Question

Please help with answering these question -

1. Which of the following is not true of an excise tax?

                              Excise taxes are much like sales taxes except they only apply to certain purchases.

                              An excise tax will usually cause the price of the product to fall

                              Both consumers and producers usually bear the impact of the excise tax.

                              Excise taxes may be used to discourage certain types of behavior.

1.1 If supply and demand for a product subject to the excise tax are both inelastic, you would expect the deadweight loss to be larger.

                              True

                              False

1.1.1 The deadweight loss of this tax:

                              is the inefficiency created by the tax that causes fewer rooms to be rented

                              is $8

                              will decrease as the demand becomes more inelastic

                              will be set by the government

1.1.1.1 For the following three questions, assume that a hotel room before an excise tax costs $100. The local government imposed an excise tax of $8 per night. This caused the price that the hotel charges to increase to $105.

The most likely effect of this tax will be:

that a deadweight loss of $8 will occur

the consumer's tax burden will be $5

that this will actually have no effect on the number of rooms sold per night

the demand for these rooms is perfectly elastic

Answer 1

FALSE-An excise tax will usually cause the pice of the product to fall.

1.1- True

1.1.1 is the inefficiency created by the tax that cause fewer rooms to be rented.

1.1.1.1 that consumer's tax burden will be $5