Which of the following statement is incorrect

| November 24, 2016

Question
QUESTION 1
Which of the following statement is incorrect?

Any taxation, whether levied on the producer or consumer, will always generate a DWL.

The tax revenue is higher if the demand curve is more inelastic, holding everything else constant.

The tax revenue might decrease if the tax rate increases

A tax that is imposed on sellers is borne entirely by buyers if demand is perfectly inelastic

QUESTION 2
Consider a competitive market for CD players. If a $20 per-unit tax on CD players raises the equilibrium price paid by consumers by $4, then the supply curve

is less elasticity than the demand curve

is more elastic than the demand curve

has shifted upward by $4

has shifted downward by $4

QUESTION 3
Consider a competitive market in which demand is perfectly elastic and supply is upward sloping. If a specific subsidy is paid to buyers then following the subsidy

Producer surplus is equal to zero

Consumer surplus is equal to zero

The price paid by buyers will fall

The price received and kept by sellers is lower

b, c and d are correct

QUESTION 4
The supply curve for solar panels is given by the following: p=20+Qs.The demand curve for solar panels is given by p=160-3Qd. Assume that the government has decided that one way to reduce greenhouse gas emissions is to encourage the use of solar panels. As a result the government decides to provide a subsidy of 10 to buyers of solar panels. What proportion of the $10-subsidy is a benefit to buyers (in terms of reduction in price paid) rather than sellers?

25%

55%

75%

none of the above

QUESTION 5
The supply curve for solar panels is given by the following: p=20+Qs.The demand curve for solar panels is given by p=160-3Qd. Assume that the government has decided that one way to reduce greenhouse gas emissions is to encourage the use of solar panels. As a result the government provides a subsidy of 10 to suppliers. What is the resulting deadweight loss equal to?

2.5

10

12.5

37.5

none of the above

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