1. The burden of a tax per unit of output will fall heavily on consumers when de

Question

1. The burden of a tax per unit of output will fall heavily on consumers when demand is relatively supply is relatively a. Inelastic, elastic. b. Inelastic, inelastic. c. Elastic, elastic. d. Elastic, inelastic. 2. When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private market at the support price, the impact on total welfare is the change a. Consumer surplus b. Consumer surplus + change in producer surplus + the cost to the government. c. Consumer surplus + change in producer surplus- the cost to the government d. Consumer surplus+ change in producer surplus 3. Deadweight loss refers to: a. Losses in consumer surplus associated with excess government regulations b. Situations where market prices fail to capture all of the cost and benefits of a policy c. Net losses in total surplus d. Losses due to policies of labor unions

Explanation / Answer

First question is answered below

1. Correct option: (a) Inelastic; Elastic

Reason: Burden of tax always falls heavily on the inelastic side as they are less susceptible to price rise, leading to more burden.

In the given case, for tax burden to fall heavily on consumers, demand must be inelastic and supply must be elastic.

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