Final answer:
b) not change, and the price received by sellers will decrease.
If the government shifts a $2 tax from buyers to sellers of cigars, the price paid by buyers is likely not to change and the price received by sellers will decrease because the demand for cigarettes is relatively inelastic, and consumers are less responsive to price changes.
Step-by-step explanation:
The question is about the impact of shifting a $2 tax from buyers to sellers of cigars and how this affects the price paid by buyers and the price received by sellers. When a government shifts the burden of a tax from the buyer to the seller, the actual incidence of the tax (who bears the burden) depends on the relative elasticities of supply and demand.
In the case of cigarette taxes, the demand tends to be relatively inelastic due to the addictive nature of cigarettes. This means consumers are not very responsive to price changes. As a result, whether a tax is imposed on sellers or buyers, the price paid by consumers is likely to increase, and the price received by producers will decrease because the tax burden tends to fall more on the side of the market that is less elastic, which in this case, are the consumers. Therefore, the correct answer is b) not change, and the price received by sellers will decrease.
Moreover, when considering the effects of taxation on products such as cigarettes, governments must consider how much the quantity consumed will be affected, which impacts the resulting tax revenue.