Help answering this economic question 5. Calculating tax incidence Suppose that

Question

Help answering this economic question 5. Calculating tax incidence Suppose that the U.S. government decides to charge beer of $5 per case. After the tax, 9 per case. consumers a tax. Before the tax, 15 millon cases of beer were sold every month at a price million cases of beer are sold every month; consumers pay $6 per case (including the tax), and producers receive $2 of this amount, the burden that fall on consumers is 3 per case, and the burden The amount of the tax on a case of beer is that falls on producers is S True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on producers. per case True False

Explanation / Answer

The amount of the tax on a case of beer is $2 per case. Of this amount, the burden that falls on consumers is $1 per case, and the burden that falls on producer is $1 per case

False: As the tax burden is equally shared by producer and consumer, it does not affect on quantity sold on who the tax burden bear

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