Lesson 1.2.9

1.2.9 Indirect taxes and subsidies Quiz: Pearson Edexcel Economics, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 1.2.9, Indirect taxes and subsidies: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 1: Theme 1: Introduction to markets and market failure, written with Revision Ninja.

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The 20 questions

  1. How does an indirect tax affect the position of a market supply curve?

    • Moves along curve
    • Remains unchanged
    • Shifts right
    • Shifts left

  2. What term describes how the burden of a tax is shared between consumers and producers?

    • Indirect taxation
    • Ad valorem tax
    • Tax yield
    • Tax incidence

  3. A £2 tax causes consumer price to rise by £1.20. What percentage of tax incidence falls on consumers?

    • 60%
    • 120%
    • 40%
    • 50%

  4. Who bears most of the tax burden when demand for a good is price inelastic?

    • Local councils
    • Consumers
    • Producers
    • The government

  5. Who bears most of the tax incidence when demand for a product is price elastic?

    • Consumers
    • The government
    • Producers
    • Wholesale buyers

  6. Consumers pay £5.80 for a product subject to a £1 specific tax. What price do producers receive?

    • £4.80
    • £5.80
    • £6.80
    • £5.00

  7. What happens to total tax revenue when an indirect tax increases on a product with inelastic demand?

    • It increases
    • It remains unchanged
    • It falls to zero
    • It decreases

  8. How does a government subsidy to producers shift the market supply curve?

    • Remains unchanged
    • Moves along curve
    • Shifts left
    • Shifts right

  9. A £1 per unit subsidy reduces price by £0.40. What percentage of the subsidy reaches consumers?

    • 40%
    • 20%
    • 60%
    • 50%

  10. A government provides a £2 per unit subsidy on 100 units. What is the total cost?

    • £100
    • £50
    • £400
    • £200

  11. On a supply and demand diagram, what shape represents total government spending on a subsidy?

    • A trapezium
    • A triangle
    • A rectangle
    • A single line

  12. Which group gains the larger share of a subsidy when supply is price elastic?

    • Producers
    • Workers
    • Consumers
    • Government

  13. Which group gains the largest share of a subsidy when demand is price inelastic?

    • Government
    • Exporters
    • Consumers
    • Producers

  14. What term describes the loss of economic welfare caused by an indirect tax?

    • Producer surplus
    • Tax revenue
    • Deadweight loss
    • Consumer surplus

  15. For an indirect tax to yield high revenue, price elasticity of demand should be what?

    • Unitary
    • Inelastic
    • Perfectly elastic
    • Elastic

  16. A specific tax of £0.50 per unit is levied on 200 units. What is total tax revenue?

    • £150
    • £400
    • £600
    • £100

  17. What happens to total consumer surplus when an indirect tax is placed on a good?

    • It remains unchanged
    • It turns negative
    • It increases
    • It decreases

  18. A £1.50 tax per unit increases consumer price by £0.75. What percentage is paid by producers?

    • 100%
    • 25%
    • 75%
    • 50%

  19. What type of indirect tax is levied as a percentage of the price of a good?

    • Specific tax
    • Ad valorem tax
    • Income tax
    • Corporation tax

  20. If unit subsidy increases while quantity produced remains unchanged, what happens to total government expenditure?

    • It decreases
    • It becomes negative
    • It remains unchanged
    • It increases

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