Suppose initially there is a $100 excise tax that is levied by the government on producers of good X. Suppose the government decides to alter this $100 excise tax by having consumers have the legal responsibility for paying half of the tax while producers have the legal responsibility for paying the other half of the tax. Assume that neither consumers nor producers can evade their legal responsibility to pay this excise tax. Which of the following statements is true given this information? This new version of the excise tax will result in both consumer surplus and producer surplus decreasing relative to their respective levels with the initial version of the excise tax. This new version of the excise tax will result in a smaller amount of the good being sold at a lower price to consumers than with the initial version of the excise tax. This new version of the excise tax will result in a smaller amount of the good being sold and the net price producers receive will also decrease relative to the initial version of the excise tax. This new version of the excise tax does not change consumer surplus, producer surplus, tax revenue, or economic tax incidence from the original impact of the initial version of the excise tax. Which of the following statements are true? If the world consists of two countries, M and N, producing two goods, X and Y, then it cannot be the case that M has the absolute advantage in producing X and Y, and N has the comparative advantage in producing X and Y. If the demand curve for the good is vertical, then an excise tax on this product imposed on consumers will reduce the quantity of the good transacted in the market. Consumer surplus measures the total value of the good to the consumer minus the dollar amount the consumer spends on the good. Suppose a movie ticket costs $10. If you go to work, you are paid $15 per hour. Suppose the movie is two hours long and you decide to attend the movie rather than go to work. The opportunity cost of going to the movie is $30. Statement I, II and III are true. Statements I and III are both true. Statement III is true. Statement I, II, III and IV are true. Use the following information to answer the next TWO (2) questions.
Suppose initially there is a $100 excise tax that is levied by the government on producers of good X. Suppose the government decides to alter this $100 excise tax by having consumers have the legal responsibility for paying half of the tax while producers have the legal responsibility for paying the other half of the tax. Assume that neither consumers nor producers can evade their legal responsibility to pay this excise tax. Which of the following statements is true given this information? This new version of the excise tax will result in both consumer surplus and producer surplus decreasing relative to their respective levels with the initial version of the excise tax. This new version of the excise tax will result in a smaller amount of the good being sold at a lower price to consumers than with the initial version of the excise tax. This new version of the excise tax will result in a smaller amount of the good being sold and the net price producers receive will also decrease relative to the initial version of the excise tax. This new version of the excise tax does not change consumer surplus, producer surplus, tax revenue, or economic tax incidence from the original impact of the initial version of the excise tax. Which of the following statements are true? If the world consists of two countries, M and N, producing two goods, X and Y, then it cannot be the case that M has the absolute advantage in producing X and Y, and N has the comparative advantage in producing X and Y. If the demand curve for the good is vertical, then an excise tax on this product imposed on consumers will reduce the quantity of the good transacted in the market. Consumer surplus measures the total value of the good to the consumer minus the dollar amount the consumer spends on the good. Suppose a movie ticket costs $10. If you go to work, you are paid $15 per hour. Suppose the movie is two hours long and you decide to attend the movie rather than go to work. The opportunity cost of going to the movie is $30. Statement I, II and III are true. Statements I and III are both true. Statement III is true. Statement I, II, III and IV are true. Use the following information to answer the next TWO (2) questions.