chp 4 quizes pre and post – Flashcards
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The statutory incidence (or burden) of a tax refers to
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who the tax is legally or statutorily imposed on.
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Why does a price floor set above an equilibrium price tend to cause persistent imbalances in the market
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Because quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus
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The term "deadweight loss" or "excess burden" is used to describe which of the following
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The loss from the elimination of mutually beneficial exchanges that results from the imposition of a tax in a market
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A subsidy is defined as
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a payment to either the buyer or seller of a good or service, usually on a per-unit basis, when a good or service is purchased
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A price ceiling that sets the price of a good below market equilibrium will cause which of the following
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all of the above
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Why does a price ceiling set below an equilibrium price tend to cause persistent imbalances in the market?
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Because quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage
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A market that operates outside the legal system, either by selling illegal goods or by selling goods at illegal prices is referred to in economics as a
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black market
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The marginal tax rate is defined as
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the change in tax liability divided by the change in taxable income
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What will happen when a price ceiling is imposed below the equilibrium price of a product
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A shortage of the good will develop
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A law establishing a maximum legal price for a good or service (rent controls for example) is known as
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a price ceiling
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What happens when a tax is imposed on a good?
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The equilibrium quantity of the good always decreases
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Which of the following will most likely occur when government price controls fix the price of a good above market equilibrium
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A surplus of the good will develop
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An increase in the demand for a product will cause which of the following to occur
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The demand for and prices of the resources used to produce the product will increase
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Why will price controls will tend to cause misallocation of resources
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Production (or opportunity) cost no longer corresponds to market price
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The actual burden of a tax is determined primarily by
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the elasticities of demand and supply.
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How would an increase in the price of paper influence the market for college textbooks
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The supply of textbooks would decrease causing the price of textbooks to rise
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Why does the imposition of a tax on a good create a deadweight
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The tax reduces the quantity of exchanges between buyers and sellers
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Suppose the demand curve for a good is highly elastic and the supply curve is highly inelastic. What will happen if the government taxes this good
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Sellers will bear a larger share of the tax burden.
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Suppose the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and as a result, the price to consumers of a pack of cigarettes went up by 40 cents. Which of the following will most likely happen
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The actual burden of this tax will fall mostly on consumers
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Which of the following statements about resource markets is correct?
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New licensing requirements that substantially lowered the number of plumbers would likely lead to an increase in the wage rate of plumbers
