Final answer:
The claim that consumers pay less than the accumulated taxes paid by businesses is false. In reality, tax pyramiding on inputs often results in higher final prices for consumers, as the accumulated taxes and costs are passed through the supply chain.
Step-by-step explanation:
The statement that final prices paid by consumers increase by less than the amount of the tax paid by businesses in the case of tax pyramiding is false. Tax pyramiding, where businesses pay sales taxes on their inputs, leads to higher costs along the supply chain. These higher costs tend to be passed on to consumers in the form of higher final prices, meaning that consumers often end up paying not just the tax itself but also the compounded costs that have accumulated at each stage of production and distribution. An excise tax, for instance, introduces a wedge between the price paid by consumers (Pc) and the price received by producers (Pp). The final market price increases to Pc, but producers receive only Pp per unit sold. This tax can raise production costs and shift the supply curve left, leading to a new equilibrium quantity at a higher overall price level, which affects consumer choices and economic growth.