Refer to Figure 4-17. Suppose the market is initially in equilibrium at price P1 and then the government imposes a tax on every unit sold. Which of the following statements best describes the impact of the tax?
A) The consumer's share of the tax burden is the same whether the demand curve is D1 or D2.
B) The consumer will bear the entire burden of the tax if the demand curve is D2 and the producer will bear the entire burden of the tax if the demand curve is D1.
C) The consumer will bear a smaller share of the tax burden if the demand curve is D1.
D) The consumer will bear a smaller share of the tax burden if the demand curve is D2.
Question 2
An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in
A) a decrease in the equilibrium quantity of lobster and no change in the equilibrium price.
B) an increase in the equilibrium price of lobster and no change in the equilibrium quantity.
C) a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease.
D) an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.
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