Suppose the government imposes a per-unit tax on the sellers of potato chips, shifting the supply curve upwards from S1 to S2, as shown in the following figure Price (per box) 35 26 201 I 200 300 S₂ S₁ D Quantity (boxes) a. How does the per-unit tax affect the quantity transacted, the price paid by buyers and the price received by sellers? b. Calculate the government tax revenue. Do the buyers or the sellers bear a larger tax burden?

Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand And Government Policies
Section: Chapter Questions
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Suppose the government imposes a per-unit tax on the sellers of potato
chips, shifting the supply curve upwards from S1 to S2, as shown in the
following figure
Price
(per box)
35
26
20
200 300
S₂
S₁
D
Quantity
(boxes)
a. How does the per-unit tax affect the quantity transacted, the price paid by
buyers and the price received by sellers?
b. Calculate the government tax revenue. Do the buyers or the sellers bear a
larger tax burden?
Transcribed Image Text:Suppose the government imposes a per-unit tax on the sellers of potato chips, shifting the supply curve upwards from S1 to S2, as shown in the following figure Price (per box) 35 26 20 200 300 S₂ S₁ D Quantity (boxes) a. How does the per-unit tax affect the quantity transacted, the price paid by buyers and the price received by sellers? b. Calculate the government tax revenue. Do the buyers or the sellers bear a larger tax burden?
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