Question 1
The imposition of an excise tax usually causes the price paid by consumers to ________, while the price received by sellers ________.
◦ fall; remains unchanged
◦ rise; falls
◦ rise; remains unchanged
◦ fall; falls
◦ rise; rises
Question 2
Consumers will bear a larger burden of an excise tax if
◦ both demand and supply are relatively inelastic.
◦ demand is relatively elastic and supply is relatively inelastic.
◦ both demand and supply are relatively elastic.
◦ demand is relatively inelastic and supply is relatively elastic.
◦ the tax is collected by firms rather than remitted directly to the government by consumers.
Chris Burden, Urban Light.
Frank Lloyd Wright, Fallingwater, Kaufmann House, Bear Run, Pennsylvania.
Draw an Edgeworth box for two consumers over two goods