Question

Suppose that the U.S. government decides to charge cola producers a tax. Before the tax, 10,000 cases of cola were sold every week at a price of $4 per case. After the tax, 5,000 cases of cola are sold every week; consumers pay $6 per case, and producers receive $3 per case (after paying the tax). per case. Of this amount, the burden that falls on consumers is $ per case, and the burden The amount of the tax on a case of cola is $ that falls on producers is $ per case. True or False: The effect of the tax on the quantity sold would have been the same as if the tax had been levied on consumers. True O False

Answer 1

Solutions @) Amount of tax price paid by consumers - price received by produceos. 6-3 3 (b) Tax burden on consumer price paid by consumers after tax - pretax price 6-4 (C) Tax burden on producers = pre tax price - price received by producers after tax 4-3 a =) (d) True Tax bunden and effects of tore are the same whether tax is imposed on buyers or on sellers.