Microeconomics For Today (MindTap Course List)
Microeconomics For Today (MindTap Course List)
9th Edition
ISBN: 9781305507111
Author: Irvin B. Tucker
Publisher: Cengage Learning
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Chapter 5, Problem 19SQ
To determine

Incidence of tax burden.

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Figure 18-2 shows the widget market before and after an excise tax is imposed. What percentage of the tax per widget is borne by consumers, considering the true economic incidence of the tax?a. 0 percentb. 20 percentc. 50 percentd. 80 percent
Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation.
Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.6 and 0.8 respectively. a. Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation.  b. Suppose the government imposes a per-unit tax of $40 on the cigarette sellers. By how much would buyers and sellers of cigarettes share the tax burden respectively? Show your calculation.  c. Suppose many small sellers, such as newsstands, complain the heavy tax burden borne by them. Would it be better to these small sellers if the government decides to impose a $20 per-unit tax on both the buyers and the sellers of cigarette? Explain.
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