Suppose the government of Country X would like to reduce traffic congestion by imposing a per-unit tax on car sellers. With the aid of a well-labeled demand-and-supply diagram, explain the effects of the per-unit sales tax on the car market in Country X, and the tax incidence. а. b. Many car sellers complain about the heavy tax burden of the per-unit sales tax. To address the complains of the car sellers, the government of Country X proposes the tax to be levied on car buyers instead of car sellers. Under what condition will the sellers bear a larger tax burden than buyers? Explain whether the new proposal can successfully reduce the tax burden of car sellers.

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
Problem 3CQQ
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Suppose the government of Country X would like to reduce traffic congestion by imposing
a per-unit tax on car sellers.
а.
With the aid of a well-labeled demand-and-supply diagram, explain the effects of
the per-unit sales tax on the car market in Country X, and the tax incidence.
b.
Many car sellers complain about the heavy tax burden of the per-unit sales tax. To
address the complains of the car sellers, the government of Country X proposes
the tax to be levied on car buyers instead of car sellers.
Under what condition will the sellers bear a larger tax burden than buyers?
Explain whether the new proposal can successfully reduce the tax burden of car
sellers.
Transcribed Image Text:Suppose the government of Country X would like to reduce traffic congestion by imposing a per-unit tax on car sellers. а. With the aid of a well-labeled demand-and-supply diagram, explain the effects of the per-unit sales tax on the car market in Country X, and the tax incidence. b. Many car sellers complain about the heavy tax burden of the per-unit sales tax. To address the complains of the car sellers, the government of Country X proposes the tax to be levied on car buyers instead of car sellers. Under what condition will the sellers bear a larger tax burden than buyers? Explain whether the new proposal can successfully reduce the tax burden of car sellers.
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