6. If a nation imports a good when the economy is opened to trade, the domestic
ID: 1142199 • Letter: 6
Question
6. If a nation imports a good when the economy is opened to trade, the domestic price of the good will and domestic consumption will A) rise; rise B) rise; fall C) fall; rise D) fall; fall 7. Suppose the price elasticity of demand for yachts equals 4.04, while the price elasticity who will of supply for yachts equals 0.22. Ir Congress reinstates a luxury tax on yachts, pay more of the tax? A) Yacht builders will pay more B) Yacht buyers will pay more. C) Yacht builders and buyers will pay equally D) It's impossible to tell without additional information. 8. State governments levy excise taxes on cigarettes because: A) B) C) D) they want to subsidize tobacco farming. they want to discourage cigarette smuggling. it is an easy way to raise tax revenue while discouraging smoking. they want to minimize the tax burden on consumers. Demand for Gala apples is relatively elastic compared to the supply of Gala apples, so if a tax is imposed on the consumers of Gala apples, the tax incidence A) is typically on consumers more than producers. B) is typically on producers more than consumers. C) is typically split equally between consumers and producers. D) cannot be determined without more information. 9. 10. Economic analysis shows that workers pay_of the FICA A) exactly half B) very little C) most D) none 11. The 1990 "yacht tax" caused a large deadweight loss because demand for luxury yachts made in the United States is: A) very elastic. B) very inelastic. c perfectly inelastic, since rich people will pay whatever is necessary D) very steeply slopedExplanation / Answer
[As per the Chegg guideline the first-fours are answered below]
6.
Answer: B
Imported good must have higher price in domestic market, since the exchange rate and transportation costs are involved. It makes the good costlier; once it is so, the affordability would be less; it makes the consumption fall in domestic market.
7.
Answer: A
Builders (suppliers) must have to pay more taxes, because their elasticity is 0.22 that is lower than 1 or inelastic. Demand is elastic here, since it is more than 1. The party having lower elasticity should pay maximum amount of tax.
8.
Answer: C
The demand of cigarette is inelastic; means, whatever be the price of it people will still buy it. Therefore, earning revenue out of charging tax on it is easy. At the same time, making the higher price is actually discouraging smoking.
9.
Answer: B
Producers have to pay more tax, because their supply is less elastic than demand. It means they are more indifferent about price change.
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