Case Western Reserve University - ECON 102Chapter 7 Review

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Chapter 7 - Taxes 1. Suppose the government decides to fight obesity in America by imposing an excise tax on the saturated fat content of food. The effect of this tax would be to: A) lower the prof... its of ice cream suppliers. B) decrease revenue for the government. C) decrease black market activity. D) raise the profits of ice cream suppliers. 2. Suppose the government imposes a $10 excise tax on the sale of sweaters by charging suppliers $10 for each sweater sold. Based on economic analysis, we would predict that: A) the price of sweaters will increase by $10. B) consumers of sweaters will bear the entire burden of the tax. C) the price of sweaters will increase by less than $10. D) the price of sweaters will decrease by $10. 3. Recently, the government considered adding an excise tax on CDs that can be used to record music and CD players that can record discs. If this tax was enacted, we would expect: A) that consumers would pay a higher price and producers would sell fewer of these CDs and CD players than before the tax. B) there to be no effect on consumption or the prices paid by consumers of these CDs and CD players. C) that consumers would pay a lower price and producers would receive a higher price for these CDs and CD players than before the tax. D) there to be an increase in economic activity due to the tax [Show More]

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