(solution) Which of the following is an example of an excise (quantity) tax?

2. Which of the following is an example of an excise (quantity) tax?

   		a 15.3% payroll tax
   		a tax of $0.41 per gallon of gas
   		a tax of 12.4% of your wages
   		a tax on the value of your property

1. At a price of $2.00, a local coffee shop is willing to supply 100 scones per day.  At a price of $1.80, the coffee shop would be willing to supply 80 scones per day.  The price elasticity of supply is about

   		1/2.
   		2.
   		-2.
   		1.
   		-1/2.

3,The Federal Insurance Contributions Act (FICA) stipulates that the payroll tax should be collected equally from the employers and the employees. In reality, since the price elasticity of supply of labor is low, and the price elasticity of demand for labor is high:

the employees bear the greater share of the burden of the tax.

the employers bear the greater share of the burden of the tax.

It is impossible to determine who bears the burden of the tax.

the employers and the employees each bear half of the burden of the tax.

4.

Suppose that demand for medicine is perfectly inelastic. The supply of medicine is an upward sloping line. If a $5 excise tax is placed on the producers of medicine:

The price consumers pay for medicine will stay the same.

The price consumers pay for medicine will increase by $5.

The price consumers pay for medicine will decrease by $5.

The price consumers pay for medicine will increase but by less than $5.

 

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Sep 13, 2020

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