11. If the government imposes a tax in a market then the price of the good on th

Question

11. If the government imposes a tax in a market then the price of the good on the market goes up by more than the amount of the tax if the good is price-inelastic. 12. If the government imposes a tax in a market then the burden of the tax is shared evenly 13. If a firm is a monopolist in a market then the firm must make positive profits in the long 14. If a firm is a monopolist in a market then the firm will equate marginal revenue with between the buyers and sellers of the good. run. marginal costs to maximize profits and this choice will also maximize surplus in the market. 15. If a firm can perfectly price discriminate then surplus on the market is maximized.

Explanation / Answer

11. False

In case of inelastic demand, the higher portion of the tax is borne by the producers than the consumers. However, the price increase is not more than the amount of the tax.

12. False

Who pays how much tax depends on the elasticity of the good. If the good has an elastic demand, producers bear the higher portion of the tax. However, in case of inelastic goods, the consumer pays the higher portion of the tax.

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