Question

Suppose that the U.S. government decides to charge cola producers a tax. Before the tax, 50,000 cases of cola were sold every week at a price of $6 per case. After the tax, 44,000 cases of cola are sold every week; consumers pay $7 per case, and producers receive $3 per case (after paying the tax).The amount of the tax on a case of cola is $_ per case. Of this amount, the burden that falls on consumers is $ _____ per case, and the burden that falls on producers is $_____ per case.The effect of the tax on the quantity sold would have been larger if the tax had been levied on consumers.a. Trueb. False

Answer 1

Answer: A)$4, $1 and $3 B) false

Explanation:

-Consumers pay $7now, and used to pay $6 so the tax resulted in an increase to the consumer by a dollar $1 for a bottle.

-Producers used to get $6 a bottle, and now they only get $3 a bottle, so there is a $3 of tax per bottle from that information.

-Therefore the answers is that the tax is a total of $4per bottle, with $1 fon the consumer and $3 on the producer.

The amount of the tax on a case of cola is $4 per case. Of this amount, the burden that falls on consumers is $ ___1__ per case, and the burden that falls on producers is $____3_ per case.

B) False . This is because the effect of the tax on the quantity of cola sold would have been SMALLER if the tax had been levied on consumers.