side of the market.
Numerical Problem:
Suppose there is a market that has market demand characterized as X = 30
P/3.
Suppose further that market supply can be written as X = P/2 2.
(A) Find the equilibrium price and quantity in this market.
(B) If a unit tax of $16 is imposed on good X, what are the equilibrium price,
quantity, and tax revenue in the market?
(C) Who bears the economic incidence of this tax? And how much is it?
(d) Show your answer in all of the above graphically.