2. USAEO Microeconomics

Tax Incidence — Quiz

Test your understanding of tax incidence with 5 practice questions.

Practice Questions

Question 1

In a market where demand is perfectly inelastic and supply is upward sloping, who bears the majority of the tax burden when a per-unit tax is imposed on the good?

Question 2

Suppose a tax is levied on producers of a good in a market where demand is relatively elastic and supply is relatively inelastic. What can we say about the distribution of the tax burden?

Question 3

A government imposes a 5 per-unit tax on a good. The pre-tax equilibrium price is $20. After the tax, the price consumers pay is $23, and the price producers receive is $18. What fraction of the tax is borne by consumers?

Question 4

In a market for a good, the demand curve is given by $Q_d = 100 - 2P$ and the supply curve is given by $Q_s = 3P$. A $10$ per-unit tax is imposed on producers. What is the new equilibrium quantity after the tax?

Question 5

Which of the following best describes the relationship between elasticity and tax incidence?