Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct?
a. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.
b. The price paid by buyers is $0.30 per drink more than it was before the tax.
c. Forty percent of the burden of the tax falls on sellers.
d. All of the above are correct.
d
You might also like to view...
Use the following marginal benefit and marginal cost functions for activity A: MB = 100 - 5AMC = 20 + 3AThe optimal level of A is
A. 40 B. 20 C. 10 D. 0 E. 30
According to the equation of exchange, if total output is 2,000 units, the velocity of money is 5, and the money supply is $1,000, the average price per transaction will be
a. $0.50. b. $2.50. c. $5.00. d. $7.50.
For this question, assume that the Fed is expected to respond to any event by keeping the interest rate constant (i.e., equal to its initial level). An unexpected tax increase will cause
A) stock prices to fall. B) stock prices to rise. C) no change in stock prices. D) an ambiguous effect on stock prices.
The price elasticity of demand is defined as the magnitude of the
A) change in quantity demanded divided by the change in price. B) change in price divided by the change in quantity demanded. C) percentage change in quantity demanded divided by the percentage change in price. D) percentage change in price divided by the percentage change in quantity demanded.