question
An excise tax on alcohol causes the supply of alcohol to decrease and the price of alcohol to decrease.
answer
False
question
If the government's goal is to alter people's behavior through taxation, taxing goods with relatively elastic demand and supply would be most effective.
answer
True
question
Price ceilings create shortages, but taxes do not.
answer
True
question
The distance between the demand curve and the price the consumer has to pay for a product (given quantity demanded) is referred to as:
answer
consumer surplus.
question
If price is lowered by law from the market equilibrium value of $5 to a lower value of $4:
answer
producer surplus will decrease and there will be some lost total surplus.
question
A per-unit tax on coffee paid by the seller causes the:
answer
supply of coffee curve to shift upward by the amount of the per-unit tax.
question
If elasticity of demand is 0.7, elasticity of supply is 0.7, and a 5 percent excise tax is levied on the good:
answer
consumers pay 50 percent of the tax.
question
The price of gasoline is generally higher in Hawaii than in the continental United States. Therefore, the Hawaiian legislature passed a law forbidding gas stations from charging a price higher than the average price of gas on the West Coast of the United States. This is an example of:
answer
a price ceiling.
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