Q97Before the imposition of a tax, the equilibrium price and quantity are $15 and 100, respectively. After the imposition of a unit tax of $3, the market equilibrium adjusts to a price of $18 and quantity of 100. Based on this information, ...a.Price elasticity of supply is 0 and therefore the entire tax incidence falls on the consumer.b.Price elasticity of supply is 1 and therefore the entire tax incidence falls on the seller.c.Price elasticity of demand is 1 and therefore the tax incidence falls entirely on the seller.d.Price elasticity of demand is 0 and therefore the entire tax incidence falls on the consumer.e.The tax incidence is shared equally by the seller and the consumer.

Answered: Q97 Before the imposition of a tax,…

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Costs Of Taxation

Section: Chapter Questions

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Q97

Before the imposition of a tax, the equilibrium price and quantity are $15 and 100, respectively. After the imposition of a unit tax of $3, the market equilibrium adjusts to a price of $18 and quantity of 100. Based on this information, ...

Price elasticity of supply is 0 and therefore the entire tax incidence falls on the consumer.

Price elasticity of supply is 1 and therefore the entire tax incidence falls on the seller.

Price elasticity of demand is 1 and therefore the tax incidence falls entirely on the seller.

Price elasticity of demand is 0 and therefore the entire tax incidence falls on the consumer.

The tax incidence is shared equally by the seller and the consumer.

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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