(Consider This) Which of the following claims is not made by opponents of a value-added tax (VAT)?
A. Savings and investment is discouraged because future consumption is penalized.
B. The VAT is regressive, potentially leading to additional progressive taxes to offset the
regressive VAT.
C. Sellers bear a disproportionately large burden of the tax.
D. The VAT is a hidden tax, and thus easier to raise to support the expansion of government.
Answer: C
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Refer to the figure above. If the government of China wants to keep the exchange rate below E yuan per dollar:
A) it will have to buy dollar and sell yuan. B) it will have to buy yuan and sell dollars. C) it will have to buy both dollars and yuan. D) it will have to sell both dollars and yuan.
Which of the following statements is FALSE about the issues faced by the government when contemplating a tax?
A) Consideration must be given to how tax rates relate to the amount actually received. B) Consideration must be given to how taxes influence market prices. C) Consideration must be given to how taxes influence equilibrium quantity. D) Consideration must be given to the amount of funds the government will be receiving from the transfer payments paid by the public to the government.
Other things equal, if more firms enter a monopolistically competitive industry:
A. the demand curves facing existing firms would shift to the right. B. the demand curves facing existing firms would shift to the left. C. the demand curves facing existing firms would become less elastic. D. losses would necessarily occur.
The price elasticity of demand would most likely be the lowest for
A) a house. B) salt. C) a Toyota sport utility vehicle. D) Shell gasoline.