Indicate your answers to each of the following questions (more than one answer may be right):

    1. Consider a typical competitive market with an upward-sloping supply curve and downward-sloping demand curve. If a unit tax is imposed then the market price will...
    a. rise by more than the tax.     b. rise by the amount of the tax.     c. rise by an amount less than the tax.
    d. remain the same     e. fall.

    2. Consider two markets, A and B, with identical demand and supply conditions, and an equilibrium price of $18. In market A a $12 tax is imposed on buyers, while in market B a $12 tax is imposed on sellers.
    a. The price to buyers will rise more in market A than market B.
    b. The price to buyers will rise more in market B than market A.
    c. The price to buyers will rise by the same amount in both markets.
    d. It is impossible to say which market will experience the larger price increase.

    3. Suppose the government imposes a new tax in the labor market, and assigns 80 percent of the tax to employers (the buyers in the labor market) and 20 percent of the tax to workers (the suppliers).
    a. The wage paid by employers will rise by 80 percent of the tax, and the after-tax wage of employees will fall by 20 percent of the tax
    b. The wage paid by employers will rise by 20 percent of the tax, and the after-tax wage of employees will fall by 80 percent of the tax.
    c. Without more information, It is impossible to say how much the wage paid by employers will rise, and how much the after-tax wage of employees will fall.

    4. In a typical competitive market with downward-sloping demand and upward-sloping supply, which of the following would you include on a list of reasonable ways to depict a $12 tax:
    a. a $12 upward shift of the supply curve.           b. a $12 upward shift of the demand curve.
    c. a $12 downward shift of the supply curve.     d. a $12 downward shift of the demand curve.
    e. a $12 upward shift of the market price.

    5. Consider two markets, A and B, with identical upward-sloping supply curves, and the same initial equilibrium price and quantity. However, demand in market A is more ELASTIC than demand in market B.
    a. If the same-sized tax is imposed in each market, in which market will government revenues be higher? _____
    b. If the same-size tax is imposed in both markets, in which market will the welfare loss be higher? ______

    6. Consider the following effects from the imposition of a unit tax:
    Change in total benefits: -88  /    Change in consumer surplus: -128  /    Change in government revenue: +168
    Change in total cost: -64  /    Change in producer surplus: -64
    How large a welfare loss results from the tax? ______

    7. In which of the following cases will buyers pay the full amount of a unit tax?
    a. Vertical demand     b. Vertical supply     c. Horizontal demand     d. Horizontal supply